—
Annual
report
—
Highlights 2021
Operational performance
Portfolio management
Strongly increased demand for
ABB’s offering from the low level
in the previous year period when
the adverse business impact
of the COVID-19 pandemic was
significant.
Orders +20% (+17% comparable(1))
and revenues +11% (+8% compa-
rable) increased in all Business Ar-
eas and regions.
Adverse impact from imbalances
in the supply chain to some ex-
tent hampered the ability to con-
vert orders into actual deliveries,
resulting in an order backlog of
$16.6 billion, +16% (+21% compa-
rable), year-on-year.
Strong improvement in Opera-
tional EBITA margin(1) to 14.2%,
+310 basis points, higher in all
Business Areas.
Lifted long-term targets as ABB
expects to drive through-the-cycle
revenue growth to 4-7% (3-5% or-
ganic and 1-2% acquired), in con-
stant currency, and sharpened Op-
erational EBITA margin target to
be at least 15% as from 2023, in
any given year.
Mechanical Power Transmission
(Dodge) divestment completed
for $2.9 bn in cash.
Good progress in Turbocharg-
ing and E-mobility processes, ex-
pected to be completed during
first half of 2022.
Acquisition of ASTI to expand in
Autonomous Mobile Robots.
Improved portfolio management
process to build up acquisition
pipelines in the divisions.
Capital allocation
Very strong uplift in cash genera-
tion with cash flow from operat-
ing activities in continuing opera-
tions of $3.3 billion improving by
$1.5 billion year-over-year.
Net cash positive at the end of
2021.
Accelerated R&D investments in
focus areas.
Board of Directors proposing a
CHF 0.82 dividend per share at
the 2022 Annual General Meeting.
Returned $2.7 billion of Power
Grids proceeds during 2021.
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
—
ABB at a glance
ABB (ABBN: SIX Swiss Ex) is a leading global technology company
that energizes the transformation of society and industry to achieve
a more productive, sustainable future. By connecting software to
its electrification, robotics, automation and motion portfolio, ABB
pushes the boundaries of technology to drive performance to new lev-
els. With a history of excellence stretching back more than 130 years,
ABB’s success is driven by about 105,000 talented employees in over
100 countries.
% of FY 2021 third party revenues
excl. Corporate and Other
% of FY 2021 Operational EBITA
excl. Corporate and Other
% of FY 2021 third party revenues
% of FY 2021 third party revenues
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) Management estimates.
Operational EBITA(1)RevenuesEnd-markets(2)44% Electrification23% Motion21% Process Automation11% Robotics & Discrete Automation48% Electrification27% Motion18% Process Automation8% Robotics & Discrete Automation3% Renewables6% Conv. Generation6% Distribution10% O&G, Chemicals9% Mining, Metals5% Automotive5% F&B20% Other Industry19% Buildings17% Other T&IGeographies36% Europe22% USA8% Rest of Americas17% China17% Rest of AMEA Key figures
$ in millions, unless otherwise indicated
Orders
Order backlog (end December)
Revenues
Income from operations
Operational EBITA(1)
as % of operational revenues
Income from continuing operations, net of tax
Net income attributable to ABB
Basic Earnings per share ($)
Dividend per share
Cash flow from operating activities(3)
Cash flow from operating activities in continuing
operations
Net (cash) debt (end December)(1)
CO2e own operations emissions, kt scope 1 and 2
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
Share of females in senior management
positions, %
FY 2021
31,868
16,607
28,945
5,718
4,122
14.2%
4,730
4,546
2.27
0.82
3,330
3,338
(98)
FY2021
405 kt
0.142
16.3%
FY 2020
US$
Comparable(4)
+17%
+21%
+8%
+37%(5)
26,512
14,303
26,134
1,593
2,899
11.1%
345
5,146
2.44
0.80
1,693
1,875
112
+20%
+16%
+11%
+259%
+42%
+3.1 pts
n.a.
-12%
-7%(2)
+97%
+78%
FY2020
Change
561 kt
0.162
-28%
-12%
13.5%
+2.8 pts
Scope 1&2
CO2
CO2 scope 1 & 2
Ktons of CO2 equivalent emissions
Lost Time Injury Frequency Rate
Lost Time Injury Frequency Rate
LTIFR, frequency/200,000 working hours
Year
2019
2020
2021
Year
2019
2020
2021
0
150
300
450
600
750 Ktons
0
0,1
0,2
0,3
LTIFR
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) EPS growth rates are computed using unrounded amounts.
(3) Amount represents total for both continuing and discontinued operations.
(4) Growth rates for orders, order backlog and revenues are on a comparable basis, see the “Supplemental information” section
of this annual report.
(5) Constant currency (not adjusted for portfolio changes).
—
Table of contents
—
Table of contents
—
01
Introduction
8 – 51
—
02
Corporate governance report
52– 73
—
03
Compensation report
74 – 111
—
04
Financial review of ABB Group
112 – 243
—
05
ABB Ltd statutory financial statements
244 – 261
—
06
Supplemental information
262 – 266
01
Introduction
10 Chairman and CEO letter
14 Targets and targets fulfilment
16 Sustainability: Creating long-term value
across the value chain
22 Executive Committee
24 Diversity and inclusion: Our people
28 Electrification
34 Motion
38 Process Automation
42 Robotics & Discrete Automation
46 Share developments
48 Cash generation and capital allocation
50 Key investor questions 2021
10
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
C H A I R M A N A N D C EO L E T T E R
Dear shareholders, customers,
partners and employees,
The year 2021 was also characterized by uncer-
tainty related to the continuing impacts of the
COVID-19 pandemic, especially in the second half.
Although demand increased significantly, as can
be seen in ABB’s order performance, broad disrup-
tions in the global supply chain – including com-
ponent shortages, challenging logistics and tight
labor markets – hampered our ability to convert
strong order intake into actual customer deliveries.
We expect supply-chain problems to ease during
the course of this year, and while rising inflation is
a concern, it seems likely that the era of ultra-loose
monetary policy is coming to an end, which is good
news for the economy.
When it comes to longer-term trends, ABB is well-
positioned in very attractive markets. Despite
the absence of a global agreement on actions to
achieve the Paris climate goal, the COP26 climate
conference showed that reducing emissions and
making more efficient use of resources are now a
must for governments and businesses. For ABB, as
a provider of electrification, automation and digital
technologies, this represents a huge opportunity.
Demand for electricity is growing twice as fast as
for any other form of energy and software-driven
automation is the most effective way to improve
energy and resource efficiency.
Positioned for stronger growth
In 2021, ABB started to reap the benefits of its on-
going transformation. Improved efficiency com-
bined with higher demand resulted in a significant
increase in orders as well as a marked improve-
ment in profitability. In our Business Areas, we ad-
vanced on several fronts, with the launch of im-
portant innovations for the transport sector and
the mining industry, a value-adding acquisition in
robotics, and the divestment of our Dodge busi-
ness (Mechanical Power Transmission Division) for
$2.9 billion in cash.
We made good progress in building a high-perfor-
mance culture by empowering our Divisions, and
we initiated several important actions to reduce
our own CO2 emissions and make ABB a more at-
tractive employer. These achievements, which are
covered in more detail below and in the follow-
ing pages, provide a solid foundation for future
profitability and growth. They will also help to
strengthen ABB’s position in key market segments
as well as contribute to sustainable development.
In short, our company is now moving forward
strongly and with a clear purpose and direction.
Tragically, over the course of the year, we lost sev-
eral colleagues due to continued outbreaks of
COVID-19. However, our high level of prepared-
ness helped us protect our people and keep our
operations running. Thanks to our strong focus on
safety, we saw a further reduction in workplace in-
juries and recorded no fatalities for the first time
since 2011.
Financial performance
Our strong financial performance in 2021 showed
that our “ABB Way” operating model, introduced
in 2020, is the right one for our company. All of our
four Business Areas contributed to strong order
growth as well as increased profitability. We also
improved cash flow and strengthened our balance
sheet. For the full-year 2021, Group orders were up
20 percent, revenues rose by 11 percent, and we in-
creased our operational EBITA margin by 3.1 per-
cent to 14.2 percent.
Our order backlog increased, driven in part by
strong demand and but also due to supply-chain
challenges hampering customer deliveries. We
were able to mitigate some of them thanks to our
global footprint and multiple sourcing strategy,
but a worldwide shortage of semi-conductors, im-
pacted logistics and a tight labor market in the
United States meant that deliveries to customers
were delayed starting in the third quarter. We ex-
pect the situation to ease over the course of this
year.
In light of our improved financial results, and in line
with our policy of paying a sustainable dividend
over time, we will be proposing a dividend of CHF
0.82 per share to our shareholders to be voted on
at the annual general meeting on March 24, 2022.
At the AGM, we will also ask our shareholders to
approve the cancellation of shares purchased
through a second buyback program that was
launched on April 9, 2021. The buybacks are to re-
turn $7.8 billion of cash proceeds from the Power
Grids divestment to shareholders. We will also
seek shareholder approval for the cancellation of
shares purchased under the initial buyback pro-
gram that were not proposed for cancellation at
ABB’s 2021 AGM.
Cultural change
A key objective of our transformation is to build
a high-performance culture by empowering our
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
11
20 Divisions with full ownership and accountabil-
ity for their respective strategies, performance and
resources. Under our decentralized ABB Way op-
erating model, performance is measured through
a scorecard system, which provides full transpar-
ency on key measures.
To be able to deliver on our commitments to our
stakeholders, our Divisions are required to be sta-
ble and profitable before focusing on growth. At
the end of 2021, around 60 percent of our Divisions
were in growth mode, which means that they focus
both on organic growth as well as M&A opportuni-
ties to consolidate their market position.
Our long-term objective is to shift to more attrac-
tive markets, with better quality of revenues, which
means better gross margins, less risk and lower
earnings volatility. Among the high-growth seg-
ments we are targeting are: water and wastewater,
food and beverage, sustainable transport and data
centers. We aim to be number 1 or 2 in all of our
customer segments.
Strengthening our portfolio
To further strengthen our position in electrification
and automation, we pursue a strategy of active
portfolio management with the aim of making at
least five small- to mid-sized acquisitions per year.
In 2021, we acquired leading autonomous mobile
robot manufacturer ASTI Mobile Robotics Group,
which will help us to capture growing potential in
areas such as logistics and warehouse automation.
With ASTI, we now have the most comprehensive
portfolio of industrial robots on the market.
In January 2022, we strengthened our E-mobility
business by taking a controlling stake in United
States electric vehicle (EV) infrastructure company,
In-Charge Energy, as well as increasing our majority
stake in Chinese EV charging provider, Chargedot
12
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
Shanghai New Energy Technology Co., Ltd. to
80 percent.
To drive the further growth and expansion of our
E-mobility business, we are moving ahead with ef-
forts to separately list that business and we aim to
complete this during the second quarter of 2022.
As the world leader in electric vehicle charging in-
frastructure, we are well-positioned in an extremely
Another important offering, from our Process Au-
tomation Business Area, was a portfolio of tech-
nologies under the name “ABB Ability™ eMine” to
electrify and automate mines, including a remote
monitoring capability to optimize energy usage.
From 2022, the solution will also include high-
power electric chargers for mining trucks as well as
an automated trolley system that can reduce diesel
consumption by up to 90 percent.
TO BE ABLE TO DELIVER ON OuR COMMITMENTS, OuR
DIVISIONS ARE REQuIRED TO BE STABLE AND PROFITABLE
BEFORE FOCuSING ON GROWTH. AT THE END OF 2021,
AROuND 60 PERCENT OF OuR DIVISIONS WERE IN
GROWTH MODE.
attractive growth market – by 2035, EVs are ex-
pected to be outselling combustion cars.
Progress on sustainability
We also made good progress with our planned di-
vestments. We successfully closed the divestment
of the Mechanical Power Transmission Division
(Dodge) on November 1. This marks the completion
of the announced first step to focus our business
portfolio on our leading position in electrification
and automation. As part of these actions, we have
appointed a new head of the Turbocharging Divi-
sion ahead of a likely spin off.
Groundbreaking innovations
In 2021, ABB again demonstrated its capacity for
groundbreaking innovation with the launch of sev-
eral new solutions that will further drive the shift
to electrification and automation and contribute to
a low-carbon society.
One notable example from our E-mobility Division
was the Terra 360, the world’s fastest electric-ve-
hicle charger, capable of providing enough charge
for 100 km of driving in less than three minutes,
or of fully charging an EV in less than 15 minutes.
Designed for commercial fleets and heavy-duty
vehicles as well as electric cars, the Terra 360 has
the capacity to charge up to four vehicles simulta-
neously and can be installed in almost any setting
from the curbside to gas stations and motorway
stops.
In 2021, we began implementing our 2030 sustain-
ability strategy, with the focus on reducing CO2
emissions across our value chain. In the past two
years, we have reduced emissions from our own
operations by 39 percent, in part by using our own
technologies. To achieve our goal of carbon neu-
trality by 2030, we committed to electrifying our
vehicle fleet, sourcing 100 percent of our energy
from renewables and installing energy manage-
ment systems at our sites around the world. Our
carbon-neutrality commitment was verified by the
Science-Based Targets initiative as being in line
with the 1.5°C scenario of the Paris Agreement.
To help our customers reduce their CO2 emissions –
another key target of our 2030 sustainability strat-
egy – we have identified products and solutions
from our portfolio that deliver the most significant
reductions in CO2 emissions. At the core of our
offering are our energy-efficient electric motors
and drives produced by our Motion Business Area.
Drives can reduce the power consumption of mo-
tors by up to 25 percent and the Motion Business
Area’s flagship synchronous reluctance (SynRM)
motor and drive package has set a new standard
for energy efficiency. Thanks to its innovative mag-
net-free design, the SynRM motor also requires no
rare-earth materials in its manufacture, further re-
ducing resource consumption.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
13
Alongside reducing CO2 emissions, we also have
the goal of preserving resources for future gener-
ations. In December 2021, we unveiled a new com-
pany-wide approach to drive circularity in our own
and our customers’ operations. By 2030, at least
80 percent of ABB’s products and solutions will be
evaluated against a clear set of key performance
indicators (KPIs), corresponding to each stage of
the product lifecycle. We will also send no waste to
landfill, wherever this is compatible with local con-
ditions. Today, close to 40 percent of our 440 sites
around the world are already sending no waste to
landfill.
To support a culture of diversity and inclusion, in
line with our 2030 sustainability goal of promot-
ing social progress, we launched a gender-neu-
tral parental leave program for all ABB employees
around the world. We also increased the proportion
of women in senior management to 16.3 percent,
from 13.5 percent in 2020. By 2030, our goal is that
25 percent of senior management roles are filled by
women.
Accordingly, we have lifted our revenue growth tar-
get to 4–7 percent through the economic cycle,
in constant currency. Of that, we expect 3–5 per-
cent to come from organic growth and 1–2 percent
from acquired growth. We have also sharpened
our operational EBITA margin target to be at least
15 percent as of 2023. Previously, we had targeted
3–5 percent for revenue growth through the cycle
and an operational EBITA margin in the upper half
of a 13–16 percent range as of 2023.
With our leading technologies and talented people,
we are confident that ABB will continue to go from
strength to strength while living up to the expec-
tations of its stakeholders and making a valuable
contribution to a more sustainable society.
On behalf of the Board of Directors and the Ex-
ecutive Committee, we would like to thank our
customers and shareholders for their continued
trust in ABB and to thank our employees for their
tremendous commitment, engagement and hard
work. We are proud to lead them.
Best regards,
P E T E R VO S E R
B J Ö R N R O S E N G R E N
Chairman of the Board
Chief Executive Officer
of Directors
To ensure that sustainability is taken as seri-
ously as our other performance targets, we are
integrating sustainability KPIs into our perfor-
mance management planning and our businesses
are reporting them at the same time as financial
KPIs. Sustainability KPIs are now also part of se-
nior management incentives and a selection is in-
cluded in our quarterly financial reports.
Finally, to encourage our people to get personally
involved in driving ABB’s sustainability journey, we
launched the “Sustainability Changemaker Award”,
inviting ideas that support the achievement of our
2030 sustainability goals. The winning individual
or team will get the chance to turn their idea into
reality.
Strong future prospects
Having decentralized our organization and success-
fully rolled out our ABB Way operating model, we
are in a strong position to capture future growth
opportunities. The three key growth drivers for our
businesses are: resource efficiency through electri-
fication and automation, where we are global lead-
ers, occupying number 1 or 2 positions in the mar-
ket; new ways of working, in which our Divisions
are accountable for growth and decision-making
has been moved closer to the market; and the ac-
celeration of environmental, social and governance
(ESG) drivers for energy efficiency and automation.
14
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Targets fulfilment
ABB’s financial framework mirrors the company’s ambition for
improved performance and reflects increased accountability,
transparency and speed in decision making. With our 2030 sus-
tainability strategy, we are enabling a low-carbon society, pre-
serving resources, promoting social progress and driving in-
tegrity and transparency across the value chain.
Financial target framework and 2021 performance
R E V E N U E G R O W T H
O P E R AT I O N A L E B I TA M A R G I N (2)
Target:
2021 performance:
Group target:
2021 performance:
4–7%
annual average through
economic cycle(1)
8%
≥15%
as from 2023
14.2%
R O C E (2)
Target:
2021 performance:
Target:
2021 performance:
FC F CO N V E R S I O N T O N E T I N CO M E (2)
15–20%
14.9%
~100%
108%
B A S I C E P S G R O W T H
Target:
2021 performance:
EPS
growth > revenue
growth
-7%
Basic EPS growth(3)
(1) Calculated to exclude FX impacts and transformational acquisitions and divestments, includes bolt-on acquisitions and divestments within
divisions.
(2) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(3)
Includes impact from Power Grids related book gain in 2020 and Mechanical Power Transmission related book gain in 2021.
Selected sustainability targets and 2021 progress
W E E N A B L E A L O W - C A R B O N S O C I E T Y
Target:
Achieve carbon neutrality in ABB’s own
operations by 2030
W E P R E S E R V E R E S O U R C E S
Target:
Zero waste from ABB’s own operations
to be disposed of in landfills by 2030,
wherever this is compatible with local
conditions and regulations
Progress:
39%
Reduction compared with 2019 baseline
Progress:
28%
Reduction compared with 2019 baseline
W E P R O M O T E S O C I A L P R O G R E S S
Target:
Progress:
Double number of women in senior
management roles to 25% by 2030
16.3%
From 13.5% in 2020
16
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
S U S TA I N A B I L I T Y
Creating long-term value
across the value chain
ABB has always taken a sustainable approach
to business. Our predecessor companies were
founded in the late 19th century to take advantage
of electricity and since then ABB has been helping
its customers electrify their operations as well as
improve energy efficiency and productivity.
Today, sustainability is at the center of our com-
pany Purpose and the value that we create for
stakeholders. Last year, we began implementing
our 2030 sustainability strategy, having reduced
our greenhouse gas emissions by more than half in
our previous strategy period to 2020.
Focus areas of our 2030 sustainability strategy
To determine the focus areas of our 2030 sustain-
ability strategy, we conducted some 400 hours
of interviews with 300 stakeholders of ABB’s four
Business Areas, including customers, suppliers, in-
vestors, public representatives and NGOs in 2019.
We also analyzed some 40,000 comments from
ABB’s annual employee engagement survey.
respectively. Each target is supported by opera-
tional targets and actions.
From strategy to implementation
Last year, we began implementing our 2030 sus-
tainability strategy with the focus on enabling
a low-carbon society. To support our custom-
ers in reducing their CO2 emissions, we identified
a basket of the products and solutions from our
portfolio that deliver the most significant reduc-
tions in CO2 emissions for our customers. The
calculations have been validated by a third party
and the first measurements will be reported in
our 2021 sustainability report.
To achieve carbon neutrality across our own oper-
ations, we are committed to reducing our scope 1
and 2 emissions by at least 80 percent. To achieve
these targets, we will electrify our vehicle fleet, use
renewable energy to power our sites and improve
energy efficiency across our operations.
TO ACHIEVE CARBON NEuTRALITY, WE WILL ELECTRIFY
OuR VEHICLE FLEET, uSE RENEWABLE ENERGY TO
POWER OuR SITES AND IMPROVE ENERGY EFFICIENCY
ACROSS OuR OPERATIONS.
Drawing on the expectations and requirements
of those stakeholders, we defined areas where we
can make the biggest impact: enabling a low-car-
bon future, preserving resources, promoting so-
cial progress, as well as strengthening our com-
mitment to responsible business practices, and
driving integrity and transparency across the
value chain.
Sustainability focus areas and targets
For each of our sustainability focus areas, we de-
fined at least three main targets that apply to
ABB, to our customers, and to our supply chain
When it comes to our supply chain, we have
mapped our emissions and started engaging
with our suppliers through our supplier sustain-
ability frame work. We are currently defining more
specific actions on the most impactful upstream
emissions.
To perserve resources, we are introducing circu-
larity into our business models, aimed at reducing
waste at every stage of the value chain. To achieve
this goal, we will continuously improve the recy-
cling and reusability of our products and make
them more durable, as well as design and reduce
the use of virgin and hazardous materials.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
17
—
Sustainability strategy 2030
How did we get there*
400
Hours of interviews to
determine the focus areas of our
2030 sustainability strategy
300
Stakeholders of ABB’s four Business
Areas, including customers, suppliers,
investors, public representatives and
NGOs interviewed
40,000
Employee comments analyzed from
our engagement survey
—
Material topics
• Products, solutions and services
• Human rights & labor
• Stakeholder engagement
• Operations – environment
• Carbon reduction
• Circular economy
• Health & safety
• Socio-economic impact
• Ethics
• Business resilience
• Employee wellbeing
• Data privacy
• Responsible sourcing
• Diversity & inclusion
* Figures from 2019 internal and external stakeholder engagement process used for sustainability materiality matrix.
18
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Our 2030 commitment
Enabling a low-carbon society
Preserving resources
Support our customers in reducing their annual
CO2 emissions by at least 100 megatons.
Cover at least 80 percent of ABB products and
solutions with our circularity approach.
Achieve carbon neutrality across our own
operations.
Reduce CO2 emissions in our supply chain through
a systematic approach with impactful suppliers.
Reduce waste sent to landfills to zero.
Implement supplier sustainability framework
including environment for at least 80% of supply
spend in focus countries.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
19
Promoting social progress
Integrity and transparency
Aim for zero harm to employees and contractors.
Double the number of women in senior
management roles to 25%; target top-tier
employee engagement score in our industry.
Extend ABB new Code of Conduct-based approach
to projects and counterparties.
Include compliance with Supplier Code of Conduct
in procurement terms and conditions.
Provide impactful support for community-building
initiatives.
Include sustainability targets in senior management
incentives.
Implement supplier sustainability framework,
including human rights, for at least 80% of supply
spend in focus countries.
20
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
To promote social progress, we are creating safe,
fair, equitable and inclusive working environments
in which our people can succeed and develop. We
also work with suppliers to proactively identify, as-
sess and address human rights issues, and to drive
broader environmental, social and governance
performance.
Each of our sustainability targets has one or more
key performance indicators (KPIs) to measure
progress. These are being progressively integrated
into our performance management planning and
are reported by the business at the same time as
financial KPIs. Sustainability KPIs are now also part
of senior management incentives.
—
Actions to enable a low-
carbon society
to 40 percent are already sending no waste to
landfills.
We are also working with customers to reuse and
recycle our products. We aim to help them reduce
their resource consumption through more efficient
processes and by replacing or upgrading old and
outdated equipment.
Our objective is to go beyond compliance to be-
come a leader in circularity. That means setting
specific, transparent key performance indicators
for all aspects of the product lifecycle to enable
continuous improvement across our portfolio.
When it comes to our suppliers, our target is that
80 percent of our supply spend in focus countries
is covered by Sustainable Supply Base Manage-
ment (SSBM), which covers all aspects of environ-
mental, social and governance (ESG) performance,
including preserving resources.
ABB joined three initiatives led by the interna-
tional non-profit Climate Group to reduce its own
emissions:
—
Case studies
• EV 100: ABB commits to electrifying its fleet
of more than 10,000 vehicles by 2030.
• RE 100: ABB commits to sourcing 100 percent
renewable electricity by 2030.
• EP 100: ABB commits to establishing energy
efficiency targets and continuing to deploy
energy management systems at its sites.
ABB’s carbon reduction targets received approval
by the Science Based Targets initiative (SBTi) con-
firming that they are in line with the 1.5°C scenario
of the Paris Agreement. ABB also joined the Busi-
ness Ambition for 1.5°C Campaign, a global coali-
tion of UN agencies, business and industry leaders,
led by the UN Global Compact (UNGC).
—
How we are preserving
resources
We aim to preserve resources at all levels of the
value chain by eliminating waste in our own oper-
ations and making our products last longer. To-
day, among our 440 sites across the world, close
Reducing our carbon footprint with recycled
plastic
In the Netherlands, ABB introduced a range of sur-
face-mounted junction boxes made entirely from
recycled plastic waste. Hundreds of millions of
these boxes are installed across Europe every year
and using recycled rather than new plastic can re-
duce carbon emissions by up to 70 percent. In the
Netherlands, we estimate that this new range of
junction boxes and achieve an annual CO₂ footprint
reduction of up to 300,000 kilograms – the equi -
valent of 500 flights from London to New York.
ABB factory in Italy achieves zero waste
to landfill target
In 2021, ABB Smart Power’s manufacturing unit in
Frosinone, Italy, stopped sending waste to landfills,
in line with ABB’s target to eliminate waste to land-
fill by 2030. The factory, which produces more than
3 million circuit breakers per year, achieved the tar-
get within two years through rigorous waste sort-
ing and identification. Today, it separates produc-
tion waste into around 150 categories of material
and every workstation has separate waste contain-
ers for cardboard/paper and plastic.
Among our 440 sites across
the world, 40% are no longer
sending waste to landfills.
Waste to landfill has gone
down from 17.6 kt in 2019 to
12.6 kt in 2021, corresponding
to a reduction of 28%.
22
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Executive Committee
As of December 31, 2021
P E T E R T E R W I E S C H
President
Process Automation
S A M I AT I YA
President
Robotics & Discrete
Automation
B J Ö R N R O S E N G R E N
Chief Executive Officer
T H E O D O R S W E D J E M A R K
Chief Communications and
Sustainability Officer
M A R I A VA R S E L L O N A
General Counsel &
Company Secretary
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
23
C A R O L I N A G R A N AT
Chief Human Resources
Officer
T I M O I H A M U O T I L A
Chief Financial Officer
TA R A K M E H TA
President
Electrification
M O R T E N W I E R O D
President
Motion
24
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
D I V E R S I T Y A N D I N C LU S I O N
Our people
Inclusion means everyone
At ABB, we are creating an inclusive culture that
represents our communities in all of their diver-
sity. Our goal is that every one of our 105,000
colleagues around the world feels that they are
working in a safe, fair, equitable and inclusive envi-
ronment, where they can succeed and develop.
With our 2030 diversity and inclusion (D&I) strat-
egy, we seek to increase diversity across all dimen-
sions, including gender, LGBTQ+, abilities, ethnic-
ity and generations. Our commitment is reflected
in the fact that each dimension is sponsored by a
member of our Group Executive Committee, with
our CEO Björn Rosengren being the sponsor for
gender diversity.
ABB is already a diverse company, with 140 na-
tionalities and five generations represented in the
workforce. Here, we tell the stories of nine col-
leagues who have chosen to pursue their careers
at ABB.
The number of
nationalities of people
working at ABB.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
25
B R I A W I L L I A M S
HR business partner,
Electrification (uS)
A self-described people advocate and change
agent, Bria joined ABB to bring people together,
help them grow and learn, and bring their authen-
tic selves to work.
I G A K A C Z M A R E K- W R O N A
DevOps engineer and
product owner – ABB Ability,
Process Automation (Poland)
But to achieve her goals, Bria had to overcome one
big challenge – her fear of speaking in public. Bria’s
supportive manager made sure that she felt com-
fortable talking with colleagues and pitching ideas.
This meant Bria had to step out of her comfort
zone – an experience that changed her life and her
career prospects. Today, after successfully obtain-
ing her HR certification through the company’s de-
velopment opportunities, Bria helps colleagues re-
alize their career plans and potential at ABB.
As a science student, Iga wanted to work in a role
that would allow her to combine her twin interests
in arts and physics.
After her degree and an internship at ABB, Iga
joined the ABB Ability team in Poland where she
found an ideal environment to develop and learn
as one of the growing number of women in STEM
(science, technology, engineering and mathemat-
ics) fields. Her current programming role also plays
to her love of solving logic puzzles. Through ABB,
she was able to meet the famous astronomer and
Nobel Prize winner, Didier Queloz, providing fur-
ther energy and motivation to keep taking on chal-
lenges and continuing her learning journey.
P E DY Z H U Z H U
R&D program manager,
Robotics and Discrete
Automation (China)
Growing up in China, Pedy was interested in engi-
neering, a traditionally male dominated field. Af-
ter completing her master’s degree, she joined the
ABB Robotics Research & Development center.
At ABB, Pedy’s manager trusted her with respon-
sibility, allowing her to learn from her mentor and
other experienced colleagues. She felt empowered
to own her projects and benefited from a support-
ive learning environment. The support system con-
tinued throughout her maternity leave, and she felt
welcomed by her manager and team on her return.
In the decade that she has been at ABB, she has the
opportunity to develop cobots that help customers
increase efficiency, productivity and sustainability.
She personally identifies with the IRB 1300 robot,
agile and quick, just like her.
26
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
J O R G E P E R E Z B U I T R A G O
Planning & fulfilment
specialist, Electrification (uS)
S U B B A R A M A I A H G A N E S H
Leading account payables
for AMEA, Global Business
Services (India)
Jorge’s journey with ABB began at a university job
fair in Puerto Rico. Jorge wanted to learn more
about the role of a mechanical engineer, and ABB
offered him a summer internship. After finishing
his degree, Jorge was selected into the ABB R&D
team in Milwaukee, WI. Now in Philadelphia, he is
exploring the role of a Solutions Product Manager
in the Electrification business.
Jorge is motivated by the opportunities to con-
tinue learning, but the motivation goes beyond
that. At ABB, he can be himself at work. As a mem-
ber of the LGBTQ+ community, and the spokesper-
son of the internal employee group, Encompass
Pride, Jorge has felt welcomed by everyone at ABB
and wants others to feel as comfortable as he does
at work.
Subbaramaiah left a permanent job to join ABB on
a short-term contract. Two decades later, he is still
with ABB.
Subbaramaiah has faced many challenges in life.
He was diagnosed with polio as a child. Later he
suffered an accident that left him partially immo-
bile for a few months. Apart from his family, his
ABB colleagues provided a strong support system
at that tough time. His manager gave him time to
recover fully before resuming work, and the man-
aging director of ABB India visited him at home to
check on his health.
“ABB has stood by me, valued me, and given me ex-
cellent opportunities,” he said. “Most importantly,
the warmth, the feeling of a community here, is
unmatched.”
Z A H E R R A J A B
Automation engineer,
Electrification (Netherlands)
Zaher arrived in the Netherlands as a Syrian refu-
gee in 2015. Faced with learning a new language
and culture, different from his Arabic heritage, Za-
her embraced the challenge.
After his first job in automation, Zaher joined ABB
to have more flexibility in his job as a software spe-
cialist and to work with a diverse team of talented
engineers. By automating processes, such as the
packaging of switches, Zaher was able to increase
production efficiency. Zaher believes in continuous
learning, and that there are no limits to developing
new ideas and automating processes.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
27
FA R A H WA H I D A H M A Z L A N
Service sales engineer,
Electrification
(Malaysia)
A L I PA R V I Z I
Traction sales manager,
Motion
(Australia)
C R I S T I N A D ’ÁV I L A
Senior electrification
engineer, Process Automation
(Brazil)
Farah has always loved challenges. Getting into
the field of electrical engineering was one of them.
After completing her degree program, Farah joined
ABB to continue her development as an engineer,
and to have a positive impact on her local commu-
nity and the environment.
In 2020, she achieved a major win at ABB: securing
a multi-year service contract with one of Malay-
sia’s leading utilities. The secret was her ability to
listen and understand what the customer needed.
Farah credits her supportive colleagues and a great
working environment for keeping her motivated
to keep learning and developing as a service engi-
neer at ABB.
When Ali moved to Australia from his home country
of Iran, the future appeared risky, and very differ-
ent from the languages and culture he had grown
up with. That changed when ABB gave him an op-
portunity to join the traction business as a sales
manager. Ali’s manager gave him the freedom to
take initiatives to develop the traction business
in Australia and New Zealand.
Ali loves the opportunity of working on innova-
tive solutions with talented colleagues and win-
ning over influential customers. As a person who is
driven to learn new things, Ali has found both en-
couragement and reward at ABB, and views this as
an immense value-add of working in a truly global
company.
Cristina studied electrical engineering and took
her first career steps in Rio de Janeiro. But she felt
her career stalling, and one of the reasons was
there were very few women in the field. Cristina
did not give up, and went to São Paulo, where she
was hired by ABB to work on a project for Usimi-
nas, one of the biggest steel producers in Brazil.
Since that day 25 years ago, Cristina has been with
ABB and is still excited about her work. In her cur-
rent role in the field of electrical engineering she
is responsible for developing electrical and instal-
lation projects for the energy industry division in
Brazil. She has proudly witnessed how women are
playing a bigger role in engineering. Cristina’s ad-
vice to a younger generation of women joining
the engineering workforce is to “follow your goals,
overcome obstacles regardless of gender, and
never stop asking questions.”
28
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Electrification
WRITING THE FuTuRE OF SAFE,
SMART AND SuSTAINABLE
ELECTRIFICATION.
ABB’s Electrification business offers a wide-ranging portfolio
of products, digital solutions and services, from substation to socket,
enabling safe, smart and sustainable electrification.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
29
$13.2 bn
Revenues
16.1%
Operational EBITA margin
Market growth is driven by electricity demand that
grows two times faster than other energy sources
as a result of urbanization and population growth.
Additionally, digitalization is accelerating demand
for intelligent solutions.
The Business Area consists of the following six
Divisions:
• Distribution Solutions, GLOBAL NO. 1 IN
MEDIUM-VOLTAGE. Medium-voltage electrical
components and digital devices, medium- and
low-voltage switchgear, energy systems, digital
systems and service
• Smart Power, GLOBAL NO. 3, NO. 2 IN LOW
VOLTAGE. Low-voltage breakers & switches,
enclosures, motor starter application and power
protection
Key figures Electrification
• Smart Buildings, GLOBAL NO. 3, NO. 1–2 IN
DISTRIBUTION ENCLOSURES AND DIN-RAIL
PRODUCTS. Miniature breakers, distribution
enclosures, wiring accessories and building
automation
• Installation Products, GLOBAL NO. 1, NO. 1 IN
NORTH AMERICA. Wire & cable management,
termination, fittings and other accessories
• Power Conversion, NO. 4 IN DC POWER
SOLUTIONS. Power conversion products
including embedded power products, DC power
solutions and services (To be exited)
• E-mobility, GLOBAL NO. 1 IN EV CHARGING
SOLUTIONS. AC & DC charging hardware, B2C
& B2B digital services, advanced energy & fleet
management
$ in millions, unless otherwise indicated
FY 2021
FY 2020
US$
Comparable(2)
Orders
Order backlog (end December)
Revenues
Income from operations
Operational EBITA(1)
as % of operational revenues
No. of employees (FTE equiv.)
14,381
5,458
13,187
1,841
2,121
16.1%
50,800
11,884
4,358
11,924
1,335
1,681
14.1%
50,500
+21%
+25%
+11%
+38%
+26%
+2.0 pts
+1%
+18%
+29%
+9%
+21%(3)
% of FY 2021 third party revenues
% of FY 2021 third party revenues
End-markets(4)
4% Renewables
16% Distribution,
Conv. Generation
5% O&G, Chemicals
4% F&B
15% Other Industry
36% Buildings
7% Data Centers
13% Other T&I
35% Europe
25% USA
9% Rest of Americas
16% China
15% Rest of AMEA
Geographies
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) Growth rates for orders, order backlog and revenues are on a comparable basis (local currency adjusted for acquisitions and divestitures).
(3) Constant currency (not adjusted for portfolio changes).
(4) Management estimates.
30
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
E L EC T R I FI C AT I O N
Powering a sustainable future
ABB’s Electrification Business Area is meeting
growing demand for safe, smart and sustainable
electrification by tackling some of society’s great-
est challenges. In the face of rising emissions and
pollution, population growth and aging infrastruc-
ture, cities are having to transform themselves.
By far the most significant positive impact we can
have is through innovative technologies that re-
duce energy consumption and emissions, which
improves quality of life for citizens around the
world.
ABB technologies are found nearly everywhere
there is electricity. Operating in more than
100 countries, ABB Electrification employed
51,000 people and generated $13.2 billion in reve-
nue in 2021 through its six market-leading Divi-
sions – Smart Power, Smart Buildings, Installation
Products, Distribution Solutions, E-mobility and
Power Conversion.
Another innovation that dramatically reduces
greenhouse gas (GHG) emissions is ABB’s AirPlus™,
a groundbreaking eco-efficient gas mixture that
replaces SF6 in gas-insulated switchgear (GIS) ap-
plications. The importance of replacing SF6 cannot
be underestimated. It is one of the world’s most
powerful GHGs, 23,500 times more potent than
CO2, with a lifespan of 3,200 years. Since 2002, the
concentration of SF6 in the atmosphere has more
than doubled.
In 2021, ABB Electrification continued to introduce
new technologies to the market. In September,
we launched the world’s fastest EV charger, the
Terra 360, which can deliver 100km of range in less
than three minutes or fully charge an electric car in
15 minutes. This milestone for EV charging will sup-
port the rapidly growing global demand for emis-
sions-free vehicles and net-zero goals.
AS A LEADING PROVIDER OF ELECTRIFICATION
SOLuTIONS FOR INDuSTRY, INFRASTRuCTuRE AND
TRANSPORT – SECTORS THAT ACCOuNT FOR THREE-
QuARTERS OF GLOBAL ENERGY CONSuMPTION –
ABB ELECTRIFICATION IS A KEY ENABLER OF A LOW-
CARBON SOCIETY.
Global electricity demand is expected to more than
double by 2050. Unless drastic action is taken now
to reduce emissions from power generation and
consumption, temperatures will continue to rise at
unsustainable levels. As a leading provider of elec-
trification solutions for industry, infrastructure and
transport – sectors that account for three-quarters
of global energy consumption – ABB Elec trification
is a key enabler of a low-carbon society.
Digitalization continues to be an important driver
of the energy transition. ABB Electrification is in-
creasingly incorporating software and digital ser-
vices into its offering. The ABB Ability Market-
place™ portal provides customers with access to
over 100 cloud-connected digital applications. And
the ABB Electrification Startup Challenge invites
companies from around the globe to compete for
a $30,000 investment to work with our R&D teams.
One such technology is the ABB Ability™ Energy
and Asset Manager, which combines sensors and
analytics software to provide insights on energy
consumption and the performance of multiple sys-
tems in a factory or plant. By adopting this solu-
tion, a site that consumes 2 GWh of power per year,
can reduce annual CO2 emissions by 40 tons.
By 2030, we expect that our market-leading innova-
tions and the promising technologies in our pipe-
line will enable customers to reduce annual CO2
emissions by at least 100 megatons, equivalent
to the annual emissions of 30 million combustion
cars. As part of our “Mission to Zero” initiative, ABB
Electrification is using our innovative technologies
to make our own sites carbon neutral, while reduc-
ing emissions across our supply chain.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
31
Public transport operator, Hamburger Hochbahn
AG, is implementing a wide-reaching fleet electrifi-
cation program that includes Germany’s first fully
electrified bus terminal.
ABB’s turnkey solution included the installation
of transformer, switchgear, and heavy vehicle
charging stations in the central bus depot. These
can simultaneously recharge 44 buses, each with a
range of up to 150 km. Additionally, ABB provided
the planning and implementation of the electric in-
frastructure and the connection of the bus depot
to the grid.
—
Case studies
Cutting energy costs at Vietnam
telecommunications HQ by 20 percent
ABB’s smart technology has been key to realizing
telecom giant Viettel’s ambitions to save energy
and reduce its carbon footprint while maintaining
operational efficiency at its Vietnam headquarters.
The ABB i-bus® KNX solution in the Hanoi facility
controls all of the building’s functions, from light-
ing and shutter control to heating, ventilation, se-
curity, and energy management. The solution is
installed via a single bus interface alongside the
standard power lines.
Thanks to this ABB technology, energy costs have
been reduced by up to 20 percent, and the 1,000
people working in the building have a much more
comfortable and secure work environment. This
project sets a benchmark for how intelligent tech-
nology can reduce a building’s environmental
impact.
Enabling Germany’s first fully electrified bus
terminal
As part of Germany’s wider environmental agenda,
Hamburg is one of the first cities to commit to the
full electrification of its bus fleet. ABB Electrifica-
tion equipment is helping the city meet its goal of
cutting CO₂ emissions in half by 2030 compared
with 1990 levels.
32
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
includes everything from authorization and analyt-
ics to remote monitoring and control.
The new Terra 360 charger is not only the most
high-power charging solution in the world, but also
one of the most versatile. Designed for commercial
fleets, heavy-duty vehicles as well as electric cars, it
is capable of charging up to four vehicles at a time.
ABB charging solutions have also played a key role
in enabling the rapid transition to e-mobility of
countries like Norway, which has installed more
than 1,000 ABB fast chargers. Other countries, in-
cluding the USA, Finland, and Qatar, are also turn-
ing to ABB to support their ambitious emissions
reduction commitments. The Gulf state of Qatar in-
tends to fully electrify its public transport network
and has partnered with ABB to create one of the
largest e-bus networks in the world. A heavy vehi-
cle charging network with capacity for 1,000 elec-
tric buses to transport 50,000 passengers a day is
currently under construction, with four bus depots,
eight bus stations and 12 metro stations.
—
E-mobility – the future of road
transport
Of 46 energy technologies and sectors identified
by the International Energy Agency (IEA) as being
“critical” to achieve net-zero emissions by 2050,
only two are on track, according to the IEA: lighting
and e-mobility(1). Electric-vehicle (EV) registrations
increased by 41 percent globally in 2020, while
sales of combustion-engine cars dropped 16 per-
cent. In the first quarter of 2021, global EV sales
rose again by around 140 percent, compared to the
same period in 2020.
Rapid expansion of the world’s EV charging infra-
structure is necessary to support the burgeoning
adoption of electric vehicles. By 2040, an estima-
ted 290 million additional charging points will be
required, amounting to circa $500 billion in global
investment.
ABB invested early in its EV charging busi-
ness. Today, through hardware innovation, com-
bined with the expansion of our software and
digital offering, we are the market leader in EV
charging infrastructure, having sold more than
525,000 chargers across 85 markets, including over
25,000 DC fast chargers and 500,000 AC chargers
as of December 31, 2021. In addition, dedicated
R&D centers such as our new E-mobility Innovation
Lab in Delft in the Netherlands ensure the Divi-
sion provides charging infrastructure that not only
meets today’s needs but anticipates future e-mo-
bility requirements.
To advance EV charging technology, we are also
collaborating with leading software companies.
In 2021, ABB’s digital e-mobility venture, PANION,
and Amazon Web Services (AWS) began testing
a newly developed, cloud-based solution, “PAN-
ION EV Charge Planning”. This solution is de-
signed for the real-time management of EV fleets
and charging infrastructure and will be launched
in 2022.
ABB’s fast DC chargers run with a Connected Ser-
vices Platform, which employs Microsoft’s Azure
cloud services to enhance uptime, scalability, and
operational efficiencies and to provide real-time
remote support services. ABB’s superior offering
(1) https://www.iea.org/topics/tracking-clean-energy-progress
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
33
The number of chargers
sold across 85 markets,
including over 25,000 DC
fast chargers and
500,000 AC chargers as
of December 31, 2021.
34
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Motion
WRITING THE FuTuRE
OF MOTION.
ABB’s Motion business is the largest supplier of drives and motors,
globally. We provide customers with the complete range of electrical
motors, generators, drives, services and integrated digital powertrain
solutions.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
35
$6.9 bn
Revenues
17.1%
Operational EBITA margin
• IEC LV Motors, GLOBAL NO. 2. Comprehensive
portfolio of low voltage motors for any industry
and application, compliant with all major markets
globally
• Large Motors and Generators, GLOBAL NO. 2.
Comprehensive product portfolio of large AC
motors and generators
• NEMA Motors, GLOBAL NO. 1. Comprehensive
product portfolio of low voltage electric motors
Market growth is driven by megatrends such as
growing population, electrification, urbanization,
decarbonization and digitalization. This requires
further automation of industrial processes, energy
efficiency and electric mobility.
The Business Area consists of the following
seven Divisions:
• Drive Products, GLOBAL NO. 1. Comprehensive
product portfolio of low-voltage AC drives
• System Drives, GLOBAL NO. 1. Low- and medium-
voltage AC drives and modules, wind converters
• Service, GLOBAL NO. 1. Base services and spare
parts, upgrades & replacements, smart solutions
• Traction, GLOBAL NO. 2. Traction systems incl.
converters and motors, battery energy storage
systems, auxiliary converters
Key figures Motion
$ in millions, unless otherwise indicated
FY 2021
FY 2020
US$
Comparable(2)
Orders
Order backlog (end December)
Revenues
Income from operations
Operational EBITA(1)
as % of operational revenues
No. of employees (FTE equiv.)
7,616
3,749
6,925
3,276
1,183
17.1%
20,100
6,574
3,320
6,409
989
1,075
16.8%
20,900
+16%
+13%
+8%
+231%
+10%
+0.3 pts
-4%
+14%
+20%
+7%
+6%(3)
% of FY 2021 third party revenues
% of FY 2021 third party revenues
End-markets(4)
7% Conv. Generation,
Renewables
11% O&G, Chemicals
16% Mining, Metals
8% Water
& Wastewater
11% F&B
21% Other Industry
13% Buildings
8% Rail
5% Other T&I
31% Europe
30% USA
6% Rest of Americas
18% China
15% Rest of AMEA
Geographies
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) Growth rates for orders, order backlog and revenues are on a comparable basis (local currency adjusted for acquisitions and divestitures).
(3) Constant currency (not adjusted for portfolio changes).
(4) Management estimates.
36
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
M OT I O N
Helping customers become
energy efficient
In 2021, ABB Motion launched the Energy Effi-
ciency Movement, a multi-stakeholder initiative
both to raise awareness of the advanced technol-
ogies that can mitigate climate change, and drive
collective action to reduce energy consumption
worldwide. At this critical moment for the climate,
roughly 45 percent of the world’s electricity is used
to power electric motors in industry and buildings,
and much of the installed base is out of date and
inefficient.
ABB Motion enables major improvements in energy
efficiency for industry, cities and transport with its
leading portfolio of variable-speed drives, motors,
generators, traction systems and digital services.
Investing in more efficient technology is one of the
simplest and most cost-effective ways to lower en-
ergy consumption and associated greenhouse gas
emissions. As businesses and transport networks
seek to bridge the gap that divides us from a fos-
sil-free future, we offer our customers practical
and proven technologies that help.
Our deep domain expertise, comprehensive offer-
ing and unmatched global presence make ABB Mo-
tion the partner of choice for customers seeking
the best solutions and support. In 2021, Motion
employed 20,000 people and generated $6.9 bil-
lion in revenue. With the largest research and de-
velopment budget in the industry, we are consis-
tently pushing the boundaries of motor and drive
technology for the benefit of our customers and
society.
Packaging a modern motor with an ABB drive op-
timizes its operation leading to even greater ef-
ficiency. Drives control the speed and torque of
a motor to match the load requirements, typi-
cally reducing energy consumption by 25 percent
or more in industrial applications. ABB’s advanced
drive offerings include our line of ultra-low-har-
monic drives, which minimize electromagnetic dis-
turbances in power networks, resulting in more re-
liable operations, reduced maintenance needs and
higher efficiency.
Serving a wide range of applications with
efficient solutions
Transport represents another field of opportu-
nity for the latest electric motion technologies:
It accounts for about 25 percent of the world’s en-
ergy use, and more than 99 percent of that cur-
rently depends on the combustion of fossil fu-
els. ABB Motion provides a variety of solutions
for modern electric mobility, including systems
used in electric trains, buses, ships and other
heavy vehicles that are increasingly being pow-
ered by electricity. Our state-of-the-art traction,
energy storage and e-drivetrain technologies en-
able energy-efficient and emission-free mobility
in numerous transit systems, rail networks and
vehicle fleets.
Alongside our technologies, we deliver a compre-
hensive range of services and digital solutions to
maximize uptime, extend product lifecycles and
INVESTING IN MORE EFFICIENT TECHNOLOGY IS ONE
OF THE SIMPLEST AND MOST COST-EFFECTIVE WAYS
TO LOWER ENERGY CONSuMPTION AND ASSOCIATED
GREENHOuSE GAS EMISSIONS.
ABB’s portfolio includes the most energy-efficient
motors and drives on the market. Among these is
a synchronous reluctance (SynRM) motor and drive
package that has set a new standard for efficiency.
The SynRM motor meets the IE5 ultra-premium ef-
ficiency rating, providing the performance advan-
tages of permanent magnet technology without
using rare earth materials.
enhance the performance and efficiency of motors
and drives. By tailoring our service offering and
solutions to our customers’ needs, we help them
run their operations more profitably, safely and re-
liably, allowing them to better take advantage of
new business opportunities.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
37
ABB motors and drives reduce power
consumption at leading fertilizer company
To improve energy efficiency at its largest produc-
tion site, Norwegian mineral fertilizer producer,
Yara, is upgrading its electric motors with high
efficiency ABB drives and motors.
As part of a global frame agreement, Yara has al-
ready upgraded around 1,000 motors to an IE3 ef-
ficiency rating, mostly with drives. In the next step,
some 2,500 motors will be replaced with IE5 SynRM
motor and drive technology. Nearly 70 percent of
these applications are for pumps and fans, which
offer significant room for energy savings. The an-
nual power savings at the Yara Porsgrunn site in
Norway are expected to be in the region of 32–
40 GWh, leading to CO2 emissions reductions of
12–19 kilotons. In addition, Yara expects to save
some €300,000 per year in maintenance costs
due to lower wear and tear.
The Yara Porsgrunn site is also part of a project
with ABB and Stena Recycling to recycle copper,
aluminum and iron from old motors, helping to
support the circular economy.
—
Case studies
Synchronous condensers for greener energy
ABB is working closely with Statkraft, Europe’s
largest generator of renewable energy, to design,
manufacture and install two high-inertia syn-
chronous condenser systems for the Lister Drive
Greener Grid project in Liverpool, England. The in-
novative project will play a key role in stabilizing
the local electricity network to handle an increas-
ing amount of wind and solar power. This will help
National Grid meet its target of operating a ze-
ro-carbon electrical system in the UK by 2025.
Statkraft has signed a 10-year service contract
with ABB in which we will deploy digital condition
moni toring solutions that optimize performance
and predict maintenance needs. By assessing real-
time data with cloud-based analytics, our service
team will be able to plan corrective actions before
issues occur, ensuring the system is highly reliable.
ABB traction technology to increase efficiency
of Germany’s high-speed trains
ABB traction converters were selected in 2021 to
upgrade 76 high-speed locomotives on Germany’s
Deutsche Bahn network. As part of a refurbishment
program, our highly energy-efficient traction con-
verters are replacing power electronics from the
1990s. Upgrading the existing fleet will help extend
its operating life and improve energy efficiency, re-
liability and ease of maintenance.
38
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Process Automation
WRITING THE FuTuRE
OF SAFE, SMART AND
SuSTAINABLE OPERATIONS.
ABB’s Process Automation business offers a broad range of solutions
for process and hybrid industries, including integrated automation,
electrification and digital solutions, control technologies, software
and lifecycle services, as well as measurement and analytics, marine
and turbocharging offerings.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
39
$6.3 bn
Revenues
12.8%
Operational EBITA margin
Market growth is driven by need for productivity,
reliability and improved resource efficiency as well
as increasing demand for decarbonized operations
and safer workplaces.
• Marine & Ports, GLOBAL NO. 1. Azipod®
propulsion, ship and port electrification
& automation, digital
• Measurement & Analytics, NO. 1 IN
The Business Area consists of the following five
Divisions:
ANALYTICS, FORCE MEASUREMENT, NO. 2–5 IN
INSTRUMENTATION. Gas and liquid analyzers,
field instrumentation, force measurement,
digital, service
• Energy Industries, NO. 1–2 IN DISTRIBUTED
• Turbocharging, NO. 1 IN LOW AND MEDIUM
SPEED. Low, medium and high speed
turbochargers, service, digital solutions
(To be exited)
CONTROL SYSTEMS, NO. 1 IN POWER
GENERATION, NO. 3–5 IN OIL, GAS, CHEMICALS.
Integrated automation & electrical systems,
safety, service and digital solutions
• Process Industries, NO. 1 IN DISTRIBUTED
CONTROL SYSTEMS, NO. 1–2 MINING, PULP
& PAPER. Automation, electrical & motion
systems; quality control, mine hoists, gearless
mill drives, high power rectifiers, electromagnetic
stirrers
Key figures Process Automation
$ in millions, unless otherwise indicated
FY 2021
FY 2020
US$
Comparable(2)
Orders
Order backlog (end December)
Revenues
Income from operations
Operational EBITA(1)
as % of operational revenues
No. of employees (FTE equiv.)
6,779
6,079
6,259
713
801
12.8%
22,000
6,144
5,805
5,792
344
451
7.8%
22,200
+10%
+5%
+8%
+107%
+78%
+5.0 pts
-1%
+7%
+10%
+5%
+70%(3)
% of FY 2021 third party revenues
% of FY 2021 third party revenues
End-markets(4)
15% Conv. Generation,
Renewables
14% O&G
11% Chemicals &
refinery
22% Mining, Metals,
Pulp & Paper
13% Other Industry
22% Marine & Ports
3% Other
39% Europe
13% USA
10% Rest of Americas
12% China
26% Rest of AMEA
Geographies
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) Growth rates for orders, order backlog and revenues are on a comparable basis (local currency adjusted for acquisitions and divestitures).
(3) Constant currency (not adjusted for portfolio changes).
(4) Management estimates.
40
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
P R O C E S S AU TO M AT I O N
Supporting a prosperous,
low-carbon society
Demand for energy and material is expanding in
step with the world’s population growth and the
pursuit of higher living standards. At the same
time, there is a need to reduce harmful emissions
from human activity.
ABB’s Process Automation Business Area supports
industries that address a wide range of essential
needs – from supplying energy and water to manu-
facturing goods and transporting them to market.
Through our automation, electrification and digital
technologies, we help our customers in industry,
transport and infrastructure sectors improve the
safety, efficiency and sustainability of their opera-
tions. With our R&D and innovation pipeline, we are
continuing to push the boundaries of how to ad-
dress the world’s energy challenges and contribute
to a circular economy, together with our partners
and customers.
With 22,000 employees and $6.3 billion in revenue
in 2021, Process Automation enables efficient oper-
ations that are safer, smarter and more sustainable
over the lifecycle of its customers’ investments –
some of the largest and most complex industrial
infrastructures on the planet. Key to this is the ex-
tensive portfolio of solutions combined with the
deep domain expertise of our five Divisions –
Energy Industries, Process Industries, Marine &
Ports, Measurement & Analytics, and Turbocharg-
ing. Our solutions include industry-specific prod-
ucts such as mine hoists, gearless mill drives, ma-
expand our solutions and portfolio with Industry
4.0 advances. Our Business Area is a trusted part-
ner for customers at every stage of their digitaliza-
tion journey, enabling them to maximize their ex-
isting investments and installed infrastructure as
well as integrate new digital solutions, to take “bil-
lions of better operational decisions”.
In 2021, in response to the challenges of the
COVID-19 pandemic, the use of digital technologies
for remote monitoring and control of operations
became the “new normal”. Today, ABB’s remote
technologies serve a growing number of custom-
ers with asset health monitoring, predictive ana-
lytics, enterprise-wide emissions tracking, and con-
tinuous access to service expertise, while enabling
consistent cost reductions and improvements in
productivity and safety. Our ABB Ability™ Collab-
orative Operations network provides 24/7 re-
mote support to more than 1,500 ships, 80 mines,
300 power generation sites and over 1,200 other
industrial facilities. Also in 2021, this remote sup-
port was critical to keeping critical infrastructure
and production running, and people connected
during expansive lockdown periods.
Pushing the boundaries of process technologies
In 2021, we released new applications as part of
the ABB Ability™ Genix Industrial Analytics and AI
Suite. ABB Ability™ Genix Datalyzer enables com-
prehensive analysis, consolidation, and utilization
WE ENABLE INDuSTRY TO OPERATE SAFELY,
EFFICIENTLY AND SuSTAINABLY – MAKING A WORLD
OF DIFFERENCE TOGETHER.
rine propulsion systems, high power rectifiers, or
paper quality control systems, but also an indus-
try-agnostic automation platform in Distributed
Control Systems (DCS), where ABB has been the
market leader for the past 22 years. All our solu-
tions are supported by a wide range of advanced
systems, remote and digital services.
Leveraging digitalization
of emissions data from industrial plants, helping
customers manage their emissions and improve
environmental compliance while keeping costs un-
der control. ABB Ability™ Genix Asset Performance
Management (APM) consolidates ABB’s asset man-
agement portfolio into a single powerful system,
providing actionable insights that help improve
equipment utilization.
Connectivity has been at the heart of our solutions
for decades. Over the years, we have accelerated
the use of digital technologies to continuously
In another major advance, Process Automation
launched ABB Ability eMine™, a portfolio of solu-
tions that makes the all-electric mine a reality. It
deploys a range of fully integrated electrification,
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
41
automation and digital systems from mine to
port. The benefits of all-electric mining are signif-
icant. Electrifying a single mining truck eliminates
an amount of CO₂ emissions per year that would
take 46,000 trees to absorb.
The launch of the world’s fastest, most sensitive
drone-based gas leak detection and emissions
measure ment system, HoverGuard™, was yet an-
other important milestone of 2021. HoverGuard™
is capable of reliably detecting, quantifying and
mapping leaks of greenhouse gases from nat-
ural gas pipelines and other potential sources
from distances of up to 100 meters. In doing so,
it can play a critical role in helping industry, cities
and communities to reduce emissions and curb
climate change.
—
Case studies
A partnership to make green hydrogen more
affordable
Cost is currently a major barrier to the widespread
adoption of green hydrogen, which is about three
to six times more expensive than hydrogen pro-
duced using fossil fuels. In June 2021, ABB joined
forces with Switzerland’s largest producer of re-
newable energy, Axpo, to develop modular hydro-
gen production plants in Italy, with the goal of pro-
ducing affordable green hydrogen. ABB is building
on its capabilities in automation, electrification
and industrial operations, and combining them
with Axpo’s experience as an energy provider. The
work will include feasibility studies and exploring
strategies for the standardization, modularization,
and efficient production of hydrogen solely from
renewable resources.
Equipping an all-electric ferry service in Lisbon
In the Portuguese capital, Lisbon, ABB is partner-
ing with shipbuilder Astilleros Gondán GRP Division
to replace 10 diesel-powered vessels of the public
ferry operator Transtejo, S.A. with an all-electric
fleet. The new vessels, operating across the Tagus
River, will begin to enter service in 2022. ABB will
deliver a comprehensive electric power solution, in-
cluding energy storage, and an integrated marine
and propulsion automation system. Increased elec-
trification of transport, including river vessels, will
play a key role in helping Portugal meet its goal of
achieving carbon neutrality by 2050. ABB estimates
that the new electric ferries will cut CO2 emissions
by about 6,500 tons every year.
Using paper mill technology to enable a more
efficient way to recycle textiles
ABB was chosen to deliver an integrated automa-
tion, electrification, motion and quality control sys-
tem for Renewcell’s new industrial textile recycling
production facility in Sweden. Renewcell, a special-
ist in textile-to-textile recycling, is using the ABB
solution to transform a former paper mill into the
world’s first commercial-scale recycling plant for
cellulosic textiles, which are manufactured by dis-
solving natural fibers. The process for recycling
these materials is similar to pulp drying, as the cel-
lulose in cotton and viscose textiles is broken down
for reuse in new materials. The recycled textiles
would otherwise have been disposed of in landfills
or incinerated.
42
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Robotics & Discrete Automation
WRITING THE FuTuRE
OF FLEXIBLE AuTOMATION
AND SMART MACHINES.
ABB’s Robotics & Discrete Automation business provides products,
software and solutions in robotics, machine, and factory automation.
Our unparalleled expertise and the seamless integration of our
products enable customers from all industries to unlock flexible
automation. With our global presence in sales, engineering, and
service, we support our customers at every step of their growth
journey.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
43
$3.3 bn
Revenues
10.8%
Operational EBITA margin
Market growth driven by megatrends of individual-
ized consumers, labor shortage, digitalization and
uncertainty. Resulting in need for automation solu-
tions for increased productivity, highest flexibility,
improved quality and maximum simplicity.
• Machine Automation, GLOBAL NO. 5, NO.
2 IN HIGH-END SEGMENT. Solutions based
on Programmable Logic Controllers (PLCs),
Industrial PCs (IPCs), servo motion, industrial
transport systems and vision, software
The Business Area consists of the following
two Divisions:
• Robotics, GLOBAL NO. 2. Robots, robotics
application cells and smart systems, field
services, spare parts, digital services and
software
Key figures Robotics & Discrete Automation
$ in millions, unless otherwise indicated
FY 2021
FY 2020
US$
Comparable(2)
Orders
Order backlog (end December)
Revenues
Income from operations
Operational EBITA(1)
as % of operational revenues
No. of employees (FTE equiv.)
3,844
1,919
3,297
269
355
10.8%
10,600
2,868
1,403
2,907
-163
237
8.2%
10,300
+34%
+37%
+13%
n.a.
+50%
+2.6 pts
+3%
+29%
+43%
+9%
+43%(3)
% of FY 2021 third party revenues
% of FY 2021 third party revenues
33% Automotive
7% Electronics
23% General Industry
10% CSSR(5)
28% Machine
Automation
Geographies
48% Europe
9% USA
4% Rest of Americas
29% China
10% Rest of AMEA
End-markets(4)
(1) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(2) Growth rates for orders, order backlog and revenues are on a comparable basis (local currency adjusted for acquisitions and divestitures).
(3) Constant currency (not adjusted for portfolio changes).
(4) Management estimates.
(5) Consumer Segments and Service Robotics.
44
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
R O B OT I C S & D I S C R E T E AU TO M AT I O N
Opening a new world of possibilities
with flexible automation
With 11,000 employees and $3.3 billion in reve-
nue in 2021, ABB Robotics & Discrete Automation
is a pioneer in robotics, machine automation and
digital services, providing innovative solutions for
a diverse range of industries. The Business Area
supports automotive OEMs, automotive tier 1 sup-
pliers, electronics manufacturers, general industry
and the consumer and service robotics segments
and provides machine automation solutions for
machine builders.
Against the backdrop of the Covid-19 pandemic
and resulting acceleration in global mega trends
– from labor shortages, to consumer demand for
personalized products and growing pressure to op-
automotive market, our new fast and precise Ul-
trasonic Spot Weld quality inspection offers a 20x
increase in productivity, using cutting edge AI and
ultrasound technology.
Our Machine Automation division launched an in-
novative magnetic levitation shuttle system, ACO-
POS 6D, offering up to four times the shuttle den-
sity of other systems on the market.
In addition, we have continued to develop solutions
targeting new, high-growth customer segments
including e-commerce, laboratories and logis-
tics. These segments offer double-digit, profit-
able growth by increasing automation levels with
AT ABB ROBOTICS & DISCRETE AuTOMATION, WE ARE
LEADING THE TRANSFORMATION TO AuTOMATION AND
HELPING OuR CuSTOMERS REALIZE NEW POSSIBILITIES
AND OPPORTuNITIES.
erate sustainably – businesses across the board
are seeking to adapt their processes. In a survey
of 1,650 large and small businesses in the United
States, Europe and China, 84 percent(1) said that
they will introduce or increase the use of robotics
and machine automation in the next decade, with
flexibility becoming a strategic need.
Our intelligent robotics solutions support busi-
nesses well beyond traditional manufacturing, in-
creasing productivity and flexibility in high-growth
segments including healthcare, logistics, food
and beverage, construction and retail, including
ecommerce.
Strategic expansion in 2021
Throughout 2021, we successfully expanded both
our market and our offer.
We launched more than 20 major new products,
covering a broad range of applications across mul-
tiple industries. Our new OmniCore™ robot con-
trollers offer faster, scalable, more energy effi-
cient manufacturing, while the speed of our new
IRB 920T SCARA robot helps customers in elec-
tronics launch new products faster. In our core
our value-adding, flexible automation solutions.
We have made strong progress in our efforts to
support long-term profitability by reducing expo-
sure to the automotive systems business.
This current and future market expansion is under-
pinned by significant steps to broaden our technol-
ogy and application leadership.
In February, we announced a new generation of
stronger, faster collaborative robots that can work
side-by-side with people on a broad range of tasks,
dramatically expanding the reach of robotics au-
tomation and unlocking potential for sectors and
businesses that have not previously had the oppor-
tunity to automate.
We further expanded our portfolio of flexible au-
tomation solutions in August by completing the
acquisition of ASTI Mobile Robotics Group, which
has the lar gest installed fleet of autonomous mo-
bile robots (AMRs) in Europe, and a broad cus-
tomer base in 20 coun tries. The market for AMRs
has sig nificant growth potential, with global sales
expected to reach $14 billion by 2025, a CAGR of
approximately 20 percent.
(1) The survey, commissioned by ABB, was conducted by 3Gem Global Market Research & Insights between December 26, 2020, and January 19, 2021.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
45
This acquisition means we are now the only com-
pany with a comprehensive and integrated portfo-
lio covering robots, AMRs and machine automation
solutions, designed and orchestrated by our val-
ue-creating software.
In November, we took another step to enhance our
AMR offering, announcing a strategic partnership
and investment with Swiss-based start-up, Seven-
sense Robotics. Their AI and 3D vision mapping
software will enable our mobile robots to navigate
autonomously in complex, dynamic environments,
helping to drive the next generation of flexible au-
tomation for our customers.
We continue to expand our software portfolio, for
example enhancing our RobotStudio® simulation
and programming software with a new Augmented
Reality capability, advancing our integration of dig-
ital and physical worlds, and creating an intuitive,
easy to use interface for new customers. 2021 saw
double digit growth for RobotStudio®, doubling
the number of active users.
Contributing to a brighter future
At Robotics & Discrete Automation, we provide
solutions that free people from dull, dirty, danger-
ous and repetitive tasks, enabling them to develop
their skills and pursue more fulfilling occupations.
At the same time, we help our customers save en-
ergy, reduce waste and extend the lifetime of their
equipment with solutions that increase product
quality and durability.
workplaces safer and healthier, and contribute to a
more sustainable future.
—
Case studies
A ground-breaking factory transport system
In 2021, our Machine Automation division launched
ACOPOS 6D, a rail-free product transport system,
with intelligent shuttles that move independently
between stations. Unlike conventional systems,
the solution is not limited to rigid, sequential pro-
cesses. The solution integrates magnetic levitation
techno logy from Planar Motors Inc. (PMI) and helps
customers transition to producing smaller batch
sizes and shorter product lifecycles. The healthcare
and pharmaceutical sectors, in particular, stand
to benefit from this highly flexible manufacturing
solution.
A vision for sustainable packaging
ABB Robotics & Discrete Automation is helping to
address the problem of plastic waste by collabo-
rating with Zume, a provider of innovative sus-
tainable packaging solutions, to create fully com-
postable packaging from plant-based agricultural
waste. Over the next five years, ABB robots will be
installed in more than 1,000 Zume packaging man-
ufacturing cells worldwide, with the potential to
turn thousands of tons of plant material into mil-
lions of pieces of sustainable packaging every year.
Our vision is of a world where robots are as famil-
iar in the workplace as laptops or smartphones,
and where, by collaborating with humans, robots
help make work more rewarding and productive,
With Zume’s solutions, enabled by ABB robots, we
can potentially replace single-use plastics, reducing
emissions, preserving scarce resources, and cut-
ting plastic waste.
46
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Share developments
ABB Ltd share price trend during 2021
Dividends and total shareholder return
During 2021, the price of ABB Ltd shares listed on
the SIX Swiss Exchange increased 41 percent, while
the Swiss Market Index increased 20 percent. The
price of ABB Ltd shares on NASDAQ OMX Stock-
holm increased 51 percent, compared to the OMX
30 Index, which increased 29 percent. The price of
ABB Ltd American Depositary Shares traded on the
New York Stock Exchange increased 37 percent,
compared to the S&P 500 Index, which increased
27 percent.
During 2021, ABB distributed a dividend of
0.80 Swiss francs per share to shareholders. To-
tal shareholder return of ABB Ltd shares listed on
the SIX Swiss Exchange was 45 percent during the
year. With respect to the year ended December 31,
2021, ABB Ltd’s Board of Directors has proposed
to distribute a dividend to shareholders in the
amount of 0.82 Swiss francs per share. This is sub-
ject to approval by shareholders at ABB Ltd’s 2022
Annual General Meeting. The proposal is in line
with the Company’s dividend policy to pay a rising,
sustainable dividend per share over time.
Key data
Dividend per share (CHF)
Votes per share
Basic earnings per share (USD)(2)
Total ABB stockholders’ equity per share (USD)(3)
Dividend payout ratio (%)(4)
Weighted-average number of shares outstanding (in millions)
2021
0.82(1)
1
2.27
7.96
40%
2,001
2020
0.80
1
2.44
7.72
37%
2,111
2019
0.80
1
0.67
6.34
123%
2,133
(1) Proposed by the Board of Directors and subject to approval by shareholders at the Annual General Meeting on March 24, 2022.
(2) Calculation based on weighted-average number of shares outstanding.
(3) Calculation based on the number of shares outstanding at December 31.
(4) Dividend per share (converted to U.S. dollars at year-end exchange rates) divided by basic earnings per share.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
47
Share developments
—
Source: FactSet
Zurich
Average daily traded number of shares: 4,75 millions
Stockholm
Average daily traded number of shares: 1,04 millions
Year end:
345.4
High: 348.5
CHF
38
36
34
32
30
28
26
24
22
Low: 24.71
Year end:
34.90
High: 35.18
SEK
380
360
340
320
300
280
260
240
220
Low: 229.0
1
2
0
2
n
a
J
1
2
0
2
b
e
F
1
2
0
2
r
a
M
1
2
0
2
r
p
A
1
2
0
2
y
a
M
1
2
0
2
n
u
J
1
2
0
2
l
u
J
1
2
0
2
g
u
A
1
2
0
2
p
e
S
1
2
0
2
t
c
O
1
2
0
2
v
o
N
1
2
0
2
c
e
D
1
2
0
2
n
a
J
1
2
0
2
b
e
F
1
2
0
2
r
a
M
1
2
0
2
r
p
A
1
2
0
2
y
a
M
1
2
0
2
n
u
J
1
2
0
2
l
u
J
1
2
0
2
g
u
A
1
2
0
2
p
e
S
1
2
0
2
t
c
O
1
2
0
2
v
o
N
1
2
0
2
c
e
D
ABB
Swiss Market Index Rebased
ABB
OMX Stockholm 30 Index Rebased
New York
Average daily traded number of shares: 1,45 millions
Year end:
38.17
High: 38.65
USD
42
40
38
36
34
32
30
28
26
Low: 27.96
1
2
0
2
n
a
J
1
2
0
2
b
e
F
1
2
0
2
r
a
M
1
2
0
2
r
p
A
1
2
0
2
y
a
M
1
2
0
2
n
u
J
1
2
0
2
l
u
J
1
2
0
2
g
u
A
1
2
0
2
p
e
S
1
2
0
2
t
c
O
1
2
0
2
v
o
N
1
2
0
2
c
e
D
ABB
S&P 500 Index Rebased
48
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Cash generation and
capital allocation
During 2021, ABB delivered a very strong cash flow
for the full year. Cash flow from operating activities
in continuing operations was $3,338 million, 78 per-
cent higher year-on-year. The increase was driven
by improved profitability from all Business Areas, a
strong focus on net working capital management
as well as fewer items impacting comparability, in-
cluding transformational impacts such as restruc-
turing or separation costs and cash outflow in the
prior year due to the Kusile settlement and pension
plan transfers. Cash flow volatility between quar-
ters declined during 2021 – a result of a high focus
on net working capital management.
Free cash flow (FCF)(1)(2) was $2,603 million, 159
percent higher on a year-on-year basis, and FCF
conversion to net income(2) 108 percent despite 11
percent revenue growth.
The Group’s benchmark for the measurement of re-
turns is Return on Capital Employed (ROCE)(2). The
Group’s ROCE significantly increased to 14.9 per-
cent, from 10.3 percent in 2020, just shy of ABB’s 15
– 20% target range. The improvement was driven
by a higher Operational EBITA(2) and a lower ad-
justed group effective tax rate compared to 2020.
The Group’s ROCE was negatively impacted by
Free cash flow and conversion rate
USD bn
4
3
2
1
0
approximately 120 basis points due to the 19.9%
ownership interest in Hitachi Energy.
Return on Capital Employed
%
18
16
14
12
10
8
2017
2018
2019
2020
2021
ROCE(2)(3)
Impact of PG JV ownership interest
Target range 15–20%
%
250
200
150
100
50
2017
2018
2019
2020
2021
Free cash flow(1)
% of net income(1)
(1) Amount represents total for both continuing and discontinued operations.
(2) For non-GAAP measures, see the “Supplemental information” section of this annual report.
(3) 2021, 2020 and 2019 are not comparable to 2018 and 2017 due to the adoption of the new lease accounting stan-
dard in 2019.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
49
with a broad portfolio across all major applications
enabled by the company’s software suite.
In April 2021, ABB launched a follow-up share buy-
back program of up to $4.3 billion to return to
shareholders cash proceeds following the comple-
tion of the sale of 80.1 percent of the Power Grids
business to Hitachi. Through this follow-up buy-
back program, the Company purchased shares in
2021 for approximately $2.0 billion. Together with
the initial share buyback program, which ran from
July 2020 to March 2021, ABB spent approximately
a combined $2.7 billion during the year 2021. ABB
plans to continue its share buybacks for the full
year of 2022, also in excess of the Power Grids capi-
tal return program.
ABB’s capital allocation priorities are:
• Fund organic growth, research and development
(R&D), capex at attractive returns
• Rising, sustainable dividend per share over time
• Value-creating acquisitions
• Returning additional cash to shareholders
ABB invested $820 million in capital expenditure.
Non-order related R&D investment was $1,219 mil-
lion in 2021 or 4.2 percent of revenues for the year.
ABB paid $1,726 million in dividends during 2021.
The Board of Directors is proposing a 0.82 Swiss
francs dividend per share at the 2022 Annual Gen-
eral Meeting. The proposal is in line with ABB’s divi-
dend policy of paying a rising, sustainable dividend
per share over time.
In April 2021, the E-mobility Division acquired a
majority stake in Enervalis, a smart energy control
platform company. In August 2021, the Robotics Di-
vision acquired ASTI Mobile Robotics Group, a lead-
ing global autonomous mobile robot manufacturer
Allocation of Capital
Dividends
2017–2021 USD bn
10
8
6
4
2
0
CHF
0.84
0.82
0.80
0.78
0.76
0.74
Organic investment(1) (capital expenditure, R&D)
Dividends
Non-organic investment
Share buybacks
2017
2018
2019
2020
2021(2)
Dividend per share
(1) Continuing operations only.
(2) Proposed.
50
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
—
Key investor questions 2021
Q You have moved to a decentralized
operating model during 2020 and 2021 –
The ABB Way – is this now fully implemented?
A We have come a long way and have reached
important milestones. Under the ABB Way,
the Divisions represent the highest level of op-
erating decisions ensuring speed and customer
focused decisions as they are closest to the mar-
kets. A lean corporate only focuses on necessary
strategic, financial and governance activities. The
Divisions are fully accountable for their perfor-
mance and the divisional targets are aligned with
their strategic mandate of stability, profitabil-
ity before growth. To complement the decentral-
ized operating model, we apply an improved per-
formance management system. This facilitates
transparency on divisional and Business Area
performance, based on a standardized set of Key
Performance Indicators. To fully complete the de-
centralized way of working at ABB, our focus area
in 2022 will be to make sure that we also have ac-
countability, transparency and speed within all
of the Divisions. In many cases, it makes sense to
drive global accountability even one level lower
for product groups within Divisions and here we
still have potential to improve.
cent Operational EBITA margin in 2023?
Q What are the levers to reach at least 15 per -
A We have made strong progress towards our
profitability target during 2021, improv-
ing the Operational EBITA margin from 11.1% in
2020 to 14.2% in 2021. This was driven by bet-
ter results in all Business Areas, supported by in-
creased efficiency, good volumes and part of the
cost base still running at lower “pandemic levels”,
as well as clearly lower corporate costs and lower
specific items which impact comparability. We
see further potential in all of our Business Areas.
Six out of 18 Divisions (excluding Divisions that
we plan to exit) have a strategic mandate to sta-
bilize their business or improve profitability. The
remaining 12 Divisions are incentivized to drive
profitable growth and therefore improve the mix
of the Group. All Divisions have an annual pro-
ductivity target of 3 percent per annum and will
focus on pushing through strategic pricing ac-
tions and further improve operational efficien-
cies including footprint optimizations. Addition-
ally, the exit of our non-core business will also be
an important driver.
A B B A N N U A L R E P O R T 2 0 2 1
0 1 I N T R O D u C T I O N
51
Q You are now targeting 3 to 5 percent
comparable growth through the cycle,
clearly above what you have achieved over the
last five years. What has changed?
A In recent years, we have taken significant
organic and inorganic actions to align our
business portfolio to more attractive growth
markets, increasing our focus on discrete indus-
tries as well as transport and infrastructure that
offer better growth opportunities. This ongoing
shift towards better quality of revenues is part
of ABB’s DNA which centers around resource-
efficiency in electrification and automation. Ad-
ditionally, the responsibility for growth has now
been fully transferred into the businesses, close
to customers. Divisions have the best insights
into current and future customer needs and are
accountable to build their respective business
accordingly. With more Divisions transitioning
from stability and profitability to growth over
time, we expect to see a continuous shift in the
growth profile of ABB. Finally, the underlying de-
mand for our products, systems and services is
supported by the escalating drivers from sus-
tainability megatrends with more favorable regu-
lations, improved technology and changing con-
sumer patters.
Q What is the timeline for the remaining port-
folio actions after the divestment of the
Mechanical Power Transmission Division?
A Active portfolio management is part of our
performance culture. On the back of sys-
tematic portfolio reviews we ascertain whether
ultimately ABB is the best owner of the differ-
ent businesses. As a result, we successfully di-
vested the Mechanical Power Transmission Divi-
sion during 2021. We continue to make progress
on the exit of the Turbocharging Division, where
we are currently running a dual track process for
a spin-off or divestment with a spin-off currently
looking more likely and a preliminary timeline for
summer 2022. We plan to exit the Power Conver-
sion Division during H2 2022 upon improving per-
formance. In addition, we target to complete the
legal separation of the E-mobility Division during
Q1 2022 and work towards an IPO in Q2 2022 to
create a platform for accelerated growth and
value creation. We plan to remain a clear majority
owner of the new company. At the same time, our
active portfolio management process is driving
decisions within the Divisions to improve or exit
areas of underperformance, supporting improved
performance ambitions. Further, the Group in-
tends to pursue strategic partnerships as well as
bolt-on acquisitions driven by the Divisions. Over
time it is our ambition to complete approximately
five bolt-on acquisitions each year.
Q You ended the year 2021 with a net cash
position and have significantly improved
your cash generation. What are your capital
allocation priorities?
A We reiterate our capital allocation principles,
which are 1) funding organic growth, 2) pay-
ing a rising, sustainable dividend per share over
time, 3) investing in value creating acquisitions
and 4) returning additional cash to shareholders,
which we have mainly done through buybacks in
the past. We expect that our improved cash gen-
eration on the back of the ABB Way operating
model will enhance our flexibility to invest in both
organic growth and bolt-on acquisitions, while
providing attractive returns to shareholders. We
aim to increase the pace of acquisitions going for-
ward, adding technology, digital know-how and
further improve geographical footprint. Addition-
ally, we plan to continue our share buybacks for
full year of 2022, also in excess of the PG capital
return program.
Q How are you managing the various supply
chain imbalances that you are currently
facing?
A Under the ABB Way, the Divisions are in the
lead to manage the supply chain imbalances.
Mitigating measures include Divisions cooperat-
ing where it is an advantage to pool supply vol-
umes and put the combined ABB weight behind
supply chain negotiations, including C-suite dis-
cussions where needed. Disruptions towards the
end of the year were tangible, predominantly in
semiconductor shortages but also in logistics.
2022?
Q What are your expectations for ABB in
A In full year 2022, we expect a steady mar-
gin improvement towards the 2023 target of
at least 15%, supported by increased efficiency
as we fully incorporate the decentralized operat-
ing model and performance culture in all our di-
visions. Furthermore, we expect support from an
anticipated positive market momentum and our
strong order backlog.
02
Corporate
governance
report
54 Chairman’s letter
56 Summary of corporate governance approach
56 Board of Directors
62 Executive Committee
64 Shares
66 Shareholders
69
Independent external auditors
70 Other governance information
54
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
—
Chairman’s letter
Dear Shareholders,
2021 was another turbulent year, due to continued
outbreaks of COVID-19. However, our high level of
preparedness helped us protect our people and
keep our operations running. Strong demand
boosted our order and revenue growth, but
supply-chain disruptions caused delays in deliver-
ies to customers in the second half of the year.
Overall, we are pleased with ABB’s financial
performance, which has improved significantly
compared with pre-pandemic times.
Against that backdrop, we continued to transform
ABB by moving accountability to our Divisions,
increasing efficiency, making our operations safer
and more sustainable, and redesigning our leader-
ship development and succession planning. We
also plan to spin off our Turbocharging Division
and separately list our E-mobility business. With
these steps, we are living up to our Purpose of
creating superior, sustainable value, and strength-
ening our focus on electrification and automation,
both of which are key technologies to reduce
emissions and enable a more sustainable future.
Sustainability strategy 2030
In 2021, we began implementing our 2030 sustain-
ability strategy, with the focus on reducing
CO2-equivalent emissions across our value chain.
In the past two years, we have reduced emissions
from our own operations by 39 percent, putting
us well on track to achieve our goal of carbon
neutrality by 2030. In the years ahead, we can
make an even bigger contribution in our custom-
ers’ operations through many of our technologies
like ABB’s energy-efficient electric motors and
drives and electric-vehicle charging solutions. By
2030, we aim to help our customers reduce their
annual CO2-equivalent emissions by 100 mega-
tons, equivalent to the annual emissions of 30
million combustion cars.
We also clarified roles and responsibilities related
to sustainability within the Board: The Gover-
nance and Nomination Committee is responsible
for overseeing corporate social responsibility
(including health, safety and environment as well
as sustainability), while ultimate responsibility for
ABB’s sustainability strategy, its sustainability
targets and its annual sustainability report lies
with the entire Board of Directors.
At next year’s AGM, we intend to seek shareholder
support for our environmental, social and gover-
nance (ESG) goals. These include emissions
reductions across our value chain, increasing
circularity in our own and our customers’ opera-
tions, and promoting social progress, including
human rights and good governance, in our supply
chain and the communities in which we operate.
Stock-exchange listings
In December, we appointed a new head of our
Turbocharging Division ahead of a likely spin-off,
in the event of which we would invite shareholders
to an extraordinary general meeting to seek their
approval. We are also moving ahead with efforts
to separately list our E-mobility business and we
aim to complete this during the second quarter.
ABB would retain a majority shareholding in the
future listed entity. As a world leader in electric-
vehicle (EV) charging infrastructure, we are
well-positioned in an extremely attractive growth
market – by 2035, EVs are expected to be outsell-
ing combustion cars.
Board assessment and diversity
In 2021, an external assessment concluded that
the Board’s effectiveness was in the top quartile
of comparable companies. The assessment put
forward a small number of recommendations
concerning the Board’s role in ESG, risk and
reputation management, and future requirements
in the skills matrix of new Board members, all of
which were comprehensively addressed by the
Board during the course of last year. As part of
this assessment, we also conducted a peer review
within the Board in which every Board member
assessed the individual performance of all other
members. The Board will continue to conduct
internal self-assessments every year, comple-
mented periodically with external reviews.
Last year, we also highlighted the need to improve
gender diversity on the Board of Directors. In
2021, we sought and identified candidates that
would further strengthen the Board’s diversity,
expertise and experience. To accommodate
candidates’ personal career planning and allow
for board adjustments as necessary (overboard-
ing), we will be proposing one or more new
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
55
members for election at the AGM in 2023. This
year, all existing Board members will stand for
re-election, and no new members will be
proposed.
Leadership development and succession
planning
Finally, as part of the implementation of the ABB
Way operating model, our leadership develop-
ment and succession planning was redesigned
and has been reviewed by the Executive Commit-
tee and the Board of Directors, including the
Governance and Nomination Committee. Instead
of position-based succession planning, we have
introduced an open job market, where all posi-
tions up to Executive Committee (EC) level are
posted on our internal jobs platform. As part of
the new approach, EC- and Business Area-level
leadership teams review the strengths and devel-
opment needs of all team members and support
their development so that they are ready to
pursue new opportunities when they arise. In this
way, we enable our leaders to realize their ambi-
tions through a fair and transparent process that
promotes the best people for the job.
On behalf on the Board of Directors, I would like
to thank you for your continued trust and
support.
Peter Voser
Chairman of the Board of Directors
Zurich, February 24, 2022
56
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
—
Summary of corporate governance
approach
Corporate governance – general
principles
ABB is committed to the highest international
standards of corporate governance and this is
reinforced in its structure, processes and rules as
outlined in this section of the Annual Report. In
line with this, ABB complies with the general
principles as set forth in the Swiss Code of Best
Practice for Corporate Governance, as well as
those of the capital markets where its shares are
listed and traded. In addition to the provisions of
the Swiss Code of Obligations, ABB’s key princi-
ples and rules on corporate governance are laid
down in ABB’s Articles of Incorporation, the ABB
Ltd Board Governance Rules (which includes the
governance rules of ABB’s Board committees and
the ABB Ltd Related Party Transaction Policy,
which was prepared based on the Swiss Code of
Best Practice for Corporate Governance and the
independence criteria set forth in the corporate
governance rules of the New York Stock Ex-
change), and the ABB Code of Conduct. These
documents are available on ABB’s website at
https://new.abb.com/about/
corporate-governance. It is the duty of ABB’s
Board of Directors (the Board) to review and
amend or propose amendments to those docu-
ments from time to time to reflect the most
recent developments and practices, as well as to
ensure compliance with applicable laws and
regulations. Shareholders and other interested
parties may communicate with the Chairman of
the Board or the independent directors by writing
to ABB Ltd (Attn: Chairman of the Board/indepen-
dent directors), at Affolternstrasse 44, CH-8050
Zurich, Switzerland.
Compensation governance and
Board and EC compensation
Information about ABB’s compensation gover-
nance as well as Board and Executive Committee
(EC) compensation and shareholdings is provided
in the Compensation Report that can be found on
pages 74 to 110 of this Annual Report.
—
Board of Directors
Board and Board committees (2021–2022 board term)
Board of Directors
Chairman: Peter R. Voser
Gunnar Brock
Vice-Chairman: Jacob Wallenberg
David Constable
Frederico Fleury Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline
Satish Pai
Finance, Audit and
Compliance Committee
David Meline (chairman)
Gunnar Brock
Geraldine Matchett
Satish Pai
Governance and
Nomination Committee
Compensation
Committee
Peter R. Voser (chairman)
Frederico Fleury Curado (chairman)
Lars Förberg
Jennifer Xin-Zhe Li
Jacob Wallenberg
David Constable
Jennifer Xin-Zhe Li
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
57
Board governance
Chairman of the Board
The Board
The Board defines the ultimate direction of the
business of ABB and issues the necessary instruc-
tions. It determines the organization of the ABB
Group and appoints, removes and supervises the
persons entrusted with the executive manage-
ment and representation of ABB. The internal
organizational structure and the definition of the
areas of responsibility of the Board, as well as the
information and control instruments vis-à-vis the
Executive Committee are set forth in the ABB Ltd
Board Governance Rules (available at https://new.
abb.com/about/corporate-governance).
The Board takes decisions as a whole, supported
by its three committees: the Finance, Audit and
Compliance Committee (FACC), the Governance
and Nomination Committee (GNC), and the Com-
pensation Committee (CC). These committees
assist the Board in its tasks and report regularly
to the Board. The Board and its committees meet
regularly throughout the year.
The directors and officers of a Swiss corporation
are bound, as specified in the Swiss Code of
Obligations, to perform their duties with all due
care, to safeguard the interests of the corporation
in good faith and to extend equal treatment to
shareholders in like circumstances. Prior to pro-
posing new candidates for election to the Board,
checks are performed to ensure that they are
independent and that there are no conflicts of
interest.
The Swiss Code of Obligations does not specify
what standard of due care is required of the
directors of a corporate board. However, it is
generally held by Swiss legal scholars and juris-
prudence that the directors must have the
requisite capability and skill to fulfill their func-
tion, and must devote the necessary time to the
discharge of their duties. Moreover, the directors
must exercise all due care that a prudent and
diligent director would have taken in like circum-
stances. Finally, the directors are required to take
actions in the best interests of the corporation
and may not take any actions that may be harmful
to the corporation.
Although the Swiss Code of Obligations does not
discuss specifically conflicts of interest for board
members, the ABB Ltd Board Governance Rules
(available at https://new.abb.com/about/
corporate-governance) state that board members
shall avoid entering into any situation in which
their personal or financial interests may conflict
with the interests of ABB.
The Chairman is elected by the shareholders to
represent their interests in creating sustainable
value through effective governance. In addition,
the Chairman (1) takes provisional decisions on
behalf of the Board on urgent matters
where a regular Board decision cannot be
obtained, (2) calls for Board meetings and sets
the related agendas, (3) interacts with the CEO
and other EC members on a more frequent basis
outside of Board meetings and (4) represents the
Board internally and in the public sphere.
Vice-Chairman of the Board
The Vice-Chairman is elected by the Board and
handles the responsibilities of the Chairman to
the extent the Chairman is unable to do so or
would have a conflict of interest in doing so. He
also acts as counselor/advisor to the Chairman on
any matters that are Company or Board relevant
and as appropriate or as the Chairman may re-
quire and with a particular focus on strategic
aspects related to the Company and its business
in general. In addition, the Vice-Chairman takes
such other actions as may be decided by the
Board or requested by the Chairman.
Finance, Audit and Compliance Committee
The FACC is responsible for overseeing (1) the
integrity of ABB’s financial statements, (2) ABB’s
compliance with legal, tax and regulatory require-
ments, (3) the external auditors’ qualifications
and independence, (4) the performance and role
of ABB’s internal audit function and the perfor-
mance of the external auditors, (5) ABB’s capital
structure, funding requirements and financial and
risk policies, and (6) ABB’s implementation and
maintenance of an integrity program and internal
controls designed to mitigate integrity risk.
The FACC must comprise three or more indepen-
dent directors who have a thorough under-
standing of finance and accounting. The Chair-
man of the Board and, upon invitation by the
committee’s chairman, the CEO or other members
of the Executive Committee may participate in the
committee meetings, provided that any potential
conflict of interest is avoided and confidentiality
of the discussions is maintained. In addition, the
chief integrity officer, the head of internal audit
and the external auditors participate in the meet-
ings as appropriate. The Board has determined
that each member of the FACC is an audit commit-
tee financial expert as such term is defined in
Form 20-F.
58
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
Governance and Nomination Committee
Board membership
The GNC is responsible for (1) overseeing corpo-
rate governance practices within ABB, (2) over-
seeing corporate social responsibility (including
health, safety and environment as well as sustain-
ability), (3) nominating candidates for the Board,
the role of CEO and other positions on the Execu-
tive Committee, and (4) succession planning and
employment matters relating to the Board and
the Executive Committee. The GNC is also respon-
sible for maintaining an orientation program for
new Board members and an ongoing education
program for existing Board members.
The GNC must comprise three or more indepen-
dent directors. Upon invitation by the
committee’s chairman, the CEO or other members
of the Executive Committee may participate in the
committee meetings, provided that any potential
conflict of interest is avoided and confidentiality
of the discussions is maintained.
Compensation Committee
The CC is responsible for compensation matters
relating to the Board and the Executive
Committee.
The CC must comprise three or more directors
who are elected by the shareholders. The Chair-
man of the Board and, upon invitation by the
committee’s chairman, the CEO or other members
of the Executive Committee may participate in the
committee meetings, provided that any potential
conflict of interest is avoided and confidentiality
of the discussions is maintained.
Board composition
In proposing individuals to be elected to the
Board, the Board seeks to align the composition
and skills of the Board with the Company’s strate-
gic needs, business portfolio, geographic reach
and culture. The Board must be diverse in all
aspects including gender, nationalities, geo-
graphic/regional experience and business
experience. In addition, the average tenure of the
members of the Board should be well-balanced.
The Board also considers the number of other
mandates of each Board member to ensure that
he/she will have sufficient time to dedicate to
his/her role as an ABB Board member.
Elections and term of office
The members of the Board of Directors and the
Chairman of the Board as well as the members of
the Compensation Committee are elected by the
shareholders at the general meeting of sharehold-
ers for a term of office extending until completion
of the next ordinary general meeting of share-
holders. Members whose terms of office have
expired shall be immediately eligible for re-elec-
tion. ABB’s Articles of Incorporation (available at
https://new.abb.com/about/
corporate-governance) do not provide for the
retirement of directors based on their age. How-
ever, an age limit for members of the Board is set
forth in the ABB Ltd Board Governance Rules
(available at https://new.abb.com/about/
corporate-governance), although waivers are
possible and subject to Board discretion. If the
office of the Chairman of the Board of Directors
or any position on the Compensation Committee
becomes vacant during a Board term, the Board
Members of the Board (2021–2022 board term)
Board
Experience
Corporate
Officer
Experience
Other Business
Experience
e
c
n
e
i
r
e
p
x
E
d
r
a
o
B
c
i
l
b
u
P
r
e
h
t
O
d
r
a
o
B
B
B
A
)
s
r
a
e
y
(
e
r
u
n
e
T
7
23
4
7
6
5
4
4
6
6
Board Member
Peter R. Voser
Jacob Wallenberg
Gunnar Brock
David Constable
Frederico Fleury Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline
Satish Pai
t
n
e
m
e
g
a
n
a
M
k
s
i
R
s
n
o
i
t
a
r
e
p
O
y
t
i
l
i
b
a
n
i
a
t
s
u
S
y
g
o
l
o
n
h
c
e
T
/
l
a
t
i
i
g
D
e
c
n
e
i
r
e
p
x
E
l
a
b
o
G
l
O
E
C
O
F
C
/
n
i
g
i
r
O
f
o
y
r
t
n
u
o
C
y
t
i
l
a
n
o
i
t
a
N
CH
SE
SE
CA, US
BR, PT
SE, CH
CN, CA
CH, UK, FR
US, CH
IN
e
v
i
t
u
c
e
x
E
-
n
o
N
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
t
n
e
d
n
e
p
e
d
n
I
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
r
e
d
n
e
G
M
M
M
M
M
M
F
F
M
M
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
59
of Directors may appoint (shall appoint in the
case of the Chairman of the Board) another
individual from among its members to that
position for the remainder of that term. The Board
of Directors shall consist of no less than 7 and no
more than 13 members.
also serves as a member of the board of directors.
He was formerly the chief executive officer and
president as well as a member of the board of
directors of Sasol Limited (South Africa). He
joined Sasol after more than 29 years with Fluor
Corporation (U.S.). Mr. Constable was born in 1961
and is a Canadian and U.S. citizen.
Members of the Board
(2021–2022 board term)
Peter R. Voser has been a member
and Chairman of ABB’s Board of
Directors since April 2015. He was
also ABB’s Chief Executive Officer
from April 2019 to February 2020.
He is a member of the board of directors of IBM
Corporation (U.S.). He is also a member of the
board of directors of Temasek Holdings (Private)
Limited (Singapore) as well as chairman of the
board of PSA International Pte Ltd (Singapore),
one of its subsidiaries. In addition, he is the
chairman of the board of trustees of the St. Gallen
Foundation for International Studies. He was
previously the chief executive officer of Royal
Dutch Shell plc (The Netherlands). Mr. Voser was
born in 1958 and is a Swiss citizen.
Jacob Wallenberg has
been a member of ABB’s Board of
Directors since June 1999 and
Vice-Chairman since April 2015. He
is the chairman of the board of
Investor AB (Sweden). He is vice-chairman of the
boards of Telefonaktiebolaget LM Ericsson, FAM
AB and Patricia Industries (all Sweden). He is
also a member of the boards of directors of
Nasdaq, Inc. (U.S.) and the Knut and Alice Wallen-
berg Foundation (Sweden) as well as a member of
the nomination committee of SAS AB (Sweden).
Mr. Wallenberg was born in 1956 and is a Swedish
citizen.
Gunnar Brock has been a member
of ABB’s Board of Directors since
March 2018. He is chairman of the
boards of Neptunia Invest AB,
Mölnlycke Health Care AB and Stena
AB (all Sweden). He is a member of the boards of
directors of Investor AB and Patricia Industries
(both Sweden). He was formerly president and
chief executive officer of Atlas Copco AB
(Sweden). Mr. Brock was born in 1950 and
is a Swedish citizen.
David Constable has
been a member of ABB’s Board of
Directors since April 2015. He is the
chief executive officer of Fluor
Corporation (U.S.), for which he
Frederico Fleury Curado has
been a member of ABB’s Board of
Directors since April 2016. He
is a member of the boards of
directors of Ultrapar S.A. (Brazil)
and Transocean Ltd. (Switzerland). He was for-
merly the chief executive officer of Ultrapar S.A.
and Embraer S.A. (both Brazil). Mr. Curado was
born in 1961 and is a Brazilian and Portuguese
citizen.
Lars Förberg has been a member of
ABB’s Board of Directors since April
2017. He is co-founder and manag-
ing partner of Cevian Capital.
Mr. Förberg was born in 1965 and
is a Swedish and Swiss citizen.
Jennifer Xin-Zhe Li has
been a member of ABB’s Board of
Directors since March 2018. She
is a member of the boards of
directors of Flex Ltd (Singa-
pore/U.S.), Kone Oy (Finland) and Full Truck
Alliance Co. Ltd. (Cayman Islands/P.R.C.). Through
May 2021, she was a member of the boards of
directors of Philip Morris International Inc. (U.S.)
and The Hongkong and Shanghai Banking Corpo-
ration Limited (Hong Kong). Ms. Li is a founder
and general partner of Changcheng Investment
Partners (P.R.C.), a private investment fund. From
2008 to 2018, she served as chief financial officer
of Baidu Inc. (P.R.C.) and chief executive officer of
Baidu Capital (P.R.C.). Prior to that, Ms. Li spent 14
years with General Motors, holding various senior
finance positions, including chief financial officer
of GM China and corporate controller for GMAC
North American Operations. Ms. Li was born in
1967 and is a Canadian citizen.
Geraldine Matchett has
been a member of ABB’s Board of
Directors since March 2018. She is
the co-chief executive officer, the
chief financial officer and a
member of the managing board of Royal DSM N.V.
(The Netherlands). She was previously the chief
financial officer of SGS Ltd (Switzerland). Prior to
joining SGS she worked as an auditor at Deloitte
Ltd (Switzerland) and KPMG LLP (U.K.). Ms. Match-
ett was born in 1972 and is a Swiss, British and
French citizen.
60
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
in order to allow each member time to study the
covered matters prior to the meetings. Each
board meeting has a private session without
management or others being present. Decisions
made at the Board meetings are recorded in
written minutes of the meetings. Some decisions
are also taken by circular resolution.
2021 was an intensive year for the Board and its
committees. The table below shows the number
of meetings held during 2021 by the Board and its
committees, their average duration, as well as the
attendance of the individual Board members. The
Board meetings shown include a strategic retreat
attended by the members of the Board and
the EC.
Mandates of Board members
outside the ABB Group
No member of the Board may hold more than ten
additional mandates, of which no more than four
may be in listed companies. Certain types of
mandates, such as those in our subsidiaries,
those in the same group of companies and those
in non-profit and charitable institutions, are not
subject to those limits. Additional details can be
found in Article 38 of ABB’s Articles of Incorpora-
tion (available at https://new.abb.com/about/
corporate-governance).
David Meline has been a member of
ABB’s Board of Directors since April
2016. He is the chief financial
officer of Moderna Inc. (U.S.). From
2014 through 2019, Mr. Meline was
the chief financial officer of Amgen Inc. (U.S.). He
was formerly with the 3M Company (U.S.), where
he served as chief financial officer. Prior to joining
3M, Mr. Meline worked for more than 20 years for
General Motors Company (U.S.). Mr. Meline was
born in 1957 and is a U.S. and Swiss citizen.
Satish Pai has been a member of
ABB’s Board of Directors since April
2016. He is the managing director
and a member of the board of
directors of Hindalco Industries
Ltd. (India). He joined Hindalco in 2013 after
28 years with Schlumberger Limited (U.S.). Mr. Pai
was born in 1961 and is an Indian citizen.
As of December 31, 2021, none of the Board
members held any official functions or political
posts. Further information on ABB’s Board mem-
bers can be found by clicking on the ABB Board of
Directors link (available at https://new.abb.com/
about/corporate-governance).
Board meetings and attendance
The Board and its committees have regularly
scheduled meetings throughout the year. These
meetings are supplemented by additional meet-
ings (either in person or by conference call), as
necessary. Board meetings are convened by the
Chairman or upon request by any other board
member or the CEO. Documentation covering the
various items of the agenda for each Board meet-
ing is sent out in advance to each Board member
2021 Board and Board Committee Meetings
Pre annual general meeting 2021
Post annual general meeting 2021
Board
Meetings and attendance
Average duration (hours)
Mtg.
7.5
Conf.
Call
1.5
Number of meetings
Meetings attended:
Peter R. Voser
Jacob Wallenberg
Matti Alahuhta
Gunnar Brock
David Constable
Frederico Fleury Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline
Satish Pai
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
GNC
1.25
2
2
2
2
CC
1.75
2
2
2
2
FACC
3
2
2
2
2
2
Board
Mtg.
Conf.
Call
FACC
9
4
3
4
4
4
4
4
4
3
4
4
1
2
2
2
2
2
2
2
2
2
2
2
3
4
4
4
4
4
GNC
1.4
5
5
4
5
5
CC
1.6
5
5
5
5
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
61
Business relationships between
ABB and its Board members
This section describes important business rela-
tionships between ABB and its Board members,
or companies and organizations represented by
them.
Fluor Corporation (Fluor) is an important cus-
tomer of ABB. ABB sells primarily electrical
switchgears, control systems and electrical
solutions through its Electrification and Process
Automation businesses to Fluor. David Constable
is the CEO and a director of Fluor.
After reviewing the level of business with Fluor,
the Board has determined that ABB’s business
relationship with Fluor is not unusual in its nature
or conditions and does not constitute a material
business relationship. As a result, the Board
concluded that all members of the Board are
independent.
These determinations were made in accordance
with ABB Ltd’s Related Party Transaction Policy
which was prepared based on the Swiss Code of
Best Practice for Corporate Governance and the
independence criteria set forth in the corporate
governance rules of the New York Stock Exchange.
This policy is contained in the ABB Ltd Board
Governance Rules (available at https://new.abb.
com/about/corporate-governance).
Information and control systems
of the Board vis-à-vis the
Executive Committee
Information from the Executive Committee
In accordance with the ABB Board Governance
Rules (available at https://new.abb.com/about/
corporate-governance), the CEO reports regularly
to the Board about ABB’s overall business and
when circumstances require on any extraordinary
events that may arise. This includes:
• Reports on financial results (including profit
and loss, balance sheet and cash flows);
• Changes in key members of management;
• Information that may affect the supervisory or
monitoring function of the Board (including on
matters of strategy and compliance); and
• Significant developments in legal matters.
At each Board meeting, Board members are
briefed by the Chairman, CEO, CFO and other EC
members on ABB’s business performance and on
material developments affecting ABB. Outside of
Board meetings, Board members generally chan-
nel any requests for information through the
Chairman. Board members also obtain informa-
tion through offsite retreats with the Executive
Committee and visits to ABB sites. In addition,
Board members obtain information through the
Board committees in which they participate and
which are also attended by relevant EC members
and management representatives from human
resources, finance, legal and the business.
Internal Audit
ABB has an Internal Audit team that provides
independent objective assurance and other
services to help ensure that ABB operates in
accordance with applicable laws as well as inter-
nal policies and procedures. Internal Audit reports
to the FACC and to the CFO. The FACC reviews and
approves the internal audit plan, and material
changes to the plan. Investigations of potential
fraud and inappropriate business conduct are an
integral part of the internal audit process. De-
pending on circumstances, Internal Audit may act
together with ABB’s Integrity Investigations and
Monitoring department, which is part of ABB’s
integrity function. Internal Audit reports on a
regular basis its main observations and recom-
mendations to the relevant members of the EC
and to the FACC as appropriate.
Risk Management
ABB has an enterprise risk management program
(ERM) in place which takes into account ABB’s size
and complexity. ERM provides the EC and the
Board with a comprehensive and holistic view of
the risks facing the business. ERM involves man-
aging the acceptance of risk to achieve the
objectives of the business. The ERM process is
typically cyclical in nature, conveying the idea of
continuous refinement of the risk management
approach in a dynamic business environment.
Furthermore, ABB runs a mitigation process for
the identified risks that is key to the success of
this process. ERM assessments are both top down
and bottom up. They cover strategic, financial,
and operational risks, both current and long term.
Key risks identified and managed in 2021 were
those related to the continuation of the COVID-19
pandemic, to constraints in global supply chains,
as well as to the preparation for the separation of
ABB’s turbocharging business and the planned
initial public offering in Switzerland of ABB’s
electric-vehicle charging business. ERM results
are reported to the FACC and the entire Board.
This information becomes part of the overall
strategic and risk discussions by the Board to
help create value for stakeholders.
62
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
—
Executive Committee
Composition of the Executive Committee
(at December 31, 2021)
Björn Rosengren
Chief Executive Officer
C O R P O R AT E O F F I C E R S
B U S I N E S S A R E A P R E S I D E N T S
Timo Ihamuotila
Chief Financial Officer
Carolina Granat
Chief Human Resources Officer
Maria Varsellona
General Counsel
Tarak Mehta
Electrification
Peter Terwiesch
Process Automation
Morten Wierod
Motion
Theodor Swedjemark
Chief Communications and Sustainability Officer
Sami Atiya
Robotics & Discrete Automation
Executive Committee
responsibilities and
organization
The Board has delegated the executive manage-
ment of ABB to the CEO. The CEO and, under his
direction, the other members of the Executive
Committee are responsible for ABB’s overall
business and affairs and day-to-day management.
The CEO reports to the Board regularly, and
whenever extraordinary circumstances so require,
on the course of ABB’s business and financial
performance and on all organizational and per-
sonnel matters, transactions and other issues
material to the Group. Each member of the Execu-
tive Committee is appointed and discharged by
the Board.
Members of the
Executive Committee
(at December 31, 2021)
Björn Rosengren was appointed
Chief Executive Officer and
member of the Executive Commit-
tee effective March 2020. He is a
member of the board of directors
of the World Childhood Foundation (Sweden).
Before joining ABB, he was the president and chief
executive officer of Sandvik AB (Sweden) since
2015. Prior to that, Mr. Rosengren was the chief
executive officer of Wärtsilä Corporation (Fin-
land) from 2011 to 2015. He held a variety of
management roles at Atlas Copco AB (Sweden)
from 1998 to 2011. Mr. Rosengren was born in
1959 and is a Swedish citizen.
Timo Ihamuotila was appointed
Chief Financial Officer and member
of the Executive Committee effec-
tive April 2017. He is a member of
the board of directors of
SoftwareONE Holding AG and Hitachi Energy Ltd
(both Switzerland). From 2009 to 2016, Mr. Ihamu-
otila was chief financial officer and an executive
vice president of the Nokia Corporation (Finland).
From 1999 to 2009, he held various senior roles
with Nokia. Mr. Ihamuotila was born in 1966 and
is a Finnish citizen.
Carolina Granat was appointed
Chief Human Resources Officer and
member of the Executive Commit-
tee effective January 2021. She
joined ABB in 2020 as Head of
People Development. Prior to that, she was glob-
ally responsible for human resources at the
Machining Solutions business area of Sandvik AB
(Sweden). Ms. Granat was born in 1972 and
is a Swedish citizen.
Maria Varsellona was appointed
General Counsel and member of the
Executive Committee effective
November 2019. From 2014 to 2019
she was the Chief Legal Officer of
Nokia Corporation (Finland) and from 2018 to
2019 she was also the president of Nokia Technol-
ogies. From 2013 to 2014 she was the General
Counsel of Nokia Siemens Networks. During the
period from 2011 to 2013 Ms. Varsellona was the
Group General Counsel of Tetra Pak and from
2009 to 2010 she was the Group General Counsel
of Sidel, both part of the Tetra Laval Group
(Sweden). From 2001 to 2009 she held various
senior legal roles mainly with GE Oil & Gas.
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
63
Ms. Varsellona was born in 1970 and is an Italian
citizen.
Theodor Swedjemark was ap-
pointed Chief Communications
Officer and member of the Execu-
tive Committee effective August
2020. As per March 2021 his title
was amended to Chief Communications and
Sustainability Officer and member of the Execu-
tive Committee. He is a member of the board of
directors of the Swedish Swiss Chamber of Com-
merce and is the chairman of the ABB Jürgen
Dormann Foundation. Mr. Swedjemark acted as
interim Head of Corporate Communications &
Public Affairs from March 2020 through August
2020. Prior to that, he assumed the role of Chief
of Staff in 2017, later adding group responsibility
for government relations and public affairs.
During 2016, Mr. Swedjemark managed the Strate-
gic Portfolio Review of the Power Grids project.
From 2006 to 2015, he held various management
positions at ABB in different functions and busi-
nesses. Mr. Swedjemark was born in 1980 and
is a Swedish citizen.
Tarak Mehta was appointed Presi-
dent of the Electrification Business
effective April 2019 and has
been a member of the Executive
Committee since October 2010. He
is a member of the board of directors of Prysmian
S.p.A. (Italy). He had previously been President of
the Electrification Products division since January
2016. From October 2010 through December 2015,
he was President of the Low Voltage Products
division. From 2007 to 2010, he was Head of ABB’s
transformers business. Between 1998 and 2006,
he held several management positions with ABB.
Mr. Mehta was born in 1966 and is a U.S. and Swiss
citizen.
Peter Terwiesch was appointed
President of the Process Automa-
tion Business (known as Industrial
Automation from 2017–2020) and
member of the Executive Commit-
tee effective January 2015. He is a member of the
board of directors of Metall Zug AG (Switzerland).
From 2011 to 2014, Mr. Terwiesch was Head of
ABB’s Central Europe region. He was ABB’s Chief
Technology Officer from 2005 to 2011. From 1994
to 2005, he held several positions with ABB.
Mr. Terwiesch was born in 1966 and is a German
and Swiss citizen.
Morten Wierod was appointed
President of the Motion Business
and member of the Executive
Committee effective April 2019.
From 2015 until April 2019 he was
the Managing Director of the drives business unit
in the Robotics and Motion division. During 2011
to 2015, Mr. Wierod was the Managing Director of
the control products business unit in the Low
Voltage Products division. Between 1998 to 2011,
Mr. Wierod held various management roles with
ABB. Mr. Wierod was born in 1972 and is a Norwe-
gian citizen.
Sami Atiya was appointed Presi-
dent of the Robotics & Discrete
Automation Business effective
April 2019 and has been a member
of the Executive Committee since
June 2016. He is a member of the board of direc-
tors of SGS SA (Switzerland). He had previously
been President of the Robotics and Motion divi-
sion since January 2017. From June to December
2016 he was President of the Discrete Automation
and Motion division. Prior to joining ABB, Mr. Atiya
held senior roles at Siemens in Germany from 1997
to 2015, including as chief executive officer of the
mobility and logistics division in the infrastruc-
ture and cities sector from 2011. Mr. Atiya was
born in 1964 and is a German citizen.
Further information about the members of the
Executive Committee can be found by clicking on
the Executive Committee link (available at https://
new.abb.com/about/corporate-governance).
Mandates of EC members
outside the ABB Group
No member of the EC may hold more than five
additional mandates, of which no more than one
may be in a listed company. Certain types of
mandates, such as those in our subsidiaries,
those in the same group of companies and those
in non-profit and charitable institutions, are not
subject to those limits. Additional details can be
found in Article 38 of ABB’s Articles of Incorpora-
tion (available at https://new.abb.com/about/
corporate-governance).
Business relationships between
ABB and its EC members
This section describes important business relation-
ships between ABB and its EC members, or
companies and organizations represented by them.
ABB has a minority stake in Hitachi Energy Ltd
(Hitachi Energy), the holding company of ABB’s
former power grids business. Hitachi Energy is
both an important supplier to and customer of ABB.
Timo Ihamuotila is a director of Hitachi Energy.
64
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
After reviewing the level of business with Hitachi
Energy, the Board has determined that ABB’s
business relationship with Hitachi Energy is not
unusual in its nature or conditions.
These determinations were made in accordance
with ABB Ltd’s Related Party Transaction Policy
which was prepared based on the Swiss Code of
Best Practice for Corporate Governance and the
independence criteria set forth in the corporate
governance rules of the New York Stock Exchange.
This policy is contained in the ABB Ltd Board
Governance Rules (available at https://new.abb.
com/about/corporate-governance).
—
Shares
Share capital of ABB
At December 31, 2021, ABB’s ordinary share capi-
tal (including treasury shares) as registered with
the Commercial Register amounted to
CHF 246,377,791.68, divided into 2,053,148,264
fully paid registered shares with a par value of
CHF 0.12 per share.
ABB Ltd’s shares are listed on the SIX Swiss
Exchange, the NASDAQ OMX Stockholm Exchange
and the New York Stock Exchange (where its
shares are traded in the form of American deposi-
tary shares (ADS) – each ADS representing one
registered ABB share). At December 31, 2021,
ABB Ltd had a market capitalization based on
outstanding shares (total number of outstanding
shares: 1,958,344,400) of approximately
CHF 68 billion ($75 billion, SEK 676 billion). The
only consolidated subsidiary in the ABB Group
with listed shares is ABB India Limited, Bangalore,
India, which is listed on the BSE Ltd. (Bombay
Stock Exchange) and the National Stock Exchange
of India. At December 31, 2021, ABB Ltd, Switzer-
land, directly or indirectly owned 75 percent of
ABB India Limited, Bangalore, India, which at that
time had a market capitalization of approximately
INR 474 billion.
Stock exchange listings (at December 31, 2021)
Stock exchange
SIX Swiss Exchange
SIX Swiss Exchange
Security
Ticker symbol
ISIN code
ABB Ltd, Zurich, share
ABBN CH0012221716
ABB Ltd, Zurich, share buyback
(second trading line)
ABBNE CH0357679619
NASDAQ OMX Stockholm Exchange
ABB Ltd, Zurich, share
ABB CH0012221716
New York Stock Exchange
ABB Ltd, Zurich, ADS
ABB US0003752047
BSE Ltd. (Bombay Stock Exchange)
ABB India Limited, Bangalore, share
ABB(1)
INE117A01022
National Stock Exchange of India
ABB India Limited, Bangalore, share
ABB
INE117A01022
(1) Also called Scrip ID.
Share repurchases and
cancellation
Under the share buyback program that ran from
July 2020 to March 2021, ABB repurchased a total
of 128,620,589 shares. At ABB’s Annual General
Meeting 2021, the shareholders approved the
proposal to cancel 115,000,000 repurchased
shares. These shares were cancelled in June 2021,
resulting in a reduced total number of issued ABB
Ltd shares of 2,053,148,264. ABB intends to pro-
pose to the Annual General Meeting 2022 to cancel
the remaining 13,620,589 repurchased shares.
In April 2021, ABB launched a follow-up share
buyback program of up to $4.3 billion to complete
ABB’s plan to return $7.8 billion of cash proceeds
from the Power Grids divestment to shareholders.
Under that share buyback program, ABB repur-
chased a total of 58,627,600 shares as per
December 31, 2021, and a total of 74,782,600
shares as per February 15, 2022. ABB intends to
propose to the Annual General Meeting 2022 to
cancel these shares.
In addition, ABB repurchased a total of 32,668,987
shares as per December 31, 2021, primarily for use
in connection with employee share programs.
Further information can be found at https://www.
abb.com/investorrelations.
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
65
Changes to the ordinary share
capital
Except for the share cancellation described above,
there were no other changes to ABB’s ordinary
share capital during 2021, 2020 and 2019.
Convertible bonds and options
ABB does not have any bonds outstanding that
are convertible into ABB shares. For information
about options on shares issued by ABB, please
refer to “Note 19 – Stockholders’ equity” to ABB’s
Consolidated Financial Statements.
Contingent share capital
At December 31, 2021, ABB’s share capital may be
increased by an amount not to exceed
CHF 24,000,000 through the issuance of up to
200,000,000 fully paid registered shares with a par
value of CHF 0.12 per share through the exercise of
conversion rights and/or warrants granted in
connection with the issuance on national or inter-
national capital markets of newly or already issued
bonds or other financial market instruments. If this
contingent share capital were fully issued this
would increase the existing share capital by
approximately 9.7 percent. The contingent share
capital has not changed during the last three years.
At December 31, 2021, ABB’s share capital may be
increased by an amount not to exceed
CHF 1,200,000 through the issuance of up to
10,000,000 fully paid registered shares with a par
value of CHF 0.12 per share through the exercise
of warrant rights granted to its shareholders. If
this contingent share capital were fully issued this
would increase the existing share capital by
approximately 0.5 percent. This contingent share
capital has not changed during the last three
years. The Board may grant warrant rights not
taken up by shareholders for other purposes in
the interest of ABB.
The pre-emptive rights of the shareholders are
excluded in connection with the issuance of
convertible or warrant-bearing bonds or other
financial market instruments or the grant of
warrant rights. The then current owners of con-
version rights and/or warrants will be entitled to
subscribe for new shares. The conditions of the
conversion rights and/or warrants will be deter-
mined by the Board.
The acquisition of shares through the exercise of
warrants and each subsequent transfer of the
shares will be subject to the restrictions of ABB’s
Articles of Incorporation (see “Limitations on
transferability of shares and nominee registra-
tion” in the Shareholders section below) (available
at https://new.abb.com/about/
corporate-governance).
In connection with the issuance of convertible or
warrant-bearing bonds or other financial market
instruments, the Board is authorized to restrict or
deny the advance subscription rights of share-
holders if such bonds or other financial market
instruments are for the purpose of financing or
refinancing the acquisition of an enterprise,
parts of an enterprise, participations or new
investments or an issuance on national or
international capital markets. If the Board denies
advance subscription rights, the convertible or
warrant-bearing bonds or other financial market
instruments will be issued at the relevant market
conditions and the new shares will be issued
pursuant to the relevant market conditions taking
into account the share price and/or other compa-
rable instruments having a market price.
Conversion rights may be exercised during a
maximum ten-year period, and warrants may be
exercised during a maximum seven-year period,
in each case from the date of the respective
issuance. The advance subscription rights of the
shareholders may be granted indirectly.
At December 31, 2021, ABB’s share capital may be
increased by an amount not to exceed
CHF 11,284,656 through the issuance of up to
94,038,800 fully paid shares with a par value of
CHF 0.12 per share to employees. If this contin-
gent share capital were fully issued this would
increase the existing share capital by approxi-
mately 4.6 percent. This contingent share capital
has not changed during the last three years. The
pre-emptive and advance subscription rights of
ABB’s shareholders are excluded. The shares or
rights to subscribe for shares will be issued to
employees pursuant to one or more regulations to
be issued by the Board, taking into account
performance, functions, level of responsibility
and profitability criteria. ABB may issue shares or
subscription rights to employees at a price lower
than that quoted on a stock exchange. The acqui-
sition of shares within the context of employee
share ownership and each subsequent transfer of
the shares will be subject to the restrictions of
ABB’s Articles of Incorporation (see “Limitations
on transferability of shares and nominee registra-
tion” in the Shareholders section below).
Authorized share capital
At December 31, 2021, ABB had an authorized
share capital in the amount of up to CHF
24,000,000 through the issuance of up to
200,000,000 fully paid registered shares
with a par value of CHF 0.12 each, which is valid
66
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
through March 25, 2023. If the authorized share
capital were fully issued, this would increase the
existing share capital by approximately 9.7 per-
cent. Aside from renewal at the 2021 AGM, the
authorized share capital has not changed during
the last three years. The Board is authorized to
determine the date of issue of new shares, the
issue price, the type of payment, the conditions
for the exercise of pre-emptive rights and the
beginning date for dividend entitlement. In this
regard, the Board may issue new shares by means
of a firm underwriting through a banking institu-
tion, a syndicate or another third party
with a subsequent offer of these shares to the
shareholders. The Board may permit pre-emptive
rights that have not been exercised by sharehold-
ers to expire or it may place these rights and/or
shares as to which pre-emptive rights have been
granted but not exercised at market conditions or
use them for other purposes in the interest of the
Company. Furthermore, the Board is authorized to
restrict or deny the pre-emptive rights of share-
holders and allocate such rights to third parties if
the shares are used (1) for the acquisition of an
enterprise, parts of an enterprise, or participa-
tions, or for new investments, or in case of a share
placement, for the financing or refinancing of
such transactions; or (2) for the purpose of broad-
ening the shareholder constituency in connection
with a listing of shares on domestic or foreign
stock exchanges. The subscription and the acqui-
sition of the new shares, as well as each
subsequent transfer of the shares, will be subject
to the restrictions of ABB’s Articles of Incorpora-
tion (available at https://new.abb.com/about/
corporate-governance).
—
Shareholders
Shareholder structure
As of December 31, 2021, the total number of
shareholders directly registered with ABB Ltd was
approximately 96,000 and another 513,000
shareholders held shares indirectly through
nominees. In total as of that date, ABB had ap-
proximately 609,000 shareholders.
Significant shareholders
Under the Swiss Financial Market Infrastructure
Act, shareholders and groups of shareholders
acting in concert who directly or indirectly acquire
or sell shares of a listed Swiss corporation or
rights based thereon and thereby reach, exceed or
fall below the thresholds of 3 percent, 5 percent,
10 percent, 15 percent, 20 percent, 25 percent,
33¹/₃ percent, 50 percent or 66²/₃ percent of the
voting rights of the corporation must notify the
corporation and the SIX Swiss Exchange of such
holdings. Consequently, significant shareholdings
may have varied within the relevant threshold
levels since they were reported.
Investor AB, Sweden, held 265,385,142 ABB shares
as of December 31, 2021 (refer to Investor’s
year-end 2021 report available at https://www.
investorab.com/investors-media/
reports-presentations). This holding represented
12.9 percent of ABB’s total share capital and
voting rights as registered in the Commercial
Register on December 31, 2021. The number of
shares held by Investor AB does not include shares
held by Mr. Jacob Wallenberg, the chairman of
Investor AB and a director of ABB, in his individual
capacity.
The Capital Group Companies Inc., USA, disclosed
that as of July 1, 2021, it, together with its direct
and indirect affiliates, held 115,841,336 ABB
shares (refer to https://www.ser-ag.com/en/
resources/notifications-market-participants/
significant-shareholders.html#/
shareholder-details/TAL7600020). This holding
represented 5.64 percent of ABB’s total share
capital and voting rights as registered in the
Commercial Register at that time.
Cevian Capital II GP Limited, Jersey, disclosed that
as of August 3, 2020, it held 105,988,662 ABB
shares (refer to https://www.sec.gov/Archives/
edgar/data/1091587/000090266420002862/
p20-1467sc13da.htm). This holding represented
4.89 percent of ABB’s total share capital and
voting rights as registered in the Commercial
Register at that time.
BlackRock Inc., U.S., disclosed that as of August
31, 2017, it, together with its direct and indirect
subsidiaries, held 72,900,737 ABB shares (refer to
https://www.ser-ag.com/en/resources/
notifications-market-participants/
significant-shareholders.html#/
shareholder-details/TAH91000F4). This holding
represented 3.36 percent of ABB’s total share
capital and voting rights as registered in the
Commercial Register at that time.
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
67
At December 31, 2021, to the best of ABB’s knowl-
edge, no other shareholder held 3 percent or more
of ABB’s total share capital and voting rights as
registered in the Commercial Register on that date.
ABB Ltd has no cross shareholdings in excess of
5 percent of capital, or voting rights with any
other company.
Announcements related to disclosure notifications
made by shareholders during 2021 can be found
via the search facility on the platform of the Disclo-
sure Office of the SIX Swiss Exchange: https://
www.ser-ag.com/en/resources/notifications-market-
participants/significant-shareholders.html#/.
Under ABB’s Articles of Incorporation (available at
https://new.abb.com/about/corporate-
governance), each registered share represents one
vote. Significant shareholders do not have differ-
ent voting rights. To our knowledge, we are not
directly or indirectly owned or controlled by any
government or by any other corporation or person.
Shareholders’ rights
Shareholders have the right to receive dividends,
to vote and to execute such other rights as
granted under Swiss law and the Articles of
Incorporation (available at https://new.abb.com/
about/corporate-governance).
Right to vote
ABB has one class of shares and each registered
share carries one vote at the general meeting.
Voting rights may be exercised only after a share-
holder has been registered in the share register of
ABB as a shareholder with the right to vote, or with
Euroclear Sweden AB (Euroclear), which main-
tains a subregister of the share register of ABB.
A shareholder may be represented at the Annual
General Meeting by its legal representative, by
another shareholder with the right to vote or by
the independent proxy elected by the sharehold-
ers (unabhängiger Stimmrechtsvertreter). If the
Company does not have an independent proxy,
the Board of Directors shall appoint the indepen-
dent proxy for the next General Meeting of
Shareholders. All shares held by one shareholder
may be represented by one representative only.
For practical reasons shareholders must be
registered in the share register no later than 6
business days before the general meeting in order
to be entitled to vote. Except for the cases de-
scribed under “Limitations on transferability of
shares and nominee registration” below, there are
no voting rights restrictions limiting ABB’s share-
holders’ rights.
Annual General Meeting/COVID-19
ABB’s top priority is protecting the health of its
shareholders and employees. Therefore, due to
the extraordinary circumstances and in accor-
dance with applicable Swiss COVID-19 legislation,
shareholders were not able to attend ABB’s
Annual General Meeting 2021 in person, but could
exercise their shareholder rights via the indepen-
dent proxy only. The Board of Directors has
resolved that for ABB’s Annual General Meeting
2022, in accordance with applicable Swiss
COVID-19 legislation, the same procedures shall
apply. In addition, ABB will offer shareholders the
opportunity to address questions on agenda
items to the Board of Directors in writing ahead
of the meeting.
Powers of General Meeting
The Ordinary General Meeting of Shareholders
must be held each year within 6 months after the
close of the fiscal year of the Company; the busi-
ness report, the compensation report and the
Auditors’ reports must be made available for
inspection by the shareholders at the place of
incorporation of the Company by no later than
20 days prior to the meeting. Each shareholder is
entitled to request immediate delivery of a copy
of these documents.
The following powers shall be vested exclusively
in the General Meeting of Shareholders:
• Adoption and amendment of the Articles of
Incorporation;
• Election of the members of the Board of
Directors, the Chairman of the Board of Directors,
the members of the Compensation Committee,
the Auditors and the independent proxy;
• Approval of the annual management report and
consolidated financial statements;
• Approval of the annual financial statements and
decision on the allocation of profits shown on
the balance sheet, in particular with regard
to dividends;
• Approval of the maximum compensation of the
Board of Directors and of the Executive
Committee pursuant to Article 34 of the Articles
of Incorporation;
• Granting discharge to the members of the
Board of Directors and the persons entrusted
with management;
• Passing resolutions as to all matters reserved to
the authority of the General Meeting by law or
under the Articles of Incorporation or that are
submitted to the General Meeting by the Board
of Directors, subject to Article 716a of the Swiss
Code of Obligations.
68
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
Resolutions and elections at General Meetings
Shareholders’ resolutions at general meetings are
approved with an absolute majority of the votes
represented at the meeting, except for those
matters described in Article 704 of the Swiss
Code of Obligations and for resolutions with
respect to restrictions on the exercise of the right
to vote and the removal of such restrictions,
which all require the approval of two-thirds of the
votes represented at the meeting.
At December 31, 2021, shareholders representing
shares of a par value totaling at least CHF 48,000
may require items to be included in the agenda
of a general meeting. Any such request must be
made in writing at least 40 days prior to the date
of the general meeting and specify the items and
the motions of such shareholder(s).
ABB’s Articles of Incorporation do not contain
provisions on the convocation of the general
meeting of shareholders that differ from the
applicable legal provisions.
Shareholders’ dividend rights
The unconsolidated statutory financial state-
ments of ABB Ltd are prepared in accordance with
Swiss law. Based on these financial statements,
dividends may be paid only if ABB Ltd has suffi-
cient distributable profits from previous years or
sufficient free reserves to allow the distribution
of a dividend. Swiss law requires that ABB Ltd
retain at least 5 percent of its annual net profits
as legal reserves until these reserves amount to at
least 20 percent of ABB Ltd’s share capital. Any
net profits remaining in excess of those reserves
are at the disposal of the shareholders’ meeting.
Under Swiss law, ABB Ltd may only pay out a
dividend if it has been proposed by a shareholder
or the Board of Directors and approved at a
general meeting of shareholders, and the auditors
confirm that the dividend conforms to statutory
law and ABB’s Articles of Incorporation. In prac-
tice, the shareholders’ meeting usually approves
dividends as proposed by the Board of Directors.
Dividends are usually due and payable no earlier
than 2 trading days after the shareholders’ resolu-
tion and the ex-date for dividends is normally 2
trading days after the shareholders’ resolution
approving the dividend. Dividends are paid out to
the holders that are registered on the record date.
Euroclear administers the payment of those shares
registered with it. Under Swiss law, dividends not
collected within 5 years after the due date accrue
to ABB Ltd and are allocated to its other reserves.
As ABB Ltd pays cash dividends, if any, in Swiss
francs (subject to the exception for certain share-
holders in Sweden described below), exchange
rate fluctuations will affect the U.S. dollar
amounts received by holders of ADSs upon conver-
sion of those cash dividends by Citibank, N.A., the
depositary, in accordance with the Amended and
Restated Deposit Agreement dated May 7, 2001.
For shareholders who are residents of Sweden,
ABB has established a dividend access facility (for
up to 600,004,716 shares). With respect to any
annual dividend payment for which this facility is
made available, shareholders who register with
Euroclear may elect to receive the dividend from
ABB Norden Holding AB in Swedish krona (in an
amount equivalent to the dividend paid in Swiss
francs) without deduction of Swiss withholding
tax. For further information on the dividend
access facility, see ABB’s Articles of Incorporation.
Limitations on transferability of shares and
nominee registration
ABB may decline a registration with voting rights
if a shareholder does not declare that it has
acquired the shares in its own name and for its
own account. If the shareholder refuses to make
such declaration, it will be registered as a share-
holder without voting rights. A person failing to
expressly declare in its registration/application
that it holds the shares for its own account (a
nominee), will be entered in the share register
with voting rights, provided that such nominee
has entered into an agreement with ABB concern-
ing its status, and further provided that the
nominee is subject to recognized bank or financial
market supervision. In special cases the Board
may grant exemptions. There were no exemptions
granted in 2021. The limitation on the transfer-
ability of shares may be removed by an
amendment of ABB’s Articles of Incorporation
by a shareholders’ resolution requiring two-thirds
of the votes represented at the meeting.
No restriction on trading of shares
No restrictions are imposed on the transferability
of ABB shares. The registration of shareholders in
the ABB share register, Euroclear and the ADS
register kept by Citibank does not affect transfer-
ability of ABB shares or ADSs. Registered ABB
shareholders or ADR holders may therefore pur-
chase or sell their ABB shares or ADRs at any time,
including before a General Meeting regardless of
the record date. The record date serves only to
determine the right to vote at a General Meeting.
Duty to make a public tender offer
ABB’s Articles of Incorporation do not contain any
provisions raising the threshold (opting up) or
waiving the duty (opting out) to make a public
tender offer pursuant to Article 135 of the Swiss
Act on Financial Market Infrastructures and
Market Conduct in Securities and Derivatives
Trading.
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
69
—
Independent external auditors
Duration of the mandate and
term of office of the auditors
On March 25, 2021, shareholders at the Annual
General Meeting of ABB Ltd approved the ap-
pointment of KPMG AG (KPMG) to be the auditors
of the Company for the 2021 financial year.
KPMG are the auditors of ABB’s statutory and
consolidated financial statements. KPMG, Swit-
zerland, assumed the sole auditing mandate of
the consolidated financial statements of the ABB
Group beginning in the year ended Decem-
ber 31, 2018. The auditor in charge and
responsible for the mandate, Hans-Dieter Krauss,
began serving in this capacity in respect of the
financial year ended December 31, 2018. Pursuant
to ABB’s Articles of Incorporation (available at
https://new.abb.com/about/
corporate-governance), the term of office of
ABB’s auditors is one year.
Information to the Board and
the Finance, Audit and
Compliance Committee
Supervisory and control instruments vis-à-vis
the auditors
Our auditors, KPMG, attend each meeting of the
FACC and each meeting includes a private session
between the auditors and the FACC without the
management being present. In 2021, the FACC had
6 meetings (either in person or via telephone call).
On at least an annual basis, the FACC reviews and
discusses with the external auditors all significant
relationships that the auditors have with the
Company that could impair their independence.
The FACC reviews the auditor engagement letter
and the audit plan including discussion of scope,
staffing, locations and general audit approach.
The FACC also reviews and evaluates the auditors’
judgment on the quality and appropriateness of
the Company’s accounting principles as applied in
the financial reporting. In addition, the FACC
approves in advance any non-audit services to be
performed by the auditors.
At least annually, the FACC obtains and re-
views a report by the auditors that includes
discussion on:
• The Company’s internal control procedures;
• Material issues, if any, raised by the most recent
internal quality control review;
• Critical accounting policies and practices of
the Company;
• All alternative accounting treatments of
financial information that were discussed
between the auditors and management as well
as the related ramifications; and
• Material communications between the auditors
and management such as any management
letter or schedule of audit differences.
Taking into account the opinions of management
the FACC evaluates the qualifications, indepen-
dence and performance of the auditors. The FACC
reports the material elements of its supervision
of the auditors to the Board and on an annual
basis recommends to the Board the auditors to
be proposed for election at the shareholders
meeting.
Audit and additional fees paid
to the auditors
The audit fees charged by KPMG for the legally
prescribed audit amounted to $34.5 million in
2021. Audit services are defined as the standard
audit work performed each fiscal year necessary
to allow the auditors to issue an opinion on the
consolidated financial statements of ABB and to
issue an opinion on the local statutory financial
statements.
This classification may also include services that
can be provided only by the auditors, such as
pre-issuance reviews of quarterly financial results
and comfort letters delivered to underwriters in
connection with debt and equity offerings.
Included in the 2021 audit fees were approxi-
mately $4.7 million related to audits from 2020
and earlier, which were not agreed until after the
Company had filed its annual report on Form 20-F
with the SEC on February 26, 2021.
In addition, KPMG charged $13.6 million for
non-audit services during 2021. Non-audit
services include primarily carve-out financial
statement audits in relation to transactional
activities, service organization attestation
70
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
procedures, agreed-upon procedure reports,
accounting consultations, audits of pension and
benefit plans, accounting advisory services and
other attest services related to financial reporting
that are not required by statute or regulation,
income tax and indirect tax compliance services
as well as tax advisory services. In accordance
with the requirements of the U.S. Sarbanes Oxley
Act of 2002 and rules issued by the SEC, we
utilize a procedure for the review and pre approval
of any services performed by KPMG.
—
Other governance information
ABB Group organizational
structure
Employee participation
programs
ABB Ltd, Switzerland, is the ultimate parent
company of the ABB Group. It is the sole share-
holder of ABB Asea Brown Boveri Ltd which
directly or indirectly owns the other companies in
the ABB Group. The table in the appendix to this
Corporate Governance Report sets forth, as of
December 31, 2021, the name, place of incorpora-
tion, ownership interest and share capital of the
significant direct and indirect subsidiaries of ABB
Ltd. In addition, ABB Ltd also owns 19.9 percent of
Hitachi Energy Ltd. ABB’s operational group
structure is described in the “Financial review of
ABB Group” section of this Annual Report under
“Operating and financial review and prospects
– Organizational structure”.
Management contracts
There are no management contracts between ABB
and companies or natural persons not belonging
to the ABB Group.
Change of control clauses
Board members, Executive Committee members,
and other members of senior management do not
receive any special benefits in the event of a
change of control. However, the conditional
grants under the Long Term Incentive Plan (LTIP)
and the Management Incentive Plan (MIP) may be
subject to accelerated vesting in the event
of a change of control. From 2021, the rules for the
LTIP have been amended to no longer provide for
accelerated vesting upon a change in control. No
further grants are made under the MIP.
In order to align its employees’ interests with the
business goals and financial results of the Com-
pany, ABB operates a number of incentive plans,
linked to ABB’s shares, such as the Employee
Share Acquisition Plan, the Management Incentive
Plan and the Long Term Incentive Plan. For a more
detailed description of these incentive plans,
please refer to “Note 18 – Share-based payment
arrangements” to ABB’s Consolidated Financial
Statements.
General blackout periods for
trading ABB securities
During the 30 days prior to the day of publication
of the ABB Group’s quarterly financial results, as
well as on such day, the members of the Board of
Directors and the Executive Committee as well as
certain employees of ABB, as specified in ABB’s
internal policies, are prohibited from trading in
ABB Ltd securities and any related financial
instruments.
Governance differences from
NYSE Standards
According to the New York Stock Exchange’s
corporate governance standards (the Standards),
ABB is required to disclose significant ways in
which its corporate governance practices differ
from the Standards. ABB has reviewed the Stan-
dards and concluded that its corporate
governance practices are generally consistent
with the Standards, with the following significant
exceptions:
• Swiss law requires that the external auditors be
elected by the shareholders at the Annual
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
71
General Meeting rather than by the audit
committee or the board of directors.
• The Standards require that all equity
compensation plans and material revisions
thereto be approved by the shareholders.
Consistent with Swiss law such matters are
decided by our Board. However, the
shareholders decide about the creation of new
share capital that can be used in connection
with equity compensation plans.
• Swiss law requires that the members of the
compensation committee are elected by the
shareholders rather than appointed by
our Board.
• Swiss law requires shareholders to approve the
maximum aggregate Board compensation and
the maximum aggregate Executive
Committee compensation.
—
Information policy
ABB, as a publicly traded company, is committed
to communicating in a timely and consistent way
to shareholders, potential investors, financial
analysts, customers, suppliers, the media and
other interested parties. ABB is required to dis-
seminate material information pertaining to its
businesses in a manner that complies with its
obligations under the rules of the stock ex-
changes where its shares are listed and traded.
ABB publishes an annual report that provides
audited financial statements and information
about ABB including our business results, strat-
egy, products and services, corporate governance
and executive compensation. ABB also submits an
annual report on Form 20-F to the Securities and
Exchange Commission (SEC). In addition, ABB
publishes its results on a quarterly basis as press
releases, distributed pursuant to the rules and
regulations of the stock exchanges on which its
shares are listed and traded. Press releases
relating to financial results and material events
are also filed with the SEC on Form 6-K. An archive
containing Annual Reports, Form 20-F reports,
quarterly results releases and related presenta-
tions can be found in the “Financial results and
presentations” section at www.abb.com/inves-
torrelations. The quarterly results press releases
contain unaudited financial information prepared
in accordance with or reconciled to U.S. GAAP. To
subscribe to important press releases, please
click on the “Contacts and Services” and choose
“Subscribe to updates” at https://www.abb.com/
investorrelations. Ad-hoc notices can also be
found in the press releases section at https://
www.abb.com/news.
ABB’s official means of communication is the
Swiss Official Gazette of Commerce (https://
www.shab.ch). The invitation to the Company’s
Annual General Meeting is sent to registered
shareholders by mail.
Inquiries may also be made to ABB Investor
Relations:
Affolternstrasse 44
CH-8050 Zurich, Switzerland
Telephone: +41 43 317 7111
E-Mail: investor.relations@ch.abb.com
ABB’s website is: www.abb.com
Further information on
corporate governance
The list below contains references to additional
information concerning the corporate governance
of ABB (available at https://new.abb.com/about/
corporate-governance).
• Articles of Incorporation
• ABB Ltd Board Governance Rules,
which includes:
– Governance Rules of the Finance, Audit and
Compliance Committee
– Governance Rules of the Governance and
Nomination Committee
– Governance Rules of the Compensation
Committee
– Related Party Transaction Policy
• ABB Code of Conduct
• Comparison of ABB’s corporate governance
practices to the New York Stock Exchange rules
• Summary of differences of shareholder rights
under Swedish and Swiss law applicable to ABB
• CVs of the Board members
• CVs of the Executive Committee members
ABB’s corporate calendar can be found at https://
new.abb.com/investorrelations/
calendar-events-and-publications/
financial-calendar.
72
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
Appendix – ABB Ltd’s significant subsidiaries
Company name/location
ABB S.A., Buenos Aires
ABB Australia Pty Limited, Moorebank
ABB Group Holdings Pty. Ltd., Moorebank
ABB Group Investment Management Pty. Ltd., Moorebank
ABB AG, Wiener Neudorf
B&R Holding GmbH, Eggelsberg
B&R Industrial Automation GmbH, Eggelsberg
ABB N.V., Zaventem
ABB Automacao LTDA, Soracaba
ABB Eletrificacao LTDA, Soracaba
ABB Bulgaria EOOD, Sofia
ABB Electrification Canada ULC, Edmonton
ABB Inc., Saint-Laurent
ABB S.A., Santiago
ABB (China) Investment Limited, Beijing
ABB (China) Ltd., Beijing
ABB Beijing Drive Systems Co. Ltd., Beijing
ABB Beijing Switchgear Limited, Beijing
ABB Electrical Machines Ltd., Shanghai
ABB Engineering (Shanghai) Ltd., Shanghai
ABB LV Installation Materials Co. Ltd. Beijing, Beijing
ABB Shanghai Free Trade Zone Industrial Co., Ltd., Shanghai
ABB Shanghai Motors Co. Ltd., Shanghai
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen
ABB Xiamen Switchgear Co. Ltd., Xiamen
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui
ABB s.r.o., Prague
ABB A/S, Skovlunde
ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo
Asea Brown Boveri S.A.E., Cairo
ABB AS, Jüri
ABB Oy, Helsinki
ABB France, Cergy Pontoise
ABB SAS, Cergy Pontoise
ABB AG, Mannheim
ABB Beteiligungs- und Verwaltungsges. mbH, Mannheim
ABB Stotz-Kontakt GmbH, Heidelberg
B + R Industrie-Elektronik GmbH, Bad Homburg
Busch-Jaeger Elektro GmbH, Lüdenscheid
ABB Engineering Trading and Service Ltd., Budapest
Industrial C&S Hungary Kft., Budapest
ABB Global Business Services and Contracting India Private
Limited, Bangalore
ABB Global Industries and Services Private Limited, Bangalore
ABB India Limited, Bangalore
ABB S.p.A., Milan
ABB K.K., Tokyo
ABB Ltd., Seoul
ABB Electrical Control Systems S. de R.L. de C.V., Monterrey
ABB Mexico S.A. de C.V., San Luis Potosi
Asea Brown Boveri S.A. de C.V., San Luis Potosi
ABB B.V., Rotterdam
ABB Finance B.V., Rotterdam
ABB Holdings B.V., Rotterdam
ABB AS, Fornebu
ABB Electrification Norway AS, Skien
ABB
interest %
Share
capital in
thousands Currency
Country
Argentina
Australia
Australia
Australia
Austria
Austria
Austria
Belgium
Brazil
Brazil
Bulgaria
Canada
Canada
Chile
China
China
China
China
China
China
China
China
China
China
China
China
Czech Republic
Denmark
Egypt
Egypt
Estonia
Finland
France
France
Germany
Germany
Germany
Germany
Germany
Hungary
Hungary
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
278,860
131,218
552,982
505,312
15,000
35
1,240
34,308
196,554
268,759
65,110
—(2)
—(2)
100.00
5,484,348
100.00
100.00
90.00
60.00
100.00
100.00
85.70
100.00
75.00
100.00
66.52
90.00
100.00
100.00
100.00
100.00
100.00
100.00
99.83
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
95,000
140,000
5,000
16,500
14,400
40,000
17,100
6,500
11,217
15,800
29,500
6,200
400,000
100,000
353,479
166,000
1,663
10,003
25,778
45,921
167,500
61,355
7,500
358
1,535
436,281
3,000
India
India
India
Italy
100.00
5,200,100
100.00
366,923
75.00
423,817
100.00
110,000
Japan
100.00
1,000,000
Korea, Republic of
100.00 23,670,000
Mexico
Mexico
Mexico
Netherlands
Netherlands
Netherlands
Norway
Norway
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
315,134
683,418
667,686
9,200
20
363
134,550
60,450
ARS
AUD
AUD
AUD
EUR
EUR
EUR
EUR
BRL
BRL
BGN
CAD
CAD
CLP
USD
USD
USD
USD
USD
USD
USD
CNY
USD
USD
USD
USD
CZK
DKK
EGP
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
HUF
HUF
INR
INR
INR
EUR
JPY
KRW
MXN
MXN
MXN
EUR
EUR
EUR
NOK
NOK
A B B A N N U A L R E P O R T 2 0 2 1
0 2 C O R P O R AT E G O V E R N A N C E R E P O R T
73
PLN
PLN
PLN
PLN
USD
RUB
SAR
SGD
ZAR
ZAR
ZAR
EUR
SEK
SEK
SEK
CHF
CHF
CHF
CHF
CHF
CHF
CHF
Company name/location
ABB Holding AS, Fornebu
ABB Business Services Sp. z o.o., Warsaw
ABB Industrial Solutions (Bielsko-Biala) Sp. z o.o., Bielsko-Biala
ABB Industrial Solutions (Klodzko) Sp.z o.o., Klodzko
ABB Sp. z o.o., Warsaw
Industrial C&S of P.R. LLC, San Juan
ABB Ltd., Moscow
Country
ABB
interest %
Share
capital in
thousands Currency
Norway
100.00
240,000
NOK
Poland
Poland
Poland
Poland
Puerto Rico
Russian Federation
99.94
99.94
99.94
99.94
100.00
100.00
24
328,125
50
245,461
—(2)
23,000
ABB Electrical Industries Co. Ltd., Riyadh
Saudi Arabia
65.00
181,000
ABB Pte. Ltd., Singapore
ABB Holdings (Pty) Ltd., Modderfontein
ABB Investments (Pty) Ltd, Modderfontein
ABB South Africa (Pty) Ltd., Modderfontein
Asea Brown Boveri S.A., Madrid
ABB AB, Västerås
ABB Electrification Sweden AB, Västerås
ABB Norden Holding AB, Västerås
ABB Asea Brown Boveri Ltd, Zurich
ABB Canada EL Holding GmbH, Zurich
ABB Capital AG, Zurich
ABB Information Systems Ltd., Zurich
ABB Investment Holding 2 GmbH, Zurich
ABB Management Services Ltd., Zurich
ABB Schweiz AG, Baden
ABB Ltd., Taipei
ABB Elektrik Sanayi A.S., Istanbul
ABB Industries (L.L.C.), Dubai
ABB Holdings Limited, Warrington
ABB Limited, Warrington
ABB Finance (USA) Inc., Wilmington, DE
ABB Holdings Inc., Cary, NC
ABB Inc., Cary, NC
ABB Installation Products Inc, Memphis, TN
ABB Motors and Mechanical Inc, Fort Smith, AR
ABB Treasury Center (USA), Inc., Wilmington, DE
Edison Holding Corporation, Wilmington, DE
Industrial Connections & Solutions LLC, Cary, NC
(1) Company consolidated as ABB exercises full management control.
(2) Shares without par value.
Singapore
South Africa
South Africa
South Africa
Spain
Sweden
Sweden
Sweden
100.00
100.00
51.00
74.91
100.00
100.00
100.00
32,797
217,758
56,000
200,001
33,318
200,000
10,000
100.00
2,344,783
Switzerland
100.00
2,767,880
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
100.00
100.00
100.00
100.00
100.00
100.00
1,000
100
500
20
571
55,000
Taiwan (Chinese
Taipei)
100.00
195,000
TWD
Turkey
99.99
United Arab Emirates
49.00(1)
United Kingdom
United Kingdom
United States
United States
United States
United States
United States
United States
United States
United States
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
13,410
5,000
226,014
120,000
1
2
1
1
—(2)
1
—(2)
—(2)
TRY
AED
GBP
GBP
USD
USD
USD
USD
USD
USD
USD
USD
03
Compensation
report
76
Letter from the Chairman of the
Compensation Committee
78 Compensation at a Glance
81 Compensation governance
83 Board compensation policy
84
Implementation of Board compensation policy
84 Shareholding of Board members
85 Executive Committee compensation policy
91
Implementation of EC compensation policy
99 Shareholding of EC members
99 Changes applicable to EC members
100 Votes on compensation at the 2022 AGM
102 Compensation tables and
share ownership tables
111 Report of the statutory auditor
76
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
—
Letter from the Chairman of the
Compensation Committee
Dear Shareholders,
On behalf of the Board of Directors and the
Compensation Committee, I am pleased to pres-
ent the ABB Compensation Report for 2021.
Our focus remains to ensure that the compensa-
tion structure at ABB drives value creation for our
shareholders, represents a motivating package
for our executives, meets best-practice corporate
governance standards and aligns with ABB’s
sustainability strategy.
Summary of changes for 2022
One of the main subjects of our analysis this year
was how to best link our sustainability strategy
- and its associated ambitious targets for 2030
- to the short- and long-term incentive plans of
our Executive Committee (EC) members. This and
other discussions resulted in a suite of changes
which we believe will place ABB in line with leading
market practices for executive compensation and
reinforce our commitment towards sustainability
and long-term value creation. In brief:
Annual Incentive Plan (AIP)
All EC members will have two or more KPIs relat-
ing to environmental, social and corporate
governance (ESG) matters in the personal compo-
nent of their short-term incentive plan, and the
existing mechanism of subjectively adjusting its
outcome against an ESG “boundary condition”
will be discontinued.
Long-Term Incentive Plan (LTIP)
• A Corporate ESG measure will be added to the
LTIP of all EC members, with a material
weighting of 20 percent, and the Company
will set and prospectively disclose appropriate
ESG target(s) on an annual basis. The target
for the 2022 LTIP is set out in this
Compensation Report;
• There will be no vesting of the Total Shareholder
Return (TSR) portion of our LTIP award below
the median (50th percentile) of the peer group;
• A dividend equivalent (to the dividends paid
during the vesting period) payment will be
introduced on the final number of awarded
shares at the time of vesting. This will be largely
offset by the reduction of other
benefit-related costs;
• The existing discretion to increase or decrease
the target pool size applicable to EC members
will be discontinued, as well as the discretion to
increase or decrease individual target grants
(except to give no grant in certain
circumstances) and
• The clawback and leaver provisions will be
updated to provide greater clarity of the use of
discretion of the Compensation Committee to
adjust the formulaic outcomes of the
achievement level against defined performance
measures and targets.
Policy and general terms and conditions
New joiners to the EC will have an increased
variable, performance oriented portion of com-
pensation mix and, in turn, a reduced fixed
portion, when compared to current EC members.
The compensation structure for the EC, its pur-
pose and links to our Company strategy, and
associated performance measures, valid as of
2022, are set out in Exhibit 3 below.
Compensation policy outcomes
Board of Directors: the approved maximum
aggregate compensation for the 2021-2022 term
is lower than for the previous term, as a result
of a reduction in the number of members of the
Board (from eleven to ten).
The aggregate Board compensation for the
2021-2022 term is in line with the amount
approved at the 2021 Annual General Meeting
(AGM). There has been no change to the individual
Board fees since 2015 .
Executive Committee: the aggregate EC total
compensation was CHF 39.2 million in 2021,
compared to CHF 35.4 million in 2020, as summa-
rized in Exhibit 21 below and presented in detail in
Exhibits 38 and 39. This difference in total com-
pensation was driven by the increase in
performance related variable pay elements.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
77
Three of the nine EC members in place in March
2021 received a salary adjustment, which ranged
from 2.1 to 6.7 percent, for exceptional perfor-
mance and/or market adjustment. This
corresponded to an average 1.3 percent increase
on annual aggregate base salaries for the EC
members in post in March 2021, which was
broadly consistent with the salary review budget
for the wider Swiss employee population.
The average award for the current EC members
under the AIP for 2021 was 143.4 percent (out
of a maximum 150 percent), compared to
72.4 percent in 2020. This significant outcome
was driven by a strong performance from all
businesses, leading to an overachievement re-
lated to the majority of the 2021 AIP financial
targets. In comparison, the 2020 performance
levels were heavily influenced by the impact on
the business from the COVID-19 pandemic, and no
changes in targets were made.
The average weighted achievement level of the
2018 LTIP, which vested in 2021, was 57.4 percent
(out of a maximum 200 percent). There was no
vesting under the EPS component, which was
impacted by the COVID-19 pandemic that took
place during the performance period, and for
which no adjustments to targets were applied.
Disclosure
During the reporting year, the Compensation
Committee listened carefully to inputs and sug-
gestions to increase the clarity of disclosures in
our Compensation Reports. As such, we intro-
duced a new section “Compensation at a glance”
at the beginning of the Compensation Report,
where we provide a tabular overview of the EC
compensation structure. We continue to structure
the Compensation Report to clearly differentiate
between our compensation policies and their
implementation. It is also intended to progres-
sively move from narrative and complex tables
towards more simplified charts with enhanced
disclosures.
Governance
During 2021, the CC also reviewed the Company’s
gender pay policy and disclosure requirements
and fully performed its regular activities, which
include formulating the Compensation Report,
preparing the “say-on-pay” vote for the AGM,
reviewing the terms of departure for members of
the EC, and recommending to the Board the
performance measures and targets for the EC as
well as the compensation of the Board, the CEO
and the EC members. You will find further infor-
mation on our activities and on ABB’s
compensation system and governance in the
following pages.
At the AGM on March 24, 2022, you will be asked to
vote on the maximum aggregate compensation
for the Board for its 2022–2023 term and on the
maximum aggregate compensation for the EC in
2023. It is important to note that the increase in
maximum aggregate compensation for 2023,
rather than any structural increase to EC compen-
sation, is the result of the associated cost related
to the 2020 LTIP vesting in 2023, influenced by the
increased number of shares subject to vesting
compared to prior years; the current, solid perfor-
mance of the Company against its earnings per
share targets and total shareholder return peer
group; and the strong share price development
since the time of grant, with a reference price of
CHF 19.36.
This Compensation Report will also be submitted
for a non-binding, consultative vote by
shareholders.
We encourage and pursue an open and regular
dialogue with all of our stakeholders. Your con-
structive input is highly valued and appreciated as
we continue to improve our compensation
system. On behalf of the Compensation Commit-
tee, I thank you for your continued trust in ABB
and for your consistently supportive feedback.
Frederico Fleury Curado
Chairman of the Compensation Committee
Zurich, February 24, 2022
78
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
—
Compensation report
Compensation at a glance
Board compensation
Compensation for the 2021-2022 term of office
The effective Board compensation for the
2021-2022 term of office (CHF 4,380,000) was
within the maximum amount approved at the
2021 AGM (CHF 4,400,000).
Exhibit 1: Board compensation (in CHF) for the
2021-2022 term of office
Effective compensation
Approved compensation amount
4,380,000
4,400,000
Shareholding of Board members
All Board members held ABB shares at Decem-
ber 31, 2021, worth at least 200 percent of their
2021 Board compensation.
Exhibit 2: Board members shareholding (at December 31, 2021) in % of 2021 total compensation*
Peter Voser
Jacob Wallenberg
Gunnar Brock
David Constable
Frederico Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline
Satish Pai
at 1417%
Board
appointment
April 2015
June 1999
March 2018
April 2015
April 2016
April 2017
March 2018
March 2018
April 2016
April 2016
0
100%
200%
300%
400%
500%
600%
* Based on share price of CHF 26.59, the 2021 LTIP reference price, and shares held at December 31, 2021.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
79
Executive Committee (EC) compensation
Compensation structure as from 2022
Exhibit 3: EC compensation structure as from 2022
Fixed compensation -
base salary and benefits
Variable compensation –
short-term incentive (AIP)
Variable compensation –
long-term incentive (LTIP)
Wealth at risk/
Share ownership
Purpose and
link to strategy
Base salary compensates
for the role and relevant
experience; Benefits
protect against risks.
Facilitates attraction
and retention of talented
EC members
Rewards annual Company,
Business Area, functional
and individual
performance. Aligned with
the Company’s Annual
Performance Plan
Operation
Salary in cash, benefits
in kind, and pension
contribution
Annual awards, payable in
cash after a one-year
performance period
Opportunity
level
(as % of base
salary)
Based on scope of
responsibilities,
personal expe rience and
skillset
0%
Minimum
Target
Maximum
100%
150%
Rewards the achievement
of Company goals over a
three-year period.
Encourages creation of
long-term, sustainable
value for shareholders, and
delivery of long-term
strategic goals. Aligned
with the Company’s Long-
term Performance Plan
Annual grants in shares
which may vest after
three years, subject to
performance conditions
CEO
Minimum
Target
Maximum
0%
150%
300%
Other current EC Members
0%
Minimum
Target
Maximum
80–100%
160–200%
Aligns individual’s
personal wealth at risk
directly to the ABB share
price, and EC members’
interests with those of
shareholders in order to
maintain focus on ABB’s
long-term success
Individuals required to
hold ABB shares
CEO
500% (net of tax)
Other EC Members
400% (net of tax)
Exhibit 3: Structure of EC compensation as from 2022
Exhibit 3: Structure of EC compensation as from 2022
300%
Other new EC Members*
Minimum
Target
Maximum
150%
0%
* higher LTIP opportunity to be
largely offset by lower fixed
cost benefits
Performance
indicators
Changes to base salary
take into account
individual performance,
CEO and
future potential and
Corporate
external benchmarking
Officers
CEO and
Corporate
Officers
Exposed to ABB share
price
LTIP
measures
LTIP
measures
80% Group
80% Group
financial results
financial results
20% Individual results
20% Individual results
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
Business
Area
Presidents
Business
Area
Presidents
20% Group
20% Group
financial results
financial results
60% Business Area
results
60% Business Area
results
20% Individual results
20% Individual results
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
Total EC compensation for 2021
The effective EC compensation for 2021
(CHF 39,157,046) is within the maximum amount
approved at the 2020 AGM (CHF 39,500,000).
CEO
The larger portion of the CEO’s 2021 total com-
pensation was delivered via variable
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
compensation (61 percent represented by
short-term incentive and long-term incentive). For
the other EC members, on an aggregate level,
Other EC members
variable compensation represented 54 percent of
their 2021 compensation. The following chart
shows the composition of the 2021 total compen-
Variable
Fixed
Fixed
8,247,610
compensation
compensation
sation for the current EC, without consideration
compensation
54%
39%
39%
of former EC members.
Fixed
28,514,999
compensation
46%
Variable
8,247,610
compensation
61%
Variable
compensation
61%
Variable
28,514,999
compensation
54%
Other EC members
39,500,000
39,157,046
CEO
Effective aggregate compensation
Approved aggregate compensation
Exhibit 4: EC compensation (in CHF) for 2021
Fixed
46%
compensation
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
Exhibit 16: Mix of target compensation for current and new EC members
Exhibit 16: Mix of target compensation for current and new EC members
Current Other
EC Members
New Other
EC Members
25%
Current Other
EC Members
24%
New Other
EC Members
15%
25%
10%
15%
25%
10%
25%
25%
25%
9% 7%
24%
24%
9% 7%
36%
24%
36%
Base salary
Base salary
Pension benefits
Pension benefits
Other benefits
Other benefits
Short-term incentive
Short-term incentive
Long-term incentive
Long-term incentive
Exhibit 22: Compensation mix
Exhibit 22: Compensation mix
CEO
CEO
20%
9%
10%
20%
9%
30%
10%
30%
31%
31%
Other
22%
Other
EC Members
EC Members
12%
22%
12%
12%
32%
12%
32%
22%
Base salary
Base salary
Pension benefits
Pension benefits
Other benefits
Other benefits
22%
Short-term incentive
Short-term incentive
Long-term incentive
Long-term incentive
Exhibit 3: Structure of EC compensation as from 2022
LTIP
measures
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
CEO and
Corporate
Officers
80% Group
financial results
20% Individual results
Business
Area
Presidents
20% Group
financial results
60% Business Area
results
20% Individual results
80
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
CEO
Other EC members
Variable
compensation
61%
8,247,610
Fixed
compensation
39%
Variable
compensation
54%
28,514,999
Fixed
compensation
46%
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
Exhibit 16: Mix of target compensation for current and new EC members
Realized variable compensation in 2021
Realized variable compensation considers the
AIP award and the LTIP award at the end of their
respective performance cycles, reflecting actual
AIP payment and LTIP vesting based on achieve-
ment of the plan specific performance measures.
25%
10%
15%
While the outcome of the 2021 short-term incen-
tive was above the target for all current
EC members (143.4 percent on average), the
long-term incentive that vested in 2021 (2018
LTIP) remained substantially below the target,
with a final vesting level of 57.4 percent of target.
25%
25%
Exhibit 6: AIP 2021 outcome compared to target
24%
9% 7%
24%
36%
Current Other
EC Members
New Other
EC Members
O
E
C
145% CHF 2,465,000
150%
C
E
r
e
h
t
O
*
s
r
e
b
m
e
m
Exhibit 22: Compensation mix
0
1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000
Target AIP award
Realized AIP award
Maximum AIP award
10%
Target AIP award corresponds to 100% of base salary
individual outcome ranges from 140% to 145%
*
CEO
20%
9%
30%
31%
Other
EC Members
Realized total compensation in 2021
Considering the stated variable components
above, the realized total compensation in 2021
22%
12%
12%
32%
22%
was above the target total compensation for all
current EC members, driven by strong perfor-
mance in 2021.
Exhibit 7: Long-term incentive: 2018 LTIP outcome compared to target
Relative TSR
(50% of total)
Average EPS
(50% of total)
0%
LTIP Vesting
(total)
100%
114.8%
57.4%
100%
200%
200%
200%
0%
25%
50%
75%
100%
125%
150%
175%
200%
Target achievement level
Realized achievement level
Maximum achievement level
Base salary
Pension benefits
Other benefits
Short-term incentive
Long-term incentive
143% CHF 9,017,900
150%
Base salary
Pension benefits
Other benefits
Short-term incentive
Long-term incentive
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
81
Exhibit 8: Realized total compensation compared to target total compensation
CHF 4,951,782
115% CHF 5,716,782
O
E
C
C
E
r
e
h
t
O
s
r
e
b
m
e
m
CHF 22,903,903
108% CHF 24,846,171
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Target total compensation
Realized total compensation
Further details related to the realized compensa-
tion of each EC member and each compensation
component are specified in Exhibit 44.
Shareholding of EC members
Three out of nine EC members have achieved or
exceeded their share ownership requirement,
while three members have been newly appointed
to the EC in the last two years, and one member is
leaving the Company. Note that EC members may
not sell their shares (except to meet tax and social
security costs) until they achieve the required
shareholding level.
Exhibit 9: EC shareholding compared to share ownership guideline*
Björn Rosengren
Timo Ihamuotila
Carolina Granat
Maria Varsellona
Theodor Swedjemark
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
CEO shareholding
requirement (500%)
Other EC members
shareholding
requirement (400%)
EC appointment
March 2020
April 2017
January 2021
November 2019
August 2020
June 2016
October 2010
January 2017
April 2019
0%
100%
200%
300%
400%
500%
600%
700%
Held shares
Shareholding requirement
*Based on share price of CHF 26.59, the 2021 LTIP reference price, and shares held at December 31, 2021.
Compensation governance
The Compensation Report is prepared in accor-
dance with the Ordinance against Excessive
Remuneration in Listed Stock Corporations, the
Directive on Information relating to Corporate
Governance of the SIX Exchange Regulation, the
rules of the stock markets of Sweden and the
United States, where ABB shares are also listed,
and the principles of the Swiss Code of Best
Practice for Corporate Governance of
economiesuisse.
ABB’s Articles of Incorporation
ABB’s Articles of Incorporation, approved by its
shareholders, contain provisions on compensa-
tion which govern and outline the principles of
compensation relating to our Board of Directors
and Executive Committee. They can be found on
ABB’s Corporate Governance website new.abb.
com/about/corporate-governance and are sum-
marized below:
• Compensation Committee (Articles 28 to 31):
The Compensation Committee (CC) is
composed of a minimum of three members of
the Board and are elected individually by the
shareholders at the Annual General Meeting
for a period of one year. It supports the Board in
establishing and reviewing the compensation
strategy, principles and programs, in preparing
the proposals to the AGM on compensation
matters and in determining the compensation
of the Board and of the EC. The responsibilities
of the CC are defined in more detail in the Board
Regulations and Corporate Governance
guidelines, which are also available on ABB’s
Corporate Governance website.
82
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
• Compensation principles (Article 33):
Compensation of the members of the Board
consists of fixed compensation only, which is
delivered in cash and shares (with an option to
elect for shares only). Compensation of the
members of the EC consists of fixed and
variable compensation. Variable compensation
may comprise short-term and long-term
elements. Compensation may be paid in cash,
shares or other benefits.
• “Say-on-pay” vote (Article 34): Shareholders
approve the maximum aggregate amount of
compensation of the Board for the following
Board term and of the EC for the following
financial year.
• Supplementary amount for new EC members
(Article 35): If the maximum approved
aggregate compensation amount is not
sufficient to also cover the compensation of
newly promoted/hired EC members, up to 30
percent of the last maximum approved
Exhibit 10: Authority levels in compensation matters
aggregate amount shall be available
as a supplementary amount to cover the
compensation of such new EC members.
• Loans (Article 37): Loans may not be granted to
members of the Board or of the EC.
Authority levels in compensation matters
The CC acts in an advisory capacity while the
Board retains the decision authority on compen-
sation matters, except for the maximum
aggregate compensation amounts of the Board
and of the EC, which are subject to the approval of
shareholders at the AGM. The authority levels of
the different bodies on compensation matters are
detailed in Exhibit 10. Shareholders also
have a consultative vote on the prior year’s Com-
pensation Report at the AGM and a binding vote
on the maximum aggregate amount of compensa-
tion of the Board for the following Board term and
of the EC for the following financial year.
CEO
CC
Board
AGM
Compensation policy including incentive plans
Maximum aggregate compensation amount for the EC
CEO compensation
Individual compensation of other EC members
Performance target setting and assessment of the CEO
Performance target setting and assessment of other EC members
Shareholding requirements for CEO and other EC members
Maximum aggregate compensation amount for the Board
Individual compensation of Board members
Compensation Report
Proposal
Recommendation
Approval
Activities of the CC in 2021
The CC meets as often as business requires but at
least four times a year. In 2021, the CC held seven
meetings and performed the activities described
in Exhibit 11. The CEO, the Chief Human Resources
Officer (CHRO) and the Head of Performance and
Reward also attend all or part of the CC meetings
in an advisory capacity. The Chairman of the CC
may decide to invite other executives upon con-
sultation with the CEO, as appropriate. Executives
do not attend the meetings or the parts of the
meetings in which their own compensation and/
or performance are being discussed. Details on
meeting attendance of the individual CC mem-
bers (number of meetings held during 2021, their
Consultative vote
average duration, as well as the attendance of the
individual members) are provided in the section
titled “Board of Directors – Meetings and atten-
dance” of the Corporate Governance Report.
The Chairman of the CC reports to the full Board
after each CC meeting. The minutes of the meet-
ings are available to the members of the Board.
The CC retains independent, external advisors for
compensation matters. PricewaterhouseCoopers
(PwC) was mandated to provide consulting
services related to executive compensation
matters. Apart from its CC advisory role, PwC also
provides human resources, tax and advisory
services to ABB.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
83
Exhibit 11: CC activities during 2021
Strategy
Review of Long-Term Incentive plan (LTIP)
Review of link between Environmental, Social and Corporate Governance (ESG) and compensation
EC Compensation
Review of recommendations on individual compensation for EC members
Review of the share ownership of EC members
Review and approval of compensation for departing EC members
Performance – relating to past performance cycle
Assessment of short-term incentive awards for 2020
Assessment of achievement of performance targets for LTIP awards vesting in 2021
Performance – relating to forthcoming performance cycle
Setting of Annual Incentive Plan (AIP) design and targets for 2021
Consideration of forecast AIP outcomes for 2021
Consideration of preliminary AIP targets for 2022
Setting of performance targets for LTIP grants in 2021
Consideration of forecast achievement against performance targets for unvested LTIP grants
Compliance
Review of CC Terms of Reference and annual plan
Review of the gender pay policy and disclosure in Switzerland
Review of feedback from Stakeholder Engagement meetings
Regulatory and market updates
Review of the Compensation Report for publication
Preparation of maximum aggregate compensation for the Board to be submitted for AGM vote
Preparation of maximum aggregate compensation for the EC to be submitted for AGM vote
Pay equity
ABB believes that a culture of diversity, inclusion
and equal opportunity is critical to our business
success and makes us stronger. This mindset is
supported by our Diversity & Inclusion Strategy
2030, that clearly defines ABB plans to ensure an
inclusive culture and equal treatment of everyone,
regardless of gender, age, ethnic origin, sexual
orientation, etc. Equal pay is a critical component
of this strategy.
In Switzerland, under the revised Swiss Federal
Act on Gender Equality (GEA) that came into force
last year, legal entities with more than 100 em-
ployees are required to conduct an equal pay
analysis. ABB has completed this analysis for all
four required legal entities and the results of this
analysis were verified by an external accounting
firm, KPMG. As a result, the two in-scope legal
entities forming part of ABB Switzerland (ABB
Schweiz AG and ABB Power Protection SA, which
now is part of ABB Schweiz AG), meet the equal
pay requirements and are within the applicable
thresholds for salary and overall compensation
(salary plus actual bonus).
At ABB Headquarters, ABB Asea Brown Boveri Ltd
meets the equal pay requirements and is within
the applicable thresholds for salary and overall
compensation (salary plus actual bonus). The
smaller legal entity in scope, ABB Management
Services Ltd, meets the equal pay requirements
for salary and slightly underachieves the parity
level for overall compensation (salary plus actual
bonus), as it has employees from different busi-
nesses assigned with different bonus plans,
leading to varying levels of bonus payments. In
accordance with the Swiss law, ABB will continue
to monitor these requirements.
Board compensation policy
The compensation policy for the members of the
Board is designed to attract and retain experi-
enced people to the Board of Directors.
Compensation takes into account the responsibil-
ities, time and effort required to fulfill their roles
on the Board and its Committees, and is generally
positioned at levels similar to other Swiss listed
companies of comparable size and complexity.
Compensation structure
A fixed fee is payable for the Chairman,
Vice-Chairman and members of the Board, and
additional fees are payable for chairing or mem-
bership of a Board Committee, except for the
Chairman and Vice-Chairman. Board members are
paid for their service over a 12-month period that
starts with their election at the AGM. Payment of
fees is made in semi-annual installments in
arrears.
84
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Each fee is delivered in cash and shares, although
Board members may elect to receive all their fees
in shares. The number of shares delivered is
calculated prior to each semi-annual payment by
dividing the monetary amount to which the Board
members are entitled by the average closing price
of the ABB share over a predefined 30-day period.
The shares are subject to a three-year restriction
period during which they cannot be sold, trans-
ferred or pledged. Any restricted shares are
unblocked when the Board member leaves
the Board.
Implementation of Board
compensation policy
Board fees by role
As mentioned above, the levels and mix of com-
pensation of Board members are regularly
compared against the compensation of
non-executive Board members from a cross-
section of publicly traded companies in Switzer-
land that are part of the Swiss Market Index (i.e.,
Adecco, Alcon, Geberit, Givaudan, Holcim, Lonza,
Richemont, SGS, Sika, Swisscom, Swiss Life,
Zurich Insurance). Such a review was last under-
taken in 2020, and there was no adjustment made
to Board fees for the term of office from the 2021
AGM to the 2022 AGM, as set out in Exhibit
12 below.
Exhibit 12: Current Board fees
Chairman of the Board(1)
Vice-Chairman of the Board(1)
Member of the Board
Additional committee fees:
Chairman of FACC(2)
Chairman of CC or GNC(2)
Member of FACC(2)
Member of CC or GNC(2)
Board term fee (CHF)
1,200,000
450,000
290,000
110,000
60,000
40,000
30,000
(1) The Chairman and the Vice-Chairman do not receive any
additional committee fees for their roles on the GNC.
(2) CC: Compensation Committee,
FACC: Finance, Audit and Compliance Committee,
GNC: Governance and Nomination Committee.
Total Board compensation
The compensation paid to the Board members for
the calendar year 2021 and for the term of office
from the 2021 AGM to the 2022 AGM are disclosed
in Exhibit 13 below and in Exhibits 35 and 36,
respectively, in the section “Compensation tables
and share ownership tables”.
At the 2021 AGM, the shareholders
approved a maximum aggregate compensation
amount of CHF 4.40 million for the 2021-2022
Board term. This amount was lower than the
approved amount for the previous Board term,
reflecting the reduction of the total number of
members of the Board from eleven to ten. The
Board compensation to be paid is CHF 4.38 mil-
lion and is therefore within the amount approved
by the shareholders. The Board compensation
paid for the previous 2020-2021 term of office
was below the amount approved by the share-
holders due to the voluntary donation of
10 percent of fees for a six-month period during
2020 to fight the impacts of the COVID-19
pandemic.
Exhibit 13: Board compensation (in CHF)
Board term
Board of Directors
2021–2022
2020–2021
Number of members
10
11
Total compensation
4,380,000
4,436,500
Maximum aggregate
compensation amount
approved at previous AGM
4,400,000
4,700,000
Compensation of former Board members
In 2021, no payment was made to any former
Board member.
Compensation for services rendered
In 2021, ABB did not pay any fees or compensation
to the members of the Board for services ren-
dered to ABB other than those disclosed in this
Compensation Report.
Shareholding of Board members
The members of the Board collectively owned less
than 1 percent of ABB’s total shares outstanding
at December 31, 2021.
Exhibit 37 in the section “Compensation tables
and share ownership tables” shows the number of
ABB shares held by each Board member at Decem-
ber 31, 2021 and 2020. Except as described in this
Exhibit, no member of the Board and no person
closely linked to a member of the Board held any
shares of ABB or options in ABB shares.
Shares delivered to Board members as part of
their compensation are blocked for a period of
three years. Exhibit 14 shows the wealth at risk for
each Board member, comparing the value of held
shares at December 31, 2021 with the total com-
pensation for the 2021-2022 term of office. At
December 31, 2021, all Board members held ABB
shares worth at least 200 percent of their 2021
total compensation.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
85
Exhibit 14: Board shareholding (at December 31, 2021) in % of 2021 total compensation*
Peter Voser
Jacob Wallenberg
Gunnar Brock
David Constable
Frederico Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline
Satish Pai
at 1417%
0%
100%
200%
300%
400%
500%
600%
* Based on share price of CHF 26.59, the 2021 LTIP reference price, and shares held at December 31, 2021.
Executive Committee
compensation policy
The EC compensation policy reflects ABB’s com-
mitment to attract, motivate and retain people
with the talent necessary to strengthen its posi-
tion as a leading global technology company.
Compensation structure
The compensation structure is designed to be
competitive, based on performance, and to
encourage executives to deliver outstanding
results and create sustainable shareholder value
without taking excessive risks. The EC compensa-
tion framework therefore balances fixed and
variable compensation. Variable compensation is
provided through short-term and long-term
incentives based on strategic, financial and ESG
objectives, recognizing Group, Business Area and
Corporate Function performance as well as indi-
vidual performance.
This structure is linked to our strategy and is
illustrated in Exhibit 15.
A significant portion of total compensation
depends on variable pay components, which
require the achievement of challenging perfor-
mance targets, in alignment with ABB Annual and
Long-Term Performance Plans.
The target AIP award is defined as a percentage
of base salary, currently 100 percent for all EC
members. There is no award under the AIP if
performance is below thresholds on all financial
performance measures. When performance
exceeds targets, the maximum award is capped
at 150 percent of the targeted amount.
The target LTIP grant size is defined as a percent-
age of base salary, currently 150 percent for the
CEO and 80 to 100 percent for all other EC mem-
bers. There will be no award under the LTIP if
performance is below thresholds for all applicable
measures. When performance exceeds targets,
the maximum award is capped at 200 percent of
the conditional grant.
86
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 15: EC compensation structure as from 2022
Fixed compensation -
base salary and benefits
Variable compensation –
short-term incentive (AIP)
Variable compensation –
long-term incentive (LTIP)
Wealth at risk/
Share ownership
Purpose and
link to strategy
Base salary compensates
for the role and relevant
experience; Benefits
protect against risks.
Facilitates attraction
and retention of talented
EC members
Rewards annual Company,
Business Area, functional
and individual
performance. Aligned with
the Company’s Annual
Performance Plan
Operation
Salary in cash, benefits
in kind, and pension
contribution
Annual awards, payable in
cash after a one-year
performance period
Opportunity
level
(as % of base
salary)
Based on scope of
responsibilities,
personal expe rience and
skillset
0%
Minimum
Target
Maximum
100%
150%
Rewards the achievement
of Company goals over a
three-year period.
Encourages creation of
long-term, sustainable
value for shareholders, and
delivery of long-term
strategic goals. Aligned
with the Company’s Long-
term Performance Plan
Annual grants in shares
which may vest after
three years, subject to
performance conditions
CEO
Minimum
Target
Maximum
0%
150%
300%
Other current EC Members
0%
Minimum
Target
Maximum
80–100%
160–200%
Aligns individual’s
personal wealth at risk
directly to the ABB share
price, and EC members’
interests with those of
shareholders in order to
maintain focus on ABB’s
long-term success
Individuals required to
hold ABB shares
CEO
500% (net of tax)
Other EC Members
400% (net of tax)
Exhibit 3: Structure of EC compensation as from 2022
Exhibit 3: Structure of EC compensation as from 2022
300%
Other new EC Members*
Minimum
Target
Maximum
150%
0%
* higher LTIP opportunity to be
largely offset by lower fixed
cost benefits
Performance
indicators
Changes to base salary
take into account
individual performance,
CEO and
future potential and
Corporate
external benchmarking
Officers
CEO and
Corporate
Officers
Exposed to ABB share
price
LTIP
measures
LTIP
measures
80% Group
80% Group
financial results
financial results
20% Individual results
20% Individual results
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
Business
Area
Presidents
Business
Area
Presidents
20% Group
20% Group
financial results
financial results
60% Business Area
results
60% Business Area
results
20% Individual results
20% Individual results
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
From 2022, the mix of fixed and variable target
compensation elements for new EC members will
be adjusted to provide a greater emphasis on
variable pay. This will be achieved by increasing
the LTIP grant size from 100 percent to 150 per-
CEO
cent of base salary, while reducing the level of
pension contributions and other benefits. The
reduction of pension contributions and other
Variable
8,247,610
compensation
61%
Variable
compensation
61%
CEO
benefits substantially offsets the increase of the
LTIP component, and represents a shift from
guaranteed pay elements to pay at risk. Fixed
compensation for new EC members will represent
40 percent of their target total compensation, in
Other EC members
comparison to 50 percent for current EC mem-
bers. Exhibit 16 below illustrates the changes for
new EC members in more detail.
Fixed
8,247,610
compensation
39%
Variable
Fixed
compensation
compensation
54%
39%
Variable
28,514,999
compensation
54%
Other EC members
Fixed
28,514,999
compensation
46%
Fixed
compensation
46%
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
Exhibit 16: Mix of target compensation for current and new EC members
Exhibit 16: Mix of target compensation for current and new EC members
Current Other
EC Members
New Other
EC Members
25%
Current Other
EC Members
24%
New Other
EC Members
15%
25%
10%
15%
25%
10%
25%
25%
25%
9% 7%
24%
24%
9% 7%
36%
24%
36%
Base salary
Base salary
Pension benefits
Pension benefits
Other benefits
Other benefits
Short-term incentive
Short-term incentive
Long-term incentive
Long-term incentive
Exhibit 22: Compensation mix
Exhibit 22: Compensation mix
CEO
CEO
20%
9%
10%
20%
9%
30%
10%
30%
31%
31%
Other
22%
Other
EC Members
EC Members
12%
22%
12%
12%
32%
12%
32%
22%
Base salary
Base salary
Pension benefits
Pension benefits
Other benefits
Other benefits
22%
Short-term incentive
Short-term incentive
Long-term incentive
Long-term incentive
Exhibit 3: Structure of EC compensation as from 2022
LTIP
measures
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
CEO and
Corporate
Officers
80% Group
financial results
20% Individual results
Business
Area
Presidents
20% Group
financial results
60% Business Area
results
20% Individual results
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
CEO
Other EC members
Variable
compensation
61%
8,247,610
compensation
28,514,999
compensation
Fixed
39%
Variable
compensation
54%
Fixed
46%
20% Base salary
9% Pension benefits
10% Other benefits
30% Short-term incentive
31% Long-term incentive
22% Base salary
12% Pension benefits
12% Other benefits
32% Short-term incentive
22% Long-term incentive
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
87
Exhibit 16: Mix of target compensation for current and new EC members
Exhibit 16: Mix of target compensation for current and new EC members
Current Other
EC Members
New Other
EC Members
25%
15%
10%
25%
25%
24%
9% 7%
24%
36%
Base salary
Pension benefits
Other benefits
Short-term incentive
Long-term incentive
Competitive positioning of compensation
Exhibit 22: Compensation mix
The Board considers competitive market data
when setting the compensation policy for the EC.
It is also one of several factors in positioning the
target compensation for individual EC members
which include:
The CC conducted a comprehensive review of its
approach to competitive benchmarking in 2020,
which led to the creation of three benchmarking
peer groups, designed to match the size, scope
and complexity of ABB, and exclude companies
from the financial services sector.
CEO
• market value of the role
20%
9%
10%
30%
(compensation benchmarking);
12%
22%
12%
• individual profile of the EC member in terms of
Other
EC Members
experience and skills;
• personal performance and potential.
32%
31%
22%
The use of these peer groups depends on the
Base salary
Pension benefits
nature of the role and the source of relevance. For
Other benefits
example, a stronger emphasis is placed on the
Short-term incentive
Global Industry peer group for operational roles
Long-term incentive
and in compensation design, and on the
Pan-European Market peer group for functional
roles. In all cases, the other two peer groups are
used to stress test the findings of the primary
peer group (see the summary in Exhibit 17 below).
Exhibit 17: Compensation benchmarking peer groups
Peer Group
Composition
Rationale
Global Industry
A tailored group of 16 global industry peer compa-
nies(1), matching the scale and complexity of ABB
Focus for Business Area roles and benchmark-
ing compensation design
Pan-European Market A panel of 50 cross-industry European companies(2),
Swiss Market
matching the scale and complexity of ABB
A panel of 16 SMI and SMIM companies(3), matching
the scale and complexity of ABB
Focus for Corporate roles; continuity and
stability of data points
Swiss listing and location of headquarters
(1) AB SKF, Alstom, Airbus, Atlas Copco, Denso, Eaton, Emerson Electric, Honeywell, Mitsubishi Electric, Mitsubishi Heavy Industries, Schneider
Electric, Schindler, Siemens, Thermo Fisher Scientific, Toshiba and Traton.
(2) AB InBev, Adidas, Air Liquide, Associated British Foods, AstraZeneca, BAE Systems, Bayer, Bouygues, British American Tobacco, Compass
Group, Continental, CRH, Danone, Endesa, EssilorLuxottica, Fresenius, Fresenius Medical Care, GlaxoSmithKline, HeidelbergCement,
Heineken, Henkel, Hennes & Mauritz, Iberdrola, Imperial Brands, Industria de Diseno Textil, Jeronimo Martins SGPS, Kuehne & Nagel, Holcim,
Linde, L’Oreal, Michelin, National Grid, Naturgy Energy Group, Nokia, Novartis, Novo Nordisk, OMV, Philips, Rio Tinto, Safran, Saint Gobain,
Sanofi, SAP, Schneider Electric, Telefonaktiebolaget LM Ericsson, Thales, Umicore, Veolia Environment, Vinci and Vodafone.
(3) SMI: Swiss Market Index; SMIM: Swiss Market Index MID; Companies include: Adecco, Geberit, Givaudan, Glencore, Kuehne & Nagel, Holcim,
Nestle, Novartis, Richemont, Roche, Schindler, SGS, Sika, STMicroelectronics, Swatch and Swisscom.
Since benchmark reviews are performed every
other year, the comparison of ABB to its compen-
sation benchmarking peer groups, shown in
Exhibit 18 below is based on the last review in
2020. This data shows that ABB is typically posi-
tioned at the median of key comparator indicators
(market capitalization, revenues, number of
employees) against the Global Industry and
Pan-European Market peer groups, and at the
upper quartile of the Swiss Market peer group.
It is the intention to position target compensa-
tion for individual EC members between median
and upper quartile of the relevant peer group(s)
considering the other factors referenced above
(e.g., the EC member’s skills, experience, perfor-
mance, potential).
88
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 18: Comparison of ABB to compensation
benchmarking peer groups(1)
Market
capitali-
zation(2)(3)(4) Revenues(2)(4)(5)
Number of
employees(5)(6)
ABB
45.6
27.0
110,000
Global Industry
Upper Quartile
Median
Lower Quartile
Pan-European
Market
Upper Quartile
Median
Lower Quartile
Swiss Market
Upper Quartile
Median
Lower Quartile
54.6
31.1
12.4
68.9
37.4
18.2
31.6
25.9
18.0
37.8
29.2
16.5
38.4
26.9
22.2
31.7
13.4
8.2
137,828
94,500
72,827
126,994
95,331
61,450
93,930
55,930
31,785
(1) Data sources for market capitalization, revenues and number of
employees are Thomson Reuters or Annual Reports.
(2) Market capitalization and revenues are in CHF millions.
(3) Market capitalization is averaged over a period of three months
(May 3, 2020 until August 3, 2020).
(4) Amounts have been translated to CHF using the one-year
average rate from July 1, 2019 until June 30, 2020.
(5) Revenues and number of employees as per last financial year
prior to October 2020.
(6) Number of employees in full-time equivalent (FTE) unless FTE
information was not available, then in total number of
employees.
Compensation elements
Exhibit 15 above sets out the purpose and link to
strategy, the operation, the opportunity level and
the performance measures. In addition, this
section provides further details for each compen-
sation element.
Fixed compensation - base salary and benefits
Purpose and link to strategy
Base salary compensates for the role and relevant
experience; Benefits protect against risks, and
facilitate the attraction and retention of talented
EC members.
Base salary is paid in cash. Benefits consist
primarily of retirement, insurance and healthcare
plans that are designed to provide a reasonable
level of support for the employees and their
dependants in case of retirement, disability
or death.
Opportunity levels
Base salary is set with reference to the scope of
responsibilities, personal experience and skills
and competitive market data.
Benefit plans are set in line with the local com-
petitive and legal environment and are, at a
minimum, in accordance with the legal require-
ments of the respective country.
The monetary value of base salary and benefits
are disclosed in Exhibit 38 “EC compensation
in 2021”.
Performance measures and weighting
Base salary is adjusted considering the factors
set out under opportunity levels above, the execu-
tive’s performance as well as their future
potential.
Variable compensation - Annual Incentive Plan
(AIP)
Purpose and link to strategy
The AIP is designed to reward EC members for the
Group’s results, the results of their Business Area
or Corporate Function and their individual perfor-
mance over a time horizon of one year , and is
aligned with the Annual Performance Plan ap-
proved by the Board.
Opportunity levels
The AIP opportunity levels for the EC are 100 per-
cent of base salary at target with a maximum
opportunity of 150 percent.
Performance measures and weighting
The AIP structure is designed to incentivize
operational delivery and underpin our perfor-
mance culture. As such, it is focused on key
priorities, with a maximum of five measures.
• A common Group measure with a 20 to
25 percent weighting.
• Up to three Corporate or Business Area
measures, with a 55 to 60 percent weighting.
• An individual measure with a 20 percent
weighting. This personal component is informed
by up to three key performance indicators (KPIs)
which may include a combination of quantitative
and qualitative goals.
– From 2022, at least two of these KPIs will
relate to ESG, e.g., CO2 emissions, safety or
female leader targets.
– Business Area Presidents will continue have a
safety KPI, and an environment KPI (CO2 emis-
sions) will be introduced.
– Corporate Officers will have a social KPI
(gender representation on management level)
or a governance KPI (internal controls), and an
environment KPI (CO2 emissions).
– The final outcome against this individual mea-
sure will be a discretionary judgment based on
the combined performance against all per-
sonal KPIs.
• The CC/Board has a discretionary authority to
adjust the results and/or the award. This
specifically includes a downwards adjustment
based on safety performance, including
fatalities.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
89
A summary of the composition and total weight-
ing of the measures for all EC members is set out
in Exhibit 19.
Variable compensation - Long-Term Incentive
Plan (LTIP)
Exhibit 19: Composition and weighting of short-
term incentive measures for EC members
CEO and Corporate
Officers(¹)
Business Area
Presidents
Common Group
measure
Other Group
measures
25%
Up to three
measures
55%
Business Area
measures
n.a.
20%
n.a.
Up to three
measures
60%
Individual measure
Function-specific
20%
Business-specific
20%
Total
100%
100%
(1) Corporate Officers include: Chief Financial Officer, Chief Human
Resources Officer, General Counsel and Chief Communications
and Sustainability Officer.
Other design features
For each performance measure, a target will be
set corresponding to the expected level of perfor-
mance that will generate a target (100 percent)
award. For all except the individual mea-
sure, a minimum level of performance, below
which there is no award (threshold) and a maxi-
mum level of performance, above which the award
is capped at 150 percent of the target (cap), will
also be defined. For quantitative Group, Business
Area and Functional measures, the award
percentage-achievements between threshold and
target, as well as between target and cap are
determined by linear interpolations between
these points.
The outcomes of financial AIP measures are
subject to appropriate discretionary upward or
downward adjustments for non-operational items
and other adjustment principles agreed with
the Board.
In 2021, progress against defined ESG target(s)
was a “boundary condition” for making AIP
awards. Under this approach, the Board agreed to
review whether the Company had made sufficient
progress at the end of the year to justify making
the indicated AIP award. If, in the opinion of the
Board, insufficient progress had been made, the
AIP award might have been reduced on a discre-
tionary basis. Following feedback from
stakeholders, this practice will be discontinued in
2022 and replaced with the approach to ESG in the
AIP individual measure described above, and in
the LTIP described below.
Purpose and link to strategy
Rewards the achievement of predefined perfor-
mance goals over a three year period. Encourages
the creation of long-term, sustainable share-
holder value creation and is aligned with the
Company’s Long-Term Performance Plan ap-
proved by the Board.
Opportunity levels
The LTIP opportunity levels for the EC are 80 to
100 percent of base salary at target, with a maxi-
mum opportunity of 160 to 200 percent. For new
EC members from 2022, the opportunity levels
will be 150 percent and 300 percent, respectively.
This change, to be mostly offset by a reduction in
pension and other benefits costs, is taking into
account historical LTIP vesting levels and the risks
associated in moving from fixed to variable pay.
For the CEO the opportunity levels are 150 per-
cent of base salary at target, with a maximum
opportunity of 300 percent.
Performance measures and weighting
The LTIP will have, from 2022, three performance
measures:
Total Shareholder Return (TSR)
• Achievement against this measure is
determined by ABB’s relative TSR performance
against a defined peer group.
• The constituents of the peer group and the
appropriate threshold (zero), target (100
percent) and maximum (200 percent) award
points are reviewed by the CC on an
annual basis.
• The TSR calculations are made for the reference
period beginning in the year of the conditional
grant of the shares and ending three years later.
The evaluation is performed by an independent
third party.
• For grants from 2022, the award curve for the
TSR measure will be adjusted to become more
challenging. The threshold point for awards, for
which vesting starts, will move from the 25th
percentile to the 50th percentile (P50) of the
TSR peer group, i.e., there will be no award for
performance below P50.
• Vesting for P50 achievement remains at
100 percent of target, and vesting for a 75th
percentile (P75) achievement level remains at
200 percent of target (capped). There will
be a linear vesting for an achievement between
P50 and P75 (100 to 200 percent of target)
90
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Earnings Per Share (EPS)
• Achievement against this measure is
determined by ABB’s average EPS
over a three-year period.
• The average EPS result is calculated from the
sum of EPS for each of the three relevant years,
divided by three.
• EPS is defined as “Diluted earnings per share
attributable to ABB shareholders, calculated
using Income from continuing operations, net of
tax, unless the Board elects to calculate using
Net income for a particular year”.
• Appropriate threshold (zero), target
(100 percent) and maximum (200 percent)
award points are reviewed by the CC on an
annual basis.
• Performance target points are set using the
long-term strategic plan, calibrated against an
“outside-in” view, taking into account the
growth expectations, risk profile, investment
levels and profitability levels that are typical for
the industry. This “outside-in” approach is
provided by external advisors and assumes
that investors expect a risk-adjusted return on
their investment, which is based on market
value (and not on book value) and translates
such expected returns over a three-year period
into EPS targets.
• Adjustments to the outcome of the EPS may be
considered for items which are not part or the
result of the normal course of business
operation and/or which were not considered,
either by way of inclusion or exclusion, for the
target-setting of a specific LTIP launch. Only the
net impact of such adjustments over the vesting
period of the respective LTIP grant will
be considered.
ESG
• The Board will determine on an annual basis
LTIP specific ESG measure(s) and related
targets.
• For 2022, the ESG measure will be the
Company’s scope 1&2 CO2 emission reduction at
the end of the three-year performance period
(2022-2024), compared to the 2019 baseline.
• Appropriate threshold (zero), target
(100 percent) and maximum (200 percent)
award points are reviewed and approved by the
CC on an annual basis.
Exhibit 20: ESG target points for the 2022 LTIP
Measure
Weigh-
ting
Thresh-
old
Target
Maximum
ABB scope 1&2
CO2 emission
reduction
compared to
2019 baseline
20%
60%
70%
80%
At or below threshold point: no award;
At target point: 100 percent award;
At or above maximum point: capped at 200 percent award;
Linear award interpolations between points.
The relative weighting of measures for the LTIP is
as follows:
• EPS measure: 50 percent
• TSR measure: 30 percent
• ESG measure: 20 percent
Other design features
The number of shares to be granted is determined
by dividing the grant value by the average share
price over the period 20 trading days prior, and 20
trading days after, the date of publication of
ABB’s full year financial results. Settlement of the
LTIP is three years after grant, subject to achieve-
ment of performance conditions, defined prior to
grant.
The actual settlement of shares awarded will vary
between zero and 200 percent of the shares
granted, according to achievement against the
performance measures stated above.
Default settlement of the final LTIP award is
100 percent in shares, and an automatic
sell-to-cover is in place for employees who are
subject to withholding taxes.
LTIP shares are subject to malus and clawback
rules, which include illegal activities and any
financial misstatement that have a material
impact on any Group company. This means that
the Board may decide not to award any unsettled
or unvested incentive compensation (malus), or
may seek to recover long-term incentive compen-
sation that has been settled in the past
(clawback).
The CC also has the ability to suspend the pay-
ment of awards if it is likely that the Board
determines that the malus or clawback provisions
may potentially apply (e.g., if the employee is
subject to an external investigation).
The approved ESG target points for the 2022 LTIP,
which are designed to incentivize material prog-
ress towards our 2030 sustainability strategy
commitments, are illustrated in Exhibit 20 below.
For grants from 2021, there is no automatic
accelerated vesting of awards in the event
of a change of control.
For LTIP grants as of 2022 participants will also be
entitled to receive a cash amount on each vested
award share that is equal to the total dividends
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
91
per share paid by ABB on the ABB Ltd share be-
tween the grant date and the delivery date of the
vested award (a “dividend equivalent payment”).
This will be offset by reducing other
benefit-related costs by a similar level over the life
of the share grant.
CC discretion will be extended to allow for discre-
tionary adjustments to the formulaic LTIP vesting
outcome. Clawback will be extended to include
material reputational damage and will apply
for a period of up to five years following the
originally scheduled plan specific vesting date.
Total wealth at risk / Share ownership
Purpose and link to strategy
To align EC members’ personal wealth directly
with the interests of shareholders in order to
maintain focus on the long-term success of the
Company.
Share ownership program
EC members are required to retain all shares
vested from the Company’s LTIP and any other
share-based compensation until their share
ownership requirement is met. In circumstances
where there is a withholding tax obligation, the
number of shares received will be considered to
be the number of shares vested minus the shares
sold under the default sell-to-cover facility.
The share ownership requirement is equivalent
to a multiple of the EC member’s annual base
salary, net of tax (see Exhibit 15).
These shareholding requirements are aligned with
market practice and result in a wealth at risk for
each EC member which is aligned with share-
holder interests.
Only vested shares owned by an EC member and
their spouse count for the comparison of the
actual share ownership against the share owner-
ship requirement. Vested but unexercised and
unvested stock options under the Management
Incentive Plan (MIP) are not considered for this
purpose.
The CC reviews the status of EC share ownership
on an annual basis. It also reviews the required
shareholding amounts annually, based on salary
and expected share price developments.
Notice period, severance provisions and non-
competition clauses
Employment contracts for EC members in-
clude a notice period of 12 months, during which
they are entitled to their annual base salary,
benefits and short-term incentive. In accordance
with Swiss law and ABB’s Articles of
Incorporation, the contracts for the EC members
do not allow for any severance payment.
Non-compete agreements have been entered into
with the CEO and all other EC members
for a period of 12 months after their employment.
Compensation for such agreements, if any, may
not exceed the EC member’s last total annual cash
remuneration (comprising of base salary,
short-term incentive and benefits).
Implementation of EC
compensation policy
Overview
EC members received total compensation of
CHF 39.2 million in 2021 compared with
CHF 35.4 million in 2020, as summarized in Ex-
hibit 21 below and presented in detail in Exhibits
38 and 39.
Exhibit 21: Total compensation of EC
members (monetary values in CHF)(1)
Number of active EC members
Base salaries
Pension benefits
Other benefits
Calendar year
2021
9
2020
9
8,713,406
8,413,363
4,795,259
4,450,785
4,819,803
6,001,823
Total fixed compensation
18,328,468 18,865,971
Short-term incentives
12,144,280
6,782,229
Long-term incentives (fair value at
grant)
8,684,298
6,491,137
Replacement share grants
n.a.
3,308,781
Total variable compensation
20,828,578 16,582,147
Total compensation
39,157,046 35,448,118
Maximum aggregate
compensation approved at AGM
39,500,000 55,500,000
(1) For an overview of compensation by individual and component,
please refer to Exhibits 38 and 39 in section “Compensation
tables and share ownership tables” below. An overview of 2021
realized compensation by individual is provided in Exhibit 44 in
the same section.
The total compensation for the EC in 2021
increased by 10.5 percent compared to 2020.
Context of the change in costs, in addition to the
over-achievement against the challenging
short-term incentive targets, includes:
• The COVID-19 pandemic, which negatively
impacted achievement under the 2020
short-term incentive - when targets were not
adjusted - compared to the outperformance
against targets in 2021.
• In addition, the target short-term incentive was
decreased in 2020 to reflect the voluntary
10 percent donation of the EC members’ salary
to fight the impact of the COVID-19 pandemic
Exhibit 3: Structure of EC compensation as from 2022
LTIP
measures
50% Average EPS
30% Relative TSR
20% ESG (CO2
emission
reduction)
CEO and
Corporate
Officers
80% Group
financial results
20% Individual results
Business
Area
Presidents
20% Group
financial results
60% Business Area
results
20% Individual results
92
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 5: 2021 Total compensation mix for the CEO and other EC members on aggregate level
CEO
8,247,610
Fixed
compensation
39%
Variable
compensation
61%
and a pro-rata outcome was applied for those
EC members who joined the EC during the year.
• An increase in base salary resulting from a) the
omission of the voluntary 10 percent donation
of the EC members’ salary to fight the impact of
the COVID-19 pandemic for a six-month period
during 2020, b) that all EC members provided
services for the full year during 2021 and c) the
increases in salary for three EC members.
20% Base salary
9% Pension benefits
• An increase in pension contributions is solely
10% Other benefits
30% Short-term incentive
31% Long-term incentive
due to changes in the constitution of the
Executive Committee. The contribution rates in
the pension plan have not changed for several
years, and only age driven adjustments
were applied.
• A reduction in other benefits costs given that
2020 included costs related to four former EC
members, including the interim CEO, while in
2021 the costs related to only one former
EC member.
• The increase of the grant fair value for the
Current Other
EC Members
2021 LTIP grant compared to the 2020 LTIP
24%
grant, is mainly driven by the price of the
ABB share at the day of grant.
New Other
EC Members
9% 7%
24%
At the 2020 AGM, the shareholders ap-
proved a maximum aggregate compensation
amount of CHF 39.5 million for the EC for the year
2021. The EC total compensation for 2021
amounted to CHF 39.2 million and is therefore
Exhibit 22: Compensation mix
Exhibit 22: Compensation mix
Other EC members
within the approved amount. See Exhibit 21
above.
Compensation mix
Variable
compensation
54%
28,514,999
Fixed
compensation
46%
The ratio of fixed to variable components in any
given year depends on the performance of the
Company and individual EC members against
predefined performance objectives.
22% Base salary
12% Pension benefits
12% Other benefits
In 2021, the variable compensation of the CEO
32% Short-term incentive
22% Long-term incentive
was 61 percent of his total annual compensation
(previous year: 51 percent). For the other EC
members, the variable compensation was 54 per-
cent on average (previous year: 41 percent). To
allow an appropriate year-on-year comparison,
the calculation of the total annual compensation
excludes the value of any one-time replacement
grant to compensate for foregone compensation
with the previous employer.
36%
Exhibit 22 below shows the composition of the
total annual compensation in 2021 for the CEO
and for other current EC members on an aggre-
gate level, specifying the split of its five
compensation components.
Base salary
Pension benefits
Other benefits
Short-term incentive
Long-term incentive
Note that compensation paid in 2021 for former
EC members is not included in Exhibit 22. This can
be found in Exhibit 38.
Exhibit 16: Mix of target compensation for current and new EC members
25%
15%
10%
25%
25%
CEO
Other
EC Members
20%
9%
10%
30%
31%
22%
12%
12%
32%
22%
Base salary
Pension benefits
Other benefits
Short-term incentive
Long-term incentive
Compensation elements – 2021 highlights
Base salary
Three of the nine EC members in place in March
2021 received a salary adjustment, which ranged
from 2.1 to 6.7 percent, reflecting exceptional
performance and closer market alignment. The
base salary of Timo Ihamuotila was increased by
2.1 percent to CHF 970,000, Tarak Mehta by
3.3 percent to CHF 930,000, and Morten Wierod
by 6.7 percent to CHF 800,000.
Considering that the other six current EC mem-
bers had no salary adjustments, this
corresponded to a 1.3 percent increase on annual
base salaries for the EC members post March
2021, which was broadly consistent with the
salary review budget for the wider Swiss em-
ployee population.
Annual Incentive Plan (AIP) - design
Exhibit 23 below shows the composition and
weighting of the measures applied in 2021 for all
EC members under their AIP, specified by
their roles.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
93
Exhibit 23: Composition and weighting of 2021 short-term incentive measures for EC members
Focus of
measure
Common Group
measure
Bottom line
earnings
Other Group
measures
Profitability
and capital
efficiency
Cash
generation
Bottom line
output
Business Area
measures
Bottom line
earnings
CEO and
Corporate
Officers(1)
Op EBITA
margin
25%
ROCE margin
25%
Free Cash Flow
20%
Productivity
growth
10%
Cash generation
Bottom line
profit
Top line input
Bottom line
output
Safety, Cost
discipline,
Strategy
implementation
Safety, Acquisi-
tions,
Digitalization
Function-
specific
20%
Individual
measure
Total
100%
:
s
d
r
a
w
a
e
v
i
t
n
e
c
n
i
m
r
e
t
-
t
r
o
h
s
r
o
f
n
o
i
t
i
d
n
o
c
y
r
a
d
n
u
o
b
G
S
E
n
o
i
s
s
i
m
e
2
&
1
e
p
o
c
s
t
n
e
l
a
v
i
u
q
e
₂
O
C
f
o
n
o
i
t
c
u
d
e
R
President
Electrification
President
Motion
Op EBITA
margin
20%
Op EBITA
margin
20%
President
Process
Automation
Op EBITA
margin
20%
President
Robotics
& Discrete
Automation
Op EBITA
margin
20%
Op EBITA
margin
30%
Op EBITA
margin
30%
Op EBITA
margin
30%
Op Free Cash
Flow
20%
Op EBITA
margin
30%
Op Free Cash
Flow
20%
Gross Profit on
Orders
20%
Orders received
20%
Productivity
growth
10%
Productivity
growth
10%
Productivity
growth
10%
Productivity
growth
10%
Business-
specific
20%
100%
Business-
specific
20%
100%
Business-
specific
20%
100%
Business-
specific
20%
100%
(1) Corporate Officers include: Chief Financial Officer, Chief Human Resources Officer, General Counsel and Chief Communications and
Sustainability Officer.
Under the AIP, all members of the EC
have a common Group measure,
with a 20 to 25 percent weighting. In 2021, this
was Group Operational EBITA margin, applied to
create a greater focus on profitability.
In addition to the common Group measure, the
CEO and the Corporate Officers shared the same
Group measures, including ROCE margin, Free
Cash Flow and Productivity growth, with a total
weighting of 55 percent.
For Business Area Presidents, up to three mea-
sures were tailored to business imperatives,
with a total weighting of 60 percent. While all
Business Area Presidents shared two measures,
(Operational EBITA margin and Productivity
growth with 30 percent and 10 percent weighting,
respectively), the third measure varied, including
Operational Free Cash Flow, Gross Profit on
Orders and Orders received, for the remaining
20 percent.
Definitions of the quantitative measures for EC
members are set out in Exhibit 24, below.
All EC members also had an individual measure
with a 20 percent weighting. This personal com-
ponent was informed by up to three KPIs, which
included a combination of quantitative and
qualitative objectives. The final outcome against
the individual measure was based on a discretion-
ary judgment of the combined performance
against all three KPIs.
• In 2021, all the EC had a common safety KPI
– namely the percentage improvement in the
Lost Time Incident Frequency Rate (LTIFR),
underpinned by sustainability observation
tours. For the CEO and the Corporate Officers,
this related to Group level and for Business
Areas Presidents to their respective
Business Areas.
• For the CEO and Corporate Officers, the other
KPIs were linked to the Group or Function costs,
to the strategy implementation on Group or
Function level, or to internal controls.
• For the Business Area Presidents, the other KPIs
were business growth, digitalization or market
positioning targets.
94
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 24: Definition of quantitative objectives, applied in 2021
Objective
Description
Operational EBITA margin
(%)
Operational EBITA, which is Operational earnings before interest, tax and amortization, as a
percentage of Operational revenues, which is total revenues adjusted for foreign exchange/
commodity timing differences in total revenues
Return on Capital Employed
(ROCE) margin (%)
Free Cash Flow (FCF)
Productivity growth
Calculated as Operational EBITA after tax divided by the average of the period’s opening and
closing Capital employed, adjusted to reflect impacts from significant acquisitions/
divestments occurring during the same period. Capital employed is calculated as the sum of
Adjusted total fixed assets and Net Working Capital
Free Cash Flow is calculated as net cash provided by operating activities adjusted for: (i)
purchases of property, plant and equipment and intangible assets, and (ii) proceeds from sales
of property, plant and equipment
Productivity is calculated as 12-month rolling revenues over the average number of total
workforce in the last three months. Productivity growth is the change of productivity over the
same period a year earlier, represented as a percentage change
Operational Free Cash Flow
(OFCF)(¹)
Cash generated by business operations after paying capital expenditures but before paying
interests and taxes (OCF(2) minus capital expenditures)
Gross Profit on Orders
(absolute)(3)
Gross Profit on Orders is calculated by deducting the total costs to complete the order from the
total revenue value of the order
Orders received(4)
Represents the values of goods and services contracted and ordered by customers within a
given accounting period net of cancellations
(1) Applied to Robotics & Discrete Automation and Electrification only.
(2) Cash flow from operating activities excluding payments for interest and income taxes.
(3) Applied to Process Automation only.
(4) Applied to Motion only.
Outcomes were subject to appropriate adjust-
ments for some non-operational items and other
adjustment principles agreed with the Board.
with the Board. These led to minor increases in
awards for two EC members.
For 2021, the “boundary condition” was the
setting of plans in each ABB Division to mitigate
for ABB scope 1 and 2 CO2 emissions, aligned with
ABB’s sustainability strategy and associated
targets.
2021 Annual Incentive Plan – achievements
In summary, the average award for the current EC
members under the AIP for 2021 was 143.4 per-
cent (out of a maximum 150 percent), compared
to 72.4 percent in 2020. In addition to achieving
the challenging performance targets in 2021, this
improvement in outcomes from the prior year was
influenced by the following factors:
• In 2021, all nine EC members served
on a full-year basis, compared to only seven
members working on a full-year basis in 2020.
AIP opportunities and final awards for 2020
were prorated for those EC members who joined
the EC during the year.
• EC members voluntarily donated 10 percent of
their salary to fight the impacts of the COVID-19
pandemic for a six-month period during 2020.
Consequently AIP opportunities and final
awards for 2020 were based on the
reduced salaries.
• In 2020, the negative impact of the
COVID-19 pandemic on the business
performance - when targets were not adjusted
- was bigger than in 2021.
The 2021 AIP outcomes were net of the applica-
tion of adjustments for some non-operational
items, aligned with adjustment principles agreed
Common Group measure
Achievement against the 2021 Group Operational
EBITA margin measure, which applied to all EC
members, with a weighting of 20 or 25 percent,
was 150 percent (2020: 53 percent). The 2021
Group Operational EBITA margin was 14.2 percent
compared to 11.1 percent in 2020, primarily re-
flecting the increased business activity. The
weighted achievement related to the common
Group measure was 37.5 percent for the CEO and
the Corporate Officers, and 30 percent for the
Business Area Presidents.
Other Group measures
The outcome related to all other Group measures,
applied to the CEO and Corporate Officers, with
weightings of 10 to 25 percent, was at maximum.
Achievement against the Group ROCE target was
150 percent (2020: zero percent), achievement
against the Free Cash Flow target was 150 per-
cent (2020: 109 percent) and achievement against
the Productivity growth target was also
150 percent (2020: n.a.). The weighted achieve-
ment related to these Group measures was
82.5 percent.
Business Area measures
Up to three quantitative business measures were
applied to Business Area Presidents, with weight-
ings from 10 to 30 percent, and the outcomes
ranged from 119 to 150 percent of target.
Achievement against the Operational EBITA
margin measure ranged from 119 to 150 percent
(2020: zero to 95 percent), Operational Free Cash
Flow 150 percent for the two Business Areas
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
95
applicable (2020: 106 to 150 percent), Gross Profit
on Orders 150 percent (2020: zero percent),
Orders received 150 percent (2020: zero to 83
percent) and Productivity growth 150 percent for
the four Business Areas (2020: n.a.). The weighted
achievement related to these Business Area
measures ranged from 80.8 to 90 percent (2020:
21 to 66 percent).
Individual measure
Thanks to the Company’s strong focus on safety,
in 2021 the target set for the Lost Time Incident
Frequency Rate (LTIFR) was overachieved at
Group level, as a result of all Business Areas
overachieving their targets. There were no
work-related fatalities in 2021, for the first time
since 2011. The assessed achievement of the KPIs
informing the outcome of the personal compo-
nent for EC members, with a weighting of 20
percent, inclusive of the safety outcomes de-
scribed, ranged from 100 to 150 percent (2020:
100 to 150 percent).
These outcomes are summarized in Exhibit
25 below.
Exhibit 25: AIP 2021 outcomes for the CEO and the Corporate Officers (rounded)
Category
Measure (and weighting)
Target points and achievement
Threshold (0%)
Target (100%)
Maximum (150%)
Common Group
measure
25%
Other Group
measures
55%
Group Op EBITA margin
25%
ROCE
25%
Free Cash Flow
20%
Productivity growth
10%
Individual measure
20%
Safety, Cost discipline,
Strategy implementation
20%
150%
150%
150%
150%
100–125%
AIP 2021 outcomes for the Business Presidents (rounded)
Category
Measure (and weighting)
Target points and achievement
Threshold (0%)
Target (100%)
Maximum (150%)
Common Group
measure
20%
Group Op EBITA margin
20%
Business measures
80%
Op EBITA margin
30%
Op Free Cash Flow
0–20%
Gross Profit on Orders
0–20%
Orders received
0–20%
Productivity growth
10%
Individual measure
20%
Safety, Acquisitions,
Digitalization
20%
150%
119–150%
150%
150%
150%
150%
125–150%
96
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 26 below provides information related to
the overall actual 2021 AIP outcomes, in
comparison to the target 2021 AIP for all current
EC members.
Exhibit 26: Overview of targeted and realized AIP 2021 values
Common Group
Other Group
Business Area
measure
measures
measures
Individual
measure
t
n
e
m
e
v
e
i
h
c
A
g
n
i
t
h
g
i
e
W
e
m
o
c
t
u
O
t
n
e
m
e
v
e
i
h
c
A
g
n
i
t
h
g
i
e
W
e
m
o
c
t
u
O
Björn Rosengren
Timo Ihamuotila
Carolina Granat
Maria Varsellona
150.0% 25.0% 37.5% 150.0% 55.0% 82.5%
150.0% 25.0% 37.5% 150.0% 55.0% 82.5%
150.0% 25.0% 37.5% 150.0% 55.0% 82.5%
150.0% 25.0% 37.5% 150.0% 55.0% 82.5%
Theodor Swedjemark
150.0% 25.0% 37.5% 150.0% 55.0% 82.5%
t
n
e
m
e
v
e
i
h
c
A
n.a.
n.a.
n.a.
n.a.
n.a.
g
n
i
t
h
g
i
e
W
n.a.
n.a.
n.a.
n.a.
n.a.
t
n
e
m
e
v
e
i
h
c
A
e
m
o
c
t
u
O
g
n
i
t
h
g
i
e
W
e
m
o
c
t
u
O
e
m
o
c
t
u
o
P
I
A
l
a
t
o
T
)
t
e
g
r
a
t
f
o
%
n
i
(
e
g
a
t
n
e
c
r
e
p
d
r
a
w
a
P
I
A
t
e
g
r
a
T
)
F
H
C
n
i
(
d
r
a
w
a
P
I
A
l
a
u
t
c
A
)
1
(
)
F
H
C
n
i
(
n.a. 125.0% 20.0% 25.0% 145.0% 1,700,000
2,465,000
n.a. 100.0% 20.0% 20.0% 140.0%
970,000
1,358,000
n.a. 100.0% 20.0% 20.0% 140.0%
700,000
980,000
n.a. 125.0% 20.0% 25.0% 145.0%
800,000
1,160,000
n.a. 125.0% 20.0% 25.0% 145.0%
500,000
725,000
Sami Atiya
Tarak Mehta
150.0% 20.0% 30.0%
150.0% 20.0% 30.0%
Peter Terwiesch
150.0% 20.0% 30.0%
Morten Wierod
150.0% 20.0% 30.0%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. 150.0% 60.0% 90.0% 125.0% 20.0% 25.0% 145.0%
800,000
1,160,000
n.a. 150.0% 60.0% 90.0% 125.0% 20.0% 25.0% 145.0%
930,000
1,348,500
n.a. 150.0% 60.0% 90.0% 125.0% 20.0% 25.0% 145.0%
800,000
1,160,000
n.a. 134.7% 60.0% 80.8% 150.0% 20.0% 30.0% 140.8%
800,000
1,126,400
Total
8,000,000
11,482,900
(1) Represents accrued AIP award for the year 2021, which will be paid in 2022, after the publication of ABB’s financial results.
ESG boundary condition
The Board also considered that the terms for the
2021 ESG “boundary condition” were fully met.
accordingly. The 2021 LTIP target points are
illustrated in Exhibit 27 below.
Overall outcomes
The overall average award under the AIP for the
entire current EC was 143.4 percent of target
(2020: 72.4 percent) with a range from 140.8
percent (lowest achievement) to 145.0 percent of
target (highest achievement). This compared
to a range of 51.0 to 95.6 percent in 2020.
Long-Term Incentive Plan (LTIP)
2021 LTIP grants
The estimated value at grant of the share-based
grants to EC members under the 2021 LTIP was
CHF 8.7 million, compared with CHF 6.5 million in
2020. This increase in grant fair value for the 2021
LTIP grant compared to 2020 was mainly driven by
the price of the ABB share on the day of grant. In
2020 the price of the ABB share at the day of
grant, was influenced by significant market
volatility at the start of the COVID-19 pandemic
which impacted the 2020 LTIP grant fair value
substantially at that time.
The 2021 LTIP is based on two equally weighted
performance measures, one tied to ABB’s TSR and
the other to ABB’s EPS.
The companies approved by the Board to deter-
mine ABB’s relative TSR performance for the
2021 LTIP were: 3M, Danaher, Eaton, Emerson
Electric, General Electric, Honeywell Intl., Holcim,
Legrand, Mitsubishi Electric, Raytheon Technolo-
gies, Rockwell, Rolls Royce, Schneider Electric,
Siemens and Yokogawa. These were selected to
provide an appropriate and very challenging set
of peers, and influenced the vesting point setting
Exhibit 27: 2021 LTIP target points
Weigh-
ting
50%
50%
Measure
Relative
TSR
Average
EPS
Threshold Target
25th
percentile
50th
percentile
Maximum
75th
percentile
Target
point
-14%
Disclosed
after per-
formance
period
Target
point
+14%
At or below threshold point: no award;
At target point: 100 percent award;
At or above maximum point: capped at 200 percent award;
Linear award interpolations between points;
The actual EPS target is not prospectively disclosed for reasons of
commercial sensitivity.
The latest change in the EPS target points (range
reduced from plus/minus 17 percent of target for
2020 LTIP to plus/minus 14 percent of target for
the 2021 LTIP) is a reflection of the perceived EPS
volatility during the performance period, and also
serves to make the achievement of a threshold
award under the plan more demanding.
The reference price for the 2021 LTIP grant which
is used to determine the number of shares
granted to participants was CHF 26.59.
2018 LTIP achievements
The final number of shares vesting under the 2018
LTIP grant in 2021 was determined based on the
achievement level against the defined TSR and
EPS targets.
The relative TSR measure was achieved at
114.8 percent (previous year: not applicable) out
of a potential of 200 percent.
The average EPS measure vested at zero percent
(previous year: 41 percent) out of a potential
200 percent, net of adjustments for items
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
97
considered outside the normal course of business
operation and/or which were not considered in
the target setting of the 2018 LTIP. On this occa-
sion, adjustments were made for the impact of
divestments, integration costs and restructuring
costs. The EPS for 2020 applicable to the 2018
LTIP grant after the application of the approved
adjustments, amounted to USD 1.06, leading to
plan relevant average EPS of USD 0.98, being
below the threshold target point.
The average weighted achievement level of the
two performance measures under the 2018 LTIP
was 57.4 percent (out of a maximum 200 percent),
as specified in Exhibit 28.
There was no award under the EPS measure, since
the performance period for determining the value
of the award was from 2018 to 2021 and in conse-
quence, the EPS outcome was impacted by the
COVID-19 pandemic, for which no adjustment was
applied.
As announced in our 2019 Compensation Report,
the EPS performance targets for vested LTIP
awards will be retrospectively disclosed in our
Compensation Reports. The three target points
(threshold, target and maximum) and the actual
achievement for the adjusted 2018 EPS perfor-
mance measure are shown in Exhibit 28 below.
Since the Average EPS amounted to USD 0.98, no
vesting occured as the threshold target was not
met. The relative ranking of ABB’s TSR against the
predefined peer group of companies for the 2018
LTIP set on the 54th percentile, which leads
to a vesting level of 114.8 percent under this
measure. The weighted combined vesting level
corresponds to 57.4 percent of the target.
Exhibit 28: Target points and achievements of 2018 LTIP performance measures
Measure
Weighting
Threshold
Target
Maximum
Actual
Relative TSR
50%
25th percentile
50th percentile
75th percentile
54th percentile
Achievement level
Average EPS (USD) 50%
Achievement level
0%
1.15
0%
Award as percentage of target (capped at 200%)
100%
1.36
100%
200%
1.57
200%
114.8%
0.98
0%
57.4%
Overview of disclosed and realized 2018 LTIP
value
In the 2020 Compensation Report ABB intro-
duced a new table, requested by stakeholders, to
provide information related to the past LTIP, that
vested in the reporting year. This table compares
the previously disclosed “fair value” of the grant
to each EC member and the actual value of the
grant at the time of vesting. The following Exhibit
29 shows such comparison for the 2018 LTIP, that
vested in 2021. The values presented are gross
and before payment of any applicable taxes owing
by the recipient. This indicates the average gross
realized LTIP value was 76.2 percent of the dis-
closed grant fair value.
Exhibit 29: Realized value of 2018 LTIP grant for current EC members
Number
of shares
granted
related to
the TSR
measure(1)
Shares
granted
related to
the EPS
measure(2)
Total
number
of shares
granted
Disclosed
grant
fair value
(CHF)(3)(4) Vesting date
Vesting
percent-
age
Number
of
vested
shares
Realized
value
(CHF)(5)
Björn Rosengren
Grant date
n.a.
Timo Ihamuotila
April 6, 2018
18,609
18,608
37,217
819,965 April 6, 2021
57.4% 21,364 624,897
Carolina Granat
Maria Varsellona
Theodor Swedjemark
Sami Atiya
Tarak Mehta
n.a.
n.a.
n.a.
April 6, 2018
11,651
11,650
23,301
513,368 April 6, 2021
57.4% 13,376 391,248
April 6, 2018
17,395
17,395
34,790
766,494 April 6, 2021
57.4% 19,970
584,123
Peter Terwiesch
April 6, 2018
18,690
18,689
37,379
823,534 April 6, 2021
57.4% 21,457
627,617
Morten Wierod
April 6, 2018
7,646
7,646
15,292
336,913 April 6, 2021
57.4%
8,778
256,757
Total
3,260,274
2,484,642
(1) Actual achievement level of the TSR measure was 114.8 percent.
(2) Actual achievement level of the EPS measure was zero percent.
(3) Valued at CHF 22.03, the grant fair value of the ABB share on the day of grant.
(4) At the time of disclosure Morten Wierod was not member of the EC.
(5) Valued at CHF 29.25, the closing price of the ABB share on the day of vesting.
98
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
LTIP vesting outcomes in the last five years
The historical vesting percentages for the prior
five years are shown in Exhibit 30 below. Over the
last five years vesting has averaged at 75.6 per-
cent of target and 47.8 percent of the
maximum award.
Exhibit 30: LTIP historical actual vesting percentages(1)
200%
160%
120%
80%
40%
0%
74.80%
53.40%
80.50%
53.70%
92.50%
61.70%
73.00%
41.70%
57.40%
28.70%
2014 LTIP
2014 LTIP
2015 LTIP
2016 LTIP
2017 LTIP
2018 LTIP
Vesting in % of target award
Vesting in % of maximum potential award
(1) Average of relevant performance measures.
Realized total compensation - 2021
In the 2020 Compensation Report, ABB started to
disclose the realized total compensation for each
EC member. Realized compensation means that
the AIP award and the LTIP award are disclosed at
the end of their respective performance cycles,
reflecting actual payment and settlement, based
on achievements of the plan specific performance
measures. Such transparency on realized compen-
sation is designed to aid stakeholder’s
understanding of ABB’s link between pay and
performance.
The following Exhibit 31 sets out a high-level
comparison of realized and target total compen-
sation for each EC member. Note that the higher
percentages relating to the CEO and Corporate
Officers (except for the CFO) are driven by the
fact that they were not an EC member in 2018, and
therefore did not receive an LTIP grant in 2018,
vesting in 2021. A detailed summary table is
specified in Exhibit 44 in the section “Compensa-
tion tables and share ownership tables”.
Exhibit 31: Realized total compensation compared to target total compensation
Björn Rosengren
Timo Ihamuotila
Carolina Granat
Maria Varsellona
Theodor Swedjemark
115%
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
115%
105%
113%
114%
108%
107%
105%
109%
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Target total compensation
Realized total compensation
Other compensation - 2021
Members of the EC are eligible to participate in
the Employee Share Acquisition Plan (ESAP), a
savings plan based on stock options, which is
open to employees around the world. Five
members of the EC participated in the 18th annual
launch of the plan in 2021. EC members who
participated will, upon vesting, each be entitled to
acquire up to 330 ABB shares at CHF 30.32 per
share, the market share price at the start of the
2021 launch.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
99
For a more detailed description of the ESAP,
please refer to “Note 18 – Share-based payment
arrangements” in our Consolidated Financial
Statements.
In 2021, ABB did not pay any fees or compensation
to the members of the EC for services rendered to
ABB other than those disclosed in this Compensa-
tion Report. Except as disclosed in the section
titled “Executive Committee – Business relation-
ships between ABB and its EC members” in the
Corporate Governance Report, ABB did not pay
any additional fees or compensation in 2021 to
persons closely linked to a member of the EC for
services rendered to ABB.
Shareholding of EC members
Three out of nine EC members have achieved or
exceeded their share ownership requirement. Two
members are close to achieving their require-
ment, and a further three members have been
newly appointed to the EC in the last two years.
When considering the number of granted, but
unvested shares of current EC members as per
December 31, 2021, it is expected that the major-
ity of these members will meet or exceed their
share ownership requirement.
Exhibit 32: EC shareholding compared to share ownership guideline*
Björn Rosengren
Timo Ihamuotila
Carolina Granat
Maria Varsellona
Theodor Swedjemark
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
CEO shareholding requirement (500%)
Other EC members shareholding requirement (400%)
EC appointment
March 2020
April 2017
January 2021
November 2019
August 2020
June 2016
October 2010
January 2017
April 2019
0%
200%
400%
600%
800%
1000%
1200%
1400%
Held shares
Granted, but unvested shares
Shareholding requirement
* Based on share price of CHF 26.59, the 2021 LTIP reference price, and shares held at December 31, 2021. Future allocation of granted, but
unvested shares is based on target achievement level and relevant plan specific settlement: default settlement of the final 2019 LTIP award is
65 percent in shares (recipients may elect to receive 100 percent of the vested LTIP award in shares), default settlement of the final 2020 LTIP
and 2021 LTIP awards is 100 percent in shares. Default settlement of replacement shares is 65 percent in shares (recipients may elect to
receive 100 percent of the vested award in shares).
The EC members collectively owned less than
1 percent of ABB’s total shares outstanding at
December 31, 2021.
to a member of the EC held any shares of ABB or
options on ABB shares at December 31, 2021
and 2020.
At December 31, 2021, EC members held ABB
shares and conditional rights to receive shares, as
shown in Exhibit 42 in the section “Compensation
tables and share ownership tables” below. Their
holdings at December 31, 2020, are shown in
Exhibit 43 in the same section.
Changes applicable to EC
members
Terms of appointment for new EC members
As previously communicated, as from 2020,
grants under the Management Incentive Plan
(MIP), a stock option plan without performance
conditions, have been discontinued, and no
further grants were made. Any MIP instruments
held by EC members were awarded prior to their
appointment as EC members. For a more detailed
description of MIP, please refer to “Note 18 –
Share-based payment arrangements” in our
Consolidated Financial Statements.
The new Chief Human Resources Officer (CHRO),
Carolina Granat, was appointed to the EC effec-
tive from January 1, 2021 with an annual base
salary of CHF 700,000, a target short-term and
long-term incentive of 100 percent of annual base
salary. This represents a reduction in total target
direct compensation (TTDC) compared to the
prior CHRO incumbent. Carolina Granat is eligible
for standard EC benefits and, where appropriate
legacy relocation benefits.
Except as described in Exhibits 42 and 43, no
member of the EC and no person closely linked
100
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Terms of departure for EC members
leaving the EC, as shown in Exhibit 38, footnotes
(5) and (6).
The General Counsel & Company Secretary, Maria
Varsellona, has resigned from ABB and will depart
on March 31, 2022. She will be entitled to receive
compensation and benefits up to the point of her
departure. This includes a contractually agreed
pro-rata short-term incentive payment of
CHF 181,985 for the period January 1 to
March 31, 2022. All her unvested LTIP share grants
and the unvested second tranche of her replace-
ment share grant were forfeited.
Compensation of former EC members
In 2021, certain former EC members received
contractual compensation for the period after
Votes on compensation at the
2022 AGM
As illustrated in Exhibit 33, the Board’s proposals
to shareholders at the 2022 AGM will relate to
Board compensation for the 2022–2023 term of
office and EC compensation for the calendar year
2023. There will also be a non-binding vote on the
2021 Compensation Report.
Exhibit 33: Shareholders will have three separate votes on compensation at the 2022 AGM
2021
2022
2023
n
o
i
t
a
s
n
e
p
m
o
C
n
o
i
t
a
s
n
e
p
m
o
C
t
r
o
p
e
r
d
r
a
o
B
C
E
n
o
i
t
a
s
n
e
p
m
o
C
Binding vote on maxi-
mum aggregate Board
compensation for 2022–
2023 term of office
Binding vote on
maximum aggregate
EC compensation
for 2023
Non-binding vote on
2021 compensation
report
March AGM
March AGM
March AGM
Compensation period
Date of vote
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
101
In determining the proposed maximum aggregate
EC compensation, the Board takes into consider-
ation the criteria illustrated in Exhibit 34. Given
the variable nature of a major portion of the
compensation components, the proposed maxi-
mum aggregate EC compensation will almost
normally be higher than the actual compensation
paid or awarded, as it must cover the potential
maximum value of each component of
compensation.
It is important to note that the increase in maxi-
mum aggregate compensation for 2023 is mainly
the result of the associated cost related to the
2020 LTIP vesting in 2023, influenced by:
a) the increased number of shares subject to
vesting compared to prior years (see Ex-
hibit 34),
b) the current, solid performance of the Company
against its earnings per share targets and total
shareholder return peer group and
c) the strong share price development since the
time of grant with a reference price of CHF
19.36,
rather than any structural increase to EC
compensation.
Exhibit 34: Overview of key factors affecting the determination of maximum aggregate EC compensation
2019
52.0
2020
55.5
Aggregate
EC compensation
in CHF (millions)
2021
39.2
35.8
2022
2023(1)
39.5
40.0
xx.x
Maximum
(approved
at 2018
AGM)
Maximum
(approved
at 2019
AGM)
Actual
Target
Maximum
(approved
at 2020
AGM)
Maximum
(approved at
2021 AGM)
Maximum
(to be requested
at 2022 AGM)
Assumptions
AIP award percentage
150%
Adjustment of
LTIP grant size
12.5%
150%
12.5%
Number of LTIP shares
vested or potentially
vesting in year(3)
532,674
266,104
n.a.
139%(2)
100%
0%
0%
n.a.
150%
12.5%
150%
12.5%
150%
n.a.
147,979
220,561
354,869
Number of EC members 11
12
10
10
9
9
9
(1) Number will be provided in the AGM invitation.
(2) Outcome without the allocation of former EC members, but including previous CHRO. For full description, see previous section “Compensa-
tion elements – 2021 Highlights”.
(3) For example, 354,869 LTIP shares were granted in 2020 that potentially vest in 2023, subject to performance conditions.
102
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Compensation tables and share ownership tables
Exhibit 35: Board compensation in 2021 and 2020 (audited)
Paid in 2021
Paid in 2020
November
Board term
2021–2022
May
Board term
2020–2021
November
Board term
2020-2021
May
Board term
2019-2020
–
s
e
r
a
h
s
n
i
d
e
l
t
t
e
S
s
e
r
a
h
s
f
o
r
e
b
m
u
n
)
2
(
d
e
v
i
e
c
e
r
)
1
(
h
s
a
c
n
i
d
e
l
t
t
e
S
–
s
e
r
a
h
s
n
i
d
e
l
t
t
e
S
s
e
r
a
h
s
f
o
r
e
b
m
u
n
)
2
(
d
e
v
i
e
c
e
r
)
1
(
h
s
a
c
n
i
d
e
l
t
t
e
S
n
o
i
t
a
s
n
e
p
m
o
c
l
a
t
o
T
)
3
(
1
2
0
2
n
i
d
i
a
p
–
s
e
r
a
h
s
n
i
d
e
l
t
t
e
S
s
e
r
a
h
s
f
o
r
e
b
m
u
n
)
2
(
d
e
v
i
e
c
e
r
)
1
(
h
s
a
c
n
i
d
e
l
t
t
e
S
–
s
e
r
a
h
s
n
i
d
e
l
t
t
e
S
s
e
r
a
h
s
f
o
r
e
b
m
u
n
)
2
(
d
e
v
i
e
c
e
r
)
1
(
h
s
a
c
n
i
d
e
l
t
t
e
S
CHF
CHF
CHF
CHF
CHF
n
o
i
t
a
s
n
e
p
m
o
c
l
a
t
o
T
)
3
(
0
2
0
2
n
i
d
i
a
p
CHF
Name
Peter Voser, Chairman(4)
— 17,209
— 20,089 1,200,000
— 21,831
— 32,642
1,140,000
Jacob Wallenberg(5)
112,500
2,599 112,500
3,033
450,000 101,250
3,297 112,500
Matti Alahuhta(6)
—
—
Gunnar Brock(7)
82,500
1,906
—
—
3,615
160,000
4,542
330,000
— 4,787
— 4,937
—
—
David Constable(8)
80,000
1,848 87,500
2,359
335,000
78,750
2,564
87,500
Frederico Curado(9)
Lars Förberg(10)
— 3,829
— 4,577
—
—
4,090
335,000
5,347
320,000
— 4,438
— 5,805
—
—
Jennifer Xin-Zhe Li(11)
87,500
1,866 80,000
1,993
335,000
72,000
2,163
80,000
Geraldine Matchett(12)
82,500
2,490 82,500
2,906
330,000
74,250
3,159
82,500
David Meline(13)
100,000
2,310 100,000
2,696
400,000
90,000
2,931 100,000
Satish Pai(14)
82,500
1,759 82,500
2,055
330,000
74,520
2,231
82,500
4,928
7,155
7,379
3,833
6,646
8,688
3,239
4,722
4,380
3,340
427,500
304,000
313,500
332,500
304,000
304,000
304,000
313,500
380,000
313,500
Total
627,500 40,393 545,000
52,725 4,525,000 490,770 58,143 545,000
86,952
4,436,500
(1) Represents gross amounts paid, prior to deductions for social security, withholding tax etc.
(2) Number of shares per Board member is calculated based on net amount due after deductions for social security, withholding tax etc.
(3) In addition to the Board remuneration stated in the above table, in 2021 and 2020 the Company paid CHF 231,287 and CHF 272,312,
respectively, in related mandatory social security payments.
(4) Chairman of the ABB Ltd Board for the 2019-2020, 2020-2021 and 2021-2022 board terms and Chairman of the Governance and Nomination
Committee for the 2021-2022 board term; is receiving 100 percent of his compensation in the form of ABB shares.
(5) Vice-Chairman of the ABB Ltd Board for the 2019-2020, 2020-2021 and 2021-2022 board terms; Chairman of the Governance and Nomination
Committee for the 2019-2020 and 2020-2021 board terms and member of that committee for the 2021-2022 board term; is receiving 50
percent of his compensation in the form of ABB shares.
(6) Member of the Governance and Nomination Committee for the 2019-2020 and 2020-2021 board terms; received 100 percent of his
compensation in the form of ABB shares for the 2019-2020 and 2020-2021 board terms. Did not stand for election in 2021.
(7) Member of the Finance, Audit and Compliance Committee for the 2019-2020, 2020-2021 board terms; received 100 percent of his
compensation in the form of ABB shares for the 2019-2020 and 2020-2021 board term and is receiving 50 percent of his compensation in the
form of ABB shares for the 2021-2022 board term.
(8) Chairman of the Compensation Committee for the 2019-2020, 2020-2021 board terms and member of that committee for the 2021-2022
board term; is receiving 50 percent of his compensation in the form of ABB shares.
(9) Member of the Compensation Committee for the 2019-2020, 2020-2021 and Chairman of the Compensation Committee for the 2021-2022
board term; is receiving 100 percent of his compensation in the form of ABB shares.
(10) Member of the Governance and Nomination Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 100 percent
of his compensation in the form of ABB shares.
(11) Member of the Compensation Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms and member of Governance and
Nomination Committee for 2021-2022 board term; is receiving 50 percent of her compensation in the form of ABB shares.
(12) Member of the Finance, Audit and Compliance Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 50 percent
of her compensation in the form of ABB shares.
(13) Chairman of the Finance, Audit and Compliance Committee for 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 50 percent of
his compensation in the form of ABB shares.
(14) Member of the Finance, Audit and Compliance Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 50 percent
of his compensation in the form of ABB shares.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
103
Exhibit 36: Board compensation for the Board terms 2021-2022 and 2020-2021 (audited)
Name
Specific Board Roles
Peter Voser
Jacob Wallenberg
Chairman of the Board for 2020-2021 term,
Chairman of the Board and Chairman GNC for 2021-2022 term
Vice-Chairman of the Board and Chairman GNC for 2020-2021 term,
Vice Chairman of the Board and Member GNC for 2021-2022 term
Matti Alahuhta
Member GNC for 2020-2021 term
Board term
2021-2022
Board term
2020-2021(1)
CHF
CHF
1,200,000
1,140,000
450,000
427,500
n.a.
304,000
Gunnar Brock
Member FACC for both the 2020-2021 and 2021-2022 terms
330,000
313,500
David Constable
Chairman CC for 2020-2021 term, Member CC for the 2021-2022 term
320,000
332,500
Frederico Curado
Member CC for 2020-2021 term, Chairman CC for the 2021-2022 term
350,000
304,000
Lars Förberg
Member GNC for both the 2020-2021 and 2021-2022 terms
320,000
304,000
Jennifer Xin-Zhe Li
Member CC for the 2020-2021 term
Member CC and Member GNC for the 2021-2022 term
Geraldine Matchett
Member FACC for both the 2020-2021 and 2021-2022 terms
350,000
304,000
330,000
313,500
David Meline
Chairman of FACC for both the 2020-2021 and 2021-2022 terms
400,000
380,000
Satish Pai
Total
Member FACC for both the 2020-2021 and 2021-2022 terms
330,000
313,500
4,380,000
4,436,500
(1) This reflects a 10 percent COVID-19 related voluntary donation in Board fees for the first half of the 2020-2021 Board term.
Key:
CC: Compensation Committee
FACC: Finance, Audit and Compliance Committee
GNC: Governance and Nomination Committee
Exhibit 37: Board ownership of ABB shares (audited as part of the financial statement stand-alone audit)
Name
Peter Voser(1)
Jacob Wallenberg
Matti Alahuhta(2)
Gunnar Brock
David Constable
Frederico Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline(3)
Satish Pai
Total
Total number of shares held
December 31, 2021
December 31, 2020
191,946
239,878
n.a.
33,399
38,185
40,301
59,916
37,580
25,196
37,780
28,432
732,613
314,648
234,246
93,408
26,951
33,978
32,382
49,992
33,721
19,800
33,774
24,618
897,518
(1) Includes 2,000 shares held by spouse.
(2) Matti Alahuhta did not stand for re-election at ABB’s Annual General Meeting in March 2021.
(3) Includes 3,150 shares held by spouse.
104
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 38: EC compensation in 2021 (audited)
Cash Compensation
)
1
(
e
v
i
t
n
e
c
n
i
m
r
e
t
-
t
r
o
h
S
y
r
a
l
a
s
e
s
a
B
s
t
i
f
e
n
e
b
n
o
i
s
n
e
P
)
2
(
s
t
i
f
e
n
e
b
r
e
h
t
O
d
e
s
a
b
-
h
s
a
c
l
a
t
o
T
1
2
0
2
)
3
(
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
E
)
4
(
1
2
0
2
n
i
P
I
T
L
e
h
t
r
e
d
n
u
s
t
n
a
r
g
t
n
e
m
e
c
a
p
e
r
l
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
E
1
2
0
2
n
i
t
n
a
r
g
d
e
s
a
b
-
e
r
a
h
s
)
6
(
)
5
(
)
s
t
n
a
r
g
d
e
s
a
b
-
e
r
a
h
s
l
a
n
o
i
t
i
d
n
o
c
.
l
c
n
i
(
n
o
i
t
a
s
n
e
p
m
o
c
l
a
t
o
T
1
2
0
2
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
Name
Björn Rosengren
Timo Ihamuotila
Carolina Granat (EC
member as of January 1,
2021)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee members
at December 31, 2021
Sylvia Hill (EC member
until December 31, 2020)
Total departing
Executive Committee
members
1,700,012 2,465,000
744,770
807,000
5,716,782
2,530,828
966,675 1,358,000
518,063
570,546 3,413,284
962,708
700,000
980,000
417,382
399,334
2,496,716
694,744
Maria Varsellona
800,009 1,160,000
455,000
511,824 2,926,833
793,997
Theodor Swedjemark
500,004
725,000
274,535
263,567
1,763,106
397,012
800,009 1,160,000
482,662
481,598 2,924,269
793,997
925,008 1,348,500
507,646
476,481
3,257,635
923,018
800,009 1,160,000
473,441
422,542 2,855,992
793,997
791,676 1,126,400
443,506
362,112
2,723,694
793,997
7,983,402 11,482,900
4,317,005 4,295,004 28,078,311
8,684,298
— 36,762,609
730,004
661,380
478,254
524,799 2,394,437
730,004
661,380
478,254
524,799 2,394,437
—
—
Total
8,713,406 12,144,280 4,795,259 4,819,803 30,472,748
8,684,298
(1) Represents accrued short-term variable compensation for the year 2021, which will be paid in 2022, after the publication of ABB’s financial
results. Short-term variable compensation is linked to the objectives defined in each EC member’s Annual Incentive Plan. Upon full
achievement of these objectives, the short-term variable compensation of the EC members represents 100 percent of their respective base
salary. Sylvia Hill received a short-term variable compensation payment in December 2021 related to her termination period, in accordance
with the contractual obligations of ABB.
(2) Other benefits mainly comprise payments related to social security, health insurance, children’s education, transportation, tax advice and
compensation for foregone dividends on replacement share grants and certain other items.
(3) Prepared on an accrual basis.
(4) The estimated value of the share-based LTIP grants are based on the price of ABB shares on the grant date, adjusted for expected foregone
dividends during the vesting period. On the day of vesting (April 26, 2024), the value of the share-based awards granted under the LTIP may
vary from the above amounts due to changes in ABB’s share price and the outcome of the performance factors.
(5) Payments totaling CHF 296,004 were made in 2021 on behalf of certain other former EC members, representing social security premium
payments due on the LTIP 2018 vesting and tax advisory services for the period when they have been active EC members.
(6) Ulrich Spiesshofer received non-compete payments for the period January 1, 2021 to April 30, 2021 and a vesting of the 2018 LTIP, with
related social security payments, totaling to CHF 1,726,896.
— 8,247,610
— 4,375,992
— 3,191,460
— 3,720,830
— 2,160,118
— 3,718,266
— 4,180,653
— 3,649,989
— 3,517,691
— 2,394,437
— 2,394,437
— 39,157,046
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
105
Exhibit 39: EC compensation in 2020 (audited)
Cash Compensation
)
2
(
)
1
(
e
v
i
t
n
e
c
n
i
m
r
e
t
-
t
r
o
h
S
)
1
(
y
r
a
l
a
s
e
s
a
B
s
t
i
f
e
n
e
b
n
o
i
s
n
e
P
)
3
(
s
t
i
f
e
n
e
b
r
e
h
t
O
d
e
s
a
b
-
h
s
a
c
l
a
t
o
T
0
2
0
2
)
4
(
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
E
)
5
(
0
2
0
2
n
i
P
I
T
L
e
h
t
r
e
d
n
u
s
t
n
a
r
g
t
n
e
m
e
c
a
p
e
r
l
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
E
0
2
0
2
n
i
t
n
a
r
g
d
e
s
a
b
-
e
r
a
h
s
)
6
(
)
s
t
n
a
r
g
d
e
s
a
b
-
e
r
a
h
s
l
a
n
o
i
t
i
d
n
o
c
.
l
c
n
i
(
n
o
i
t
a
s
n
e
p
m
o
c
l
a
t
o
T
0
2
0
2
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
1,504,141
977,685
666,175
688,685 3,836,686
1,970,457 3,308,781 9,115,924
Name
Björn Rosengren
(EC member as of
January 27, 2020, CEO as
of March 1, 2020)
Timo Ihamuotila
902,508
698,535
494,360
646,278
2,741,681
734,103
Sylvia Hill
725,004
547,500
471,925
290,108 2,034,537
564,097
Maria Varsellona
760,008
655,880
471,538
818,288
2,705,714
618,193
Theodor Swedjemark
(EC member as of
August 1, 2020)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee members
at December 31, 2020
Peter Voser (EC member
until February 29, 2020)
Ulrich Spiesshofer
(EC member until
April 16, 2019)(7)
Jean-Christophe
Deslarzes (EC member
until May 31, 2019)
Diane de Saint Victor
(EC member until
October 31, 2019)
Total departing
Executive Committee
members
200,002
130,000
118,951
75,259
524,212
92,887
760,008
418,000
465,509
423,787
2,067,304
618,193
848,339
695,115
479,932
390,681 2,414,067
695,462
760,008
387,600
456,374
334,575 1,938,557
618,193
704,171
681,150
413,120
346,080 2,144,521
579,552
7,164,189 5,191,465 4,037,884 4,013,741 20,407,279
6,491,137 3,308,781 30,207,197
280,835
421,250
37,443
48,160
787,688
561,670
749,825
214,588
820,421 2,346,504
156,668
158,939
86,309
169,099
571,015
250,001
260,750
74,561
950,402
1,535,714
1,249,174 1,590,764
412,901 1,988,082 5,240,921
—
—
—
—
—
—
787,688
— 2,346,504
—
571,015
— 1,535,714
— 5,240,921
Total
8,413,363 6,782,229 4,450,785 6,001,823 25,648,200
6,491,137 3,308,781 35,448,118
(1) Base salary as well as the target short-term incentive were adjusted where appropriate for EC members who voluntarily donated 10 percent
of their salary to fight the impacts of the COVID-19 crisis for a six-month period during 2020.
(2) Represents accrued short-term variable compensation for the year 2020, which was paid in 2021, after the publication of ABB’s 2020
financial results. Short-term variable compensation is linked to the objectives defined in each EC member’s Annual Incentive Plan. Upon full
achievement of these objectives, the short-term variable compensation of the EC members represents 100 percent of their respective base
salary. The short-term variable compensation of the former CEO, Ulrich Spiesshofer, corresponded to the contractually agreed average of
the year 2017 and 2018 short-term variable compensation award. Peter Voser received his short-term variable compensation payment
monthly at target achievement level. Diane de Saint Victor and Jean-Christophe Deslarzes received a pro-rata short-term variable
compensation payment for their period of service as an EC member, in accordance with the contractual obligations of ABB.
(3) Other benefits comprise payments related to social security, health insurance, children’s education, transportation, tax advice and certain
other items like compensation for unused vacation balances at the time of departure from ABB.
(4) Prepared on an accrual basis.
(5) The estimated value of the share-based LTIP grants are based on the price of ABB shares on the grant date, adjusted for expected foregone
dividends during the vesting period. On the day of vesting (April 27, 2023), the value of the share-based awards granted under the LTIP may
vary from the above amounts due to changes in ABB’s share price and the outcome of the performance factors.
(6) Payments totaling CHF 161,274 were made in 2020 on behalf of certain other former EC members, representing social security premium
payments.
(7) ABB paid Ulrich Spiesshofer in addition to the compensation related to the termination period, non-compete payments for the period
May 1, 2020, to December 31, 2020, and related social security payments totaling CHF 2,806,111.
— 3,475,784
— 2,598,634
— 3,323,907
—
617,099
— 2,685,497
— 3,109,529
— 2,556,750
— 2,724,073
106
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 40: LTIP grants in 2021 (audited)
)
3
(
)
2
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
1
2
0
2
e
h
t
f
o
r
o
t
c
a
f
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
e
c
n
a
m
r
o
f
r
e
p
S
P
E
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
1,265,401
481,354
347,372
396,985
198,506
396,985
461,509
396,985
396,985
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
e
c
n
a
m
r
o
f
r
e
p
R
S
T
e
h
t
r
e
d
n
u
h
c
n
u
a
l
1
2
0
2
e
h
t
f
o
r
o
t
c
a
f
)
1
(
P
I
T
L
e
h
t
f
o
47,951
18,240
13,163
15,044
7,522
15,044
17,488
15,044
15,044
)
3
(
)
2
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
1
2
0
2
e
h
t
f
o
r
o
t
c
a
f
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
e
c
n
a
m
r
o
f
r
e
p
R
S
T
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
1,265,427
481,354
347,372
397,012
198,506
397,012
461,509
397,012
397,012
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
e
c
n
a
m
r
o
f
r
e
p
S
P
E
e
h
t
r
e
d
n
u
h
c
n
u
a
l
1
2
0
2
e
h
t
f
o
r
o
t
c
a
f
)
1
(
P
I
T
L
e
h
t
f
o
47,950
18,240
13,163
15,043
7,522
15,043
17,488
15,043
15,043
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
)
3
(
)
2
(
1
2
0
2
n
i
P
I
T
L
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
2,530,828
962,708
694,744
793,997
397,012
793,997
923,018
793,997
793,997
d
e
t
n
a
r
g
s
e
r
a
h
s
f
o
r
e
b
m
u
n
l
a
t
o
T
h
c
n
u
a
l
1
2
0
2
e
h
t
r
e
d
n
u
)
2
(
)
1
(
P
I
T
L
e
h
t
f
o
95,901
36,480
26,326
30,087
15,044
30,087
34,976
30,087
30,087
164,535
4,342,082
164,540
4,342,216
329,075
8,684,298
Name
Björn Rosengren
Timo Ihamuotila(4)
Carolina Granat (EC member
as of January 1, 2021)
Maria Varsellona
Theodor Swedjemark(4)
Sami Atiya
Tarak Mehta(4)
Peter Terwiesch4)
Morten Wierod(4)
Total Executive
Committee members at
December 31, 2021
(1) Vesting date April 26, 2024.
(2) The reference number of shares of the EPS and TSR performance factors are valued using the fair value of the ABB shares on the grant date
adjusted for expected foregone dividends during the vesting period.
(3) Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to
withholding taxes. The plan foresees a maximum payout of 200 percent of the number of reference shares granted based on the
achievement against the pre-defined average EPS and relative TSR targets.
(4) In addition to the above awards, five members of the EC participated in the 18th launch of the ESAP in 2021, which will allow them to save
over a 12-month period and, in November 2022, use their savings to acquire ABB shares under the ESAP. Each EC member who participated
in ESAP will be entitled to acquire up to 330 ABB shares at an exercise price of CHF 30.32 per share.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
107
Exhibit 41: LTIP grants in 2020 (audited)
)
3
(
)
2
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
0
2
0
2
e
h
t
f
o
r
o
t
c
a
f
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
e
c
n
a
m
r
o
f
r
e
p
S
P
E
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
985,221
367,044
282,041
309,089
46,436
309,089
347,731
309,089
289,776
r
e
d
n
u
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
f
o
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
S
P
E
e
h
t
)
1
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
0
2
0
2
e
h
t
65,857
24,535
18,853
20,661
3,104
20,661
23,244
20,661
19,370
)
3
(
)
2
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
0
2
0
2
e
h
t
f
o
r
o
t
c
a
f
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
e
c
n
a
m
r
o
f
r
e
p
R
S
T
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
985,236
367,059
282,056
309,104
46,451
309,104
347,731
309,104
289,776
r
e
d
n
u
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
f
o
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
R
S
T
e
h
t
)
1
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
0
2
0
2
e
h
t
65,858
24,536
18,854
20,662
3,105
20,662
23,244
20,662
19,370
r
e
d
n
u
d
e
t
n
a
r
g
s
e
r
a
h
s
f
o
r
e
b
m
u
n
l
a
t
o
T
)
2
(
)
1
(
P
I
T
L
e
h
t
f
o
h
c
n
u
a
l
0
2
0
2
e
h
t
d
e
s
a
b
-
e
r
a
h
s
f
o
e
u
l
a
v
d
e
t
a
m
i
t
s
e
l
a
t
o
T
)
3
(
)
2
(
0
2
0
2
n
i
P
I
T
L
e
h
t
r
e
d
n
u
s
t
n
a
r
g
CHF
131,715
1,970,457
49,071
37,707
41,323
6,209
41,323
46,488
41,323
38,740
734,103
564,097
618,193
92,887
618,193
695,462
618,193
579,552
216,946
3,245,516
216,953
3,245,621
433,899
6,491,137
Name
Björn Rosengren (EC member
as of January 27, 2020, CEO
as of March 1, 2020)
Timo Ihamuotila(4)
Sylvia Hill
Maria Varsellona
Theodor Swedjemark
(EC member as of
August 1, 2020)(4)
Sami Atiya
Tarak Mehta(4)
Peter Terwiesch(4)
Morten Wierod(4)
Total Executive
Committee members at
December 31, 2020
(1) Vesting date April 27, 2023.
(2) The reference number of shares of the EPS and TSR performance factors are valued using the fair value of the ABB shares on the grant date
adjusted for expected foregone dividends during the vesting period.
(3) Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to
withholding taxes. The plan foresees a maximum payout of 200 percent of the number of reference shares granted based on the
achievement against the pre-defined average EPS and relative TSR targets.
(4) In addition to the above awards, five members of the EC participated in the 17th launch of the ESAP in 2020, which allowed them to save over
a 12-month period and, in November 2021, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in
ESAP was be entitled to acquire up to 440 ABB shares at an exercise price of CHF 22.87 per share.
108
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 42: EC shareholding overview at December 31, 2021 (audited as part of the financial statement
stand-alone audit)
Total
number of
shares held
at Decem-
ber 31, 2021
Vested at
December
31, 2021
s
n
o
i
t
p
o
d
e
t
s
e
v
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
—
—
—
—
—
—
—
—
—
10,000
150,440
1,200
26,006
1,360
51,472
118,056
100,440
51,912
Unvested at December 31, 2021
s
n
o
i
t
p
o
d
e
t
s
e
v
n
u
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
9
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
0
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
1
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
l
)
2
(
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
l
)
2
(
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
(vesting
2022)
(vesting
2022)
(vesting
2023)
(vesting
2024)
(vesting
2022)
(vesting
2023)
—
—
—
—
148,750
—
—
—
—
—
131,715
95,901
130,150
18,904
49,071
49,071
36,480
—
—
—
49,587
44,422
41,323
36,158
—
—
26,326
—
6,209
15,044
41,323
46,488
41,323
38,740
30,087
34,976
30,087
30,087
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
510,886
—
148,750
220,561
354,869
298,988
130,150
18,904
Name
Björn Rosengren
Timo Ihamuotila
Carolina Granat (EC
member as of January 1,
2021)(3)
Maria Varsellona(4)
Theodor Swedjemark(3)(5)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee members
at December 31, 2021
(1) The final LTIP 2019 award will be settled 65 percent in shares and 35 percent in cash. This applies to both performance factors (EPS and
TSR). However, the participants have the possibility to elect to receive 100 percent of the vested award in shares. The final LTIP 2020 and
LTIP 2021 award will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding
taxes.
(2) It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However, the participants have
the possibility to elect to receive 100 percent of the vested award in shares.
(3) This includes shares held by the spouse.
(4) Unvested share grants were forfeited as a result of the resignation provided and removed from the shareholding overview.
(5) In addition, his spouse holds unvested shares and options granted in connection with her role in the company.
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
109
Exhibit 43: EC shareholding overview at December 31, 2020 (audited as part of the financial statement
stand-alone audit)
Total
number
of shares
held at
Decem-
ber 31,
2020
Vested
at
Decem-
ber 31,
2020
Unvested at December 31, 2020
s
n
o
i
t
p
o
d
e
t
s
e
v
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
s
n
o
i
t
p
o
d
e
t
s
e
v
n
u
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
8
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
9
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
0
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
l
)
2
(
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
l
)
2
(
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
l
)
2
(
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
(vesting
2021/
2022)
(vesting
2021)
(vesting
2022)
(vesting
2023)
(vesting
2021)
(vesting
2022)
(vesting
2023)
Name
Björn Rosengren (EC
member as of
January 27, 2020, CEO
as of March 1, 2020)
Timo Ihamuotila
Theodor Swedjemark
(EC member as of
August 1, 2020)(3)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee
members at
December 31, 2020
5,000
171,610
—
—
—
—
—
37,217
Sylvia Hill
2,265 796,875 318,750
Maria Varsellona
—
—
—
—
—
—
—
131,715
— 130,150
18,904
49,071
36,158
41,323
49,071
37,707
—
—
—
—
41,323
40,010
40,009
—
6,209
49,587
41,323
44,422
46,488
41,323
36,158
41,323
38,740
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
480 102,000 250,750
42,778
179,636
142,338
1,544
—
—
—
—
—
—
—
—
23,301
34,790
37,379
15,292
545,651 898,875 569,500
147,979
298,042
433,899 40,010 170,159
18,904
(1) The final LTIP 2018 award and LTIP 2019 award will be settled 65 percent in shares and 35 percent in cash. This applies
to both performance factors (EPS and TSR). However, the participants have the possibility to elect to receive
100 percent of the vested award in shares. The final LTIP 2020 award will be settled 100 percent in shares, with an
automatic sell-to-cover in place for employees who are subject to withholding taxes.
(2) It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However,
the participants have the possibility to elect to receive 100 percent of the vested award in shares.
(3) In addition, his spouse holds unvested shares and options granted in connection with her role in the company.
110
A B B A N N U A L R E P O R T 2 0 2 1
0 3 C O M P E N S AT I O N R E P O R T
Exhibit 44: Targeted and realized EC total compensation in 2021
Base
salary
Pension
benefits
Other
benefits(1)
Target
short-term
incentive(2)
Grant fair
value of
2018 LTIP(3)
Target total
variable
compensation
Target total
compensation
1,700,012
744,770
807,000
1,700,000
n.a.
1,700,000
4,951,782
966,675
518,063
570,546
970,000
819,965
1,789,965
3,845,249
Target compensation (in CHF)
Björn Rosengren
Timo Ihamuotila
Carolina Granat (EC member as
of January 1, 2021)
Maria Varsellona
800,009
455,000
511,824
800,000
Theodor Swedjemark
500,004
274,535
263,567
500,000
700,000
417,382
399,334
700,000
n.a.
n.a.
n.a.
700,000
2,216,716
800,000
2,566,833
500,000
1,538,106
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total
800,009
482,662
481,598
800,000
513,368
1,313,368
3,077,637
925,008
507,646
476,481
930,000
766,494
1,696,494
3,605,629
800,009
473,441
422,542
800,000
823,534
1,623,534
3,319,526
791,676
443,506
362,112
800,000
336,913
1,136,913
2,734,207
7,983,402 4,317,005 4,295,004
8,000,000 3,260,274
11,260,274
27,855,685
Realized compensation (in CHF)
Björn Rosengren
Timo Ihamuotila
Carolina Granat (EC member as
of January 1, 2021)
Base
salary
Pension
benefits
Other
benefits(1)
Short-term
incentive
2021(4)
Grant fair
value of
2018 LTIP(5)
Total variable
compensation
Total
compensation
1,700,012
744,770
807,000
2,465,000
n.a.
2,465,000
5,716,782
966,675
518,063
570,546
1,358,000
624,897
1,982,897
4,038,181
Maria Varsellona
800,009
455,000
511,824
1,160,000
Theodor Swedjemark
500,004
274,535
263,567
725,000
700,000
417,382
399,334
980,000
n.a.
n.a.
n.a.
980,000
2,496,716
1,160,000
2,926,833
725,000
1,763,106
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total
800,009
482,662
481,598
1,160,000
391,248
1,551,248
3,315,517
925,008
507,646
476,481
1,348,500
584,123
1,932,623
3,841,758
800,009
473,441
422,542
1,160,000
627,617
1,787,617
3,483,609
791,676
443,506
362,112
1,126,400
256,757
1,383,157
2,980,451
7,983,402 4,317,005 4,295,004 11,482,900 2,484,642
13,967,542
30,562,953
Realized achievement level
Björn Rosengren
Timo Ihamuotila
Carolina Granat (EC member as
of January 1, 2021)
Base
salary
Pension
benefits
Other
benefits(1)
Short-term
incentive(4)
Grant fair
value of
2018 LTIP(5)
100.0% 100.0% 100.0%
145.0%
n.a.
100.0% 100.0% 100.0%
140.0%
76.2%
100.0% 100.0% 100.0%
140.0%
Maria Varsellona
100.0% 100.0% 100.0%
Theodor Swedjemark
100.0% 100.0% 100.0%
145.0%
145.0%
145.0%
145.0%
145.0%
n.a.
n.a.
n.a.
76.2%
76.2%
76.2%
76.2%
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
140.8%
100.0% 100.0% 100.0%
143.4%
76.2%
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Average
Total variable
compensation
Total
compensation
145.0%
110.8%
140.0%
145.0%
145.0%
118.1%
113.9%
110.1%
121.7%
127.7%
115.4%
105.0%
112.6%
114.0%
114.6%
107.7%
106.5%
104.9%
109.0%
110.0%
(1) Other benefits comprise payments related to social security, health insurance, children’s education, transportation, tax advice and certain
other items.
(2) Target short-term incentive corresponds to 100 percent of the latest applicable annual base salary.
(3) Represents the LTIP 2018 grant date fair value as per April 6, 2018, as disclosed in our annual report 2018.
(4) Represents accrued STI for the year 2021, which will be paid in 2022, after the publication of ABB’s financial results. STI is linked to the
objectives defined in each EC member’s Annual Incentive Plan.
(5) Valued at CHF 29.25, the closing price of the ABB share on the day of vesting.
111
1 Report of the Statutory Auditor To the General Meeting of ABB Ltd, Zurich We have audited the accompanying compensation report of ABB Ltd for the year ended December 31, 2021. The audit was limited to the information according to articles 14 – 16 of the Ordinance Against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained in the tables labeled “audited” on pages 102 to 109 of the compensation report. Responsibility of the Board of Directors The Board of Directors is responsible for the preparation and overall fair presentation of the compensation report in accordance with Swiss law and the Ordinance against Excessive compensation in Stock Exchange Listed Compa-nies (Ordinance). The Board of Directors is also responsible for designing the compensation system and defining individual compensation packages. Auditor's Responsibility Our responsibility is to express an opinion on the accompanying compensation report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the compensation report complies with Swiss law and articles 14 – 16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstate-ments in the compensation report, whether due to fraud or error. This audit also includes evaluating the reasonable-ness of the methods applied to value components of compensation, as well as assessing the overall presentation of the compensation report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the compensation report for the year ended December 31, 2021 of ABB Ltd complies with Swiss law and articles 14 – 16 of the Ordinance. KPMG AG Hans-Dieter Krauss Mohammad Nafeie Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 24, 2022 KPMG AG, Badenerstrasse 172, CH-8036 Zurich © 2022 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 04
2021 Financial
review of
ABB Group
114 2021 Operating and financial review
and prospects
162 Consolidated Financial Statements
of ABB Group
114
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
About ABB
ABB is a leading global technology company that
energizes the transformation of society and
industry to achieve a more productive, sustain-
able future. By connecting software to its
electrification, robotics, automation and motion
portfolio, ABB pushes the boundaries of technol-
ogy to drive performance to new levels.
With a history of excellence stretching back more
than 130 years, ABB’s success is driven by about
105,000 talented employees.
—
Organizational structure
Our business is international in scope and we
generate revenues in numerous currencies. We
operate in over 100 countries across three
regions: Europe, the Americas, and Asia, Middle
East and Africa. We are headquartered in Zurich,
Switzerland.
We manage our company through our four Busi-
ness Areas: Electrification, Motion, Process
Automation, and Robotics & Discrete Automation.
For a breakdown of our consolidated revenues
(i) by Business Area, (ii) by geographic region, and
(iii) by product type, see “Analysis of results of
operations—Revenues” and “Note 23 - Operating
segment and geographic data” to our Consoli-
dated Financial Statements. Until June 30, 2020,
we also operated the Power Grids business, which
is reported as discontinued operations in the
Consolidated Financial Statements (see “Discon-
tinued operations” section below). On July 1,
2020, we completed the divestment of 80.1 per-
cent of the Power Grids business to Hitachi Ltd
(Hitachi). We retain a 19.9 percent ownership
interest through our investment in Hitachi Energy
Ltd, formerly Hitachi ABB Power Grids Ltd (Hitachi
Energy) which beneficially owns or controls all the
subsidiaries of the Power Grids business.
Our principal corporate offices are located at
Affolternstrasse 44, CH 8050 Zurich, Switzerland,
telephone number +41 43 317 7111. Our agent for
U.S. federal securities law purposes is ABB Hold-
ings Inc., located at 305 Gregson Drive, Cary,
North Carolina 27511. Our internet address is
www.abb.com or global.abb. The information
contained on or accessible from our Web site is
not incorporated into this annual report, and you
should not consider it to be a part of this annual
report. The United States Securities and Ex-
change Commission (SEC) maintains a website at
www.sec.gov which contains in electronic form
each of the reports and other information that we
have filed electronically with the SEC.
—
Employees
A breakdown of our employees by geographic
region is as follows:
December 31,
Europe
The Americas
2021
2020
2019
50,000 49,200
68,400
25,600 27,600
35,200
Asia, Middle East and Africa
28,800 28,800
40,800
Total
104,400 105,600 144,400
The proportion of our employees that are repre-
sented by labor unions or are subject to collective
bargaining agreements varies based on the labor
practices of each country in which we operate.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
115
—
History of the ABB Group
The ABB Group was formed in 1988
through a merger between Asea AB and BBC
Brown Boveri AG. Initially founded in 1883, Asea
AB was a major participant in the introduction of
electricity into Swedish homes and businesses
and in the development of Sweden’s railway
network. In the 1940s and 1950s, Asea AB ex-
panded into the power, mining and steel
industries. Brown Boveri and Cie. (later renamed
BBC Brown Boveri AG) was formed in Switzerland
in 1891 and initially specialized in power genera-
tion and turbines. In the early to mid-1900s, it
expanded its operations throughout Europe and
broadened its business operations to in-
clude a wide range of electrical engineering
activities.
In January 1988, Asea AB and BBC Brown Boveri
AG each contributed almost all of their businesses
to the newly formed ABB Asea Brown Boveri Ltd,
of which they each owned 50 percent. In 1996,
Asea AB was renamed ABB AB and BBC Brown
Boveri AG was renamed ABB AG. In February 1999,
the ABB Group announced a group reconfigura-
tion designed to establish a single parent holding
company and a single class of shares. ABB Ltd was
incorporated on March 5, 1999, under the laws of
Switzerland. In June 1999, ABB Ltd became the
holding company for the entire ABB Group. This
was accomplished by having ABB Ltd issue shares
to the shareholders of ABB AG and ABB AB, the
two companies that formerly owned the ABB
Group. The ABB Ltd shares were exchanged for
the shares of those two companies, which,
as a result of the share exchange and certain
related transactions, became wholly-owned
subsidiaries of ABB Ltd.
As described above, on July 1, 2020, we divested
80.1 percent of our ownership in the Power Grids
business to Hitachi.
ABB Ltd shares are currently listed on the SIX
Swiss Exchange, the NASDAQ OMX Stockholm
Exchange and the New York Stock Exchange (in
the form of American Depositary Shares).
—
ABB Today
As a global leader in resource efficiency, excelling
in electrification and automation, our offering is
relevant for the global energy transition,
increased energy efficiency, and the transition to
more adaptive manufacturing and automation,
putting us right in the center of long-term secu-
lar trends.
The ABB Purpose
The ABB Purpose captures what we do, and the
ABB Way describes how we do it. With our Pur-
pose at the core, ABB strives to create superior
value for customers, employees and shareholders.
The ABB Purpose is summarized as:
constitutes a barrier to entry: decades-long
domain expertise, cutting-edge technology and
innovation as well as the ability to scale opera-
tions and distribution.
• We succeed by creating superior value.
• We push the boundaries of technology to drive
performance to new levels.
• We energize the transformation of society and
industry to achieve a more productive,
sustainable future.
Our core competencies
With its long history, ABB not only invented or
pioneered many power and automation technolo-
gies but has retained technology and market
leadership in many of these areas. Being present
in various vertical markets for decades with close
long-term relationships with customers and
channel partners has resulted in our unique deep
domain expertise, enabling a thorough under-
standing of customers’ needs and operations.
Our leadership in resource efficiency is based on
our core competencies, each of which
We continuously evolve our offering to
remain a relevant and trusted partner to our
116
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
customers. Our annual non-order related research
and development spending in 2021 amounted to
approximately 4.2 percent of revenues. We focus
our research and development expenditures on
key areas of innovation and have spent approxi-
mately $7 billion since the beginning of 2016,
focusing on developing best-in-class products
and services in the fields of electrification and
automation with the goal of helping our custom-
ers to increased productivity and lower their
ecological footprint.
All our four Business Areas are market leaders in
their respective areas being in either the number 1
or 2 positions. Our global reach along with our
extensive local presence assists us in scaling
innovations to achieve stronger returns, which
supports higher absolute investments for future
growth. Active globally, our revenues are
well-balanced across regions with customers
served directly and through a strong channel
partner network.
The ABB Way
The ABB Way is the glue that unites our Group and
comprises a select number of common processes
covering our business model, our people and
culture, the ABB brand and our governance frame-
work. It facilitates accountability, transparency
and speed in ABB.
In our operating model, the Divisions represent
the highest level of operating decisions. They are
closest to their respective markets and customer
needs. Each Division progresses through the
strategic mandates and priorities of stability and
profitability before growth. Meaning, in order to
deploy full focus on organic and acquired growth
to the extent of consolidating the market, the
business’ structure should be robust and profit-
ability should be at least in line with industry
peers. We have made good progress on the transi-
tion through these priorities with two thirds of
our Divisions, representing approximately 60 per-
cent of Group revenues, now on a growth
mandate.
Each Division has full accountability for its results
and carries the responsibility for business devel-
opment, and research and development for
leading technology to secure a number 1 or 2
market position. To fully complete the decentral-
ized way of working at ABB, our focus area in 2022
will be to make sure that we also have account-
ability, transparency and speed within all of the
Divisions. Strong performance management is
key in a decentralized business model. We
apply a monthly scorecard system for the Divi-
sions and Business Areas, based
on a standardized set of Key Performance Indica-
tors, to support full transparency of performance.
It is accompanied by a mandatory target to make
annual productivity improvements of at least
3 percent each year.
The corporate functions focus on necessary
strategic, financial and governance activities,
with a lean headcount of approximately
800 employees.
Enhanced growth profile
Over the past several years, we have taken signifi-
cant organic and inorganic actions to align our
business portfolio to more attractive growth
markets, increasing our focus on discrete indus-
tries, as well as transport and infrastructure, that
offer better growth opportunities. Additionally,
we have increased the proportion of sales stem-
ming from short-cycle businesses,
meaning a reduced proportion from
project-related activities, which should reduce the
risk and volatility in our earnings. This ongoing
shift towards better quality of revenues is part of
ABB’s DNA which centers around
resource-efficiency in electrification and
automation.
The responsibility for growth has been fully
transferred to the Divisions, as they are closest to
customers. This includes both organic and ac-
quired growth. The Divisions have the best
insights into current and future customer needs
and are accountable for building their respective
business accordingly. With more Divisions transi-
tioning over time from stability and profitability
to growth, we expect to see a continuous shift in
our growth profile.
Finally, the underlying demand for our products,
systems and services is supported by strong
sustainability megatrends with more favorable
regulations, improved technology and changing
consumer patterns all being positive drivers. An
example of such a megatrend is sustainable
transport. We estimate that approximately 10 per-
cent of our order intake comes from this area and
that we have outgrown the market in recent years.
The related segments have different commercial
maturity, including more mature technologies
which already generate significant orders, includ-
ing traction systems in rail or hybrid ships using
Azipod® propulsion. Segments that are in com-
mercial take-off (i.e. currently see very high
growth rates) include electric vehicle charging
solutions or robotic solutions for electric vehicle
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
117
manufacturing. There are also very early-stage
segments which are still emerging and which
might offer a high potential in the future such as
fully electric mines (“eMines”) or alternative fuels
such as hydrogen.
—
Our markets
ABB is a leading global technology company
with a comprehensive and increasingly digitalized
offering of electrification, motion and automa-
tion solutions. Our exposure to customers is
geographically balanced while catering to multi-
ple end-markets and segments. We believe that
our portfolio is well positioned to benefit from
secular growth drivers, including urbanization,
labor shortage, shift to electrification, automa-
tion and robotization, as well as other data and
digitalization trends.
We are focused on creating superior customer
value through our comprehensive, modular offer-
ing, combining traditional products and services
with software-enabled products and systems as
well as digital services and software that we sell
both separately and combined as scalable solu-
tions. Superior software is a key differentiation of
our digital offering and about 60 percent of our
approximately 7,000 employees in research and
development are active in software development.
The majority of our businesses are market leaders
within their respective segments. We believe
market leadership is critical, as it provides the
opportunity for price leadership, which in turn
supports profitability, enabling us to invest in
further research and development to sustain our
technological leadership. For a discussion of the
geographic distribution of our total revenues, see
“Analysis of results of operations—Revenues.”
Industry market
Approximately half of our customers are indus-
trial customers. We serve production facilities
and factories all around the world, from process
industries such as oil and gas, pulp and paper as
well as mining, to discrete industries including
automotive, food and beverage and consumer
electronics. Automation, software and digital
services that help customers achieve improved
safety, uptime, energy efficiency and productivity
are key to the success of our offerings in this
market. The ongoing COVID-19 pandemic has
served as a prominent reminder for companies of
the importance of simplicity and flexibility in
automated production and has accelerated
customer demand for the digital services and
solutions we offer.
Industrial end-markets recovered from the initial
pandemic-related impacts. In discrete industries,
end-markets such as food and beverage, con-
sumer electronics, machine builders and general
industry grew strongly. Investments in robotics by
the automotive industry recovered and we ap-
plied a strategic selective order approach aimed
at improving long-term profitability in the
segment.
Later-cycle process industries segments picked
up especially during the second half of 2021,
benefiting from a rebound in commodity prices
and generally easing international travel restric-
tions. This was particularly the case for the oil and
gas segment, while the recovery in segments such
as pulp and paper, mining or water and wastewa-
ter had already started earlier.
Transport & infrastructure market
Approximately one-third of our customers oper-
ate in the transport & infrastructure market. Our
expertise provides efficient, reliable and sustain-
able solutions for these customers, with a focus
on energy efficiency and reduced operating costs.
Transport & infrastructure markets were strong in
2021. Buildings activity rebounded from the
widespread lockdowns of the previous year. Data
center markets continued to expand, with ABB
successful in offering bundled solutions to hyper-
scale and co-location customers in particular.
Underlying demand in rail for electrification and
traction solutions was also high, while modest
growth rates were impacted by the strong order
intake in 2020. In the marine sector, we saw
continued strong order demand for our
market-leading electric propulsion systems.
Services in the cruise segment started to pick-up
in the second half of 2021 in anticipation of a
recovery in cruising activities. EV charging mar-
kets also continued to see very strong
growth rates.
118
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Utilities market
ABB delivers solutions mainly for distribution
utilities and renewables customers, while continu-
ing to service conventional power generation
customers with our control and automation
solutions. Following the divestment of our Power
Grids business to Hitachi in July 2020, our expo-
sure to the utilities market has decreased
significantly.
During 2021, the renewables markets saw very
strong growth after a challenging, pandemic-
impacted 2020. Business levels in the
conventional power generation market improved,
albeit from a low level. Demand from electrical
distribution utilities was strong, with ongoing
investments to increase grid reliability and resil-
ience with integrating increased renewables.
We serve industry, transport & infrastructure and
utilities through our operating Divisions which
are included in our Business Areas. Developments
in these Business Areas are discussed in more
detail below. Revenue figures presented in this
Businesses section are before intersegment
eliminations.
—
Businesses
Electrification Business Area
Overview
Products and Services
The products of the Electrification Business Area
portfolio are designed to enable safe, smart, and
sustainable electrification, with a full range of
low- and medium-voltage products and solutions,
along with pre-engineered packaged services and
tailored solutions for intelligent protection and
connection.
The Electrification Business Area delivers prod-
ucts through a global network of channel partners
and end customers. Most of the Business Area’s
revenue is derived from distributors and approxi-
mately a quarter is derived from direct sales to
end-users. The remaining revenues are generated
from original equipment manufacturers (OEMs),
engineering, procurement, construction (EPC)
contracting companies, system integrators,
utilities and panel builders. The proportion of
direct compared to channel partner sales varies
by segment, product technology and geographic
markets.
The Electrification Business Area had approxi-
mately 50,800 employees on December 31, 2021,
and generated $13.2 billion of revenues in 2021.
Customers
The Electrification Business Area serves a wide
range of customer segments, including residen-
tial, commercial, and industrial buildings, electric
utilities, oil and gas, chemicals, data centers,
e-mobility, renewables, food and beverage, and
other industries and infrastructure.
The Electrification Business Area’s products and
services are delivered through six operating
Divisions.
The Distribution Solutions Division helps utility,
industry and transport & infrastructure custom-
ers improve power quality and control, reduce
outage time and enhance operational reliability
and efficiency. The Division offers products,
solutions and services that largely serve the
power distribution sector, often providing the
requisite medium-voltage link between
high-voltage transmission systems and
low-voltage users. With ABB AbilityTM enabled
digital solutions at its core, the offering includes
low-voltage switchgear (up to 1 kilovolt) and
medium-voltage equipment (1 to 66 kilovolts),
indoor and outdoor circuit breakers, reclosers,
fuses, contactors, relays, instrument transform-
ers, sensors, motor control centers, as well
as a wide range of air- and gas-insulated switch-
gear. The Division also produces indoor and
outdoor modular systems and other
segment-specific solutions to facilitate efficient
and reliable distribution, protection and control
of power, adding value through design, engineer-
ing, project management and service. The service
offering spans the entire value chain, from the
moment a customer makes the first inquiry to
disposal and recycling of the product, enriched by
advanced digital services for asset management.
Throughout the value chain, the Division provides
training, technical support and customized
contracts.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
119
The Smart Power Division helps protect, control,
and connect people, plants, and systems
with a portfolio of low-voltage products and
systems. The product offering includes,
molded-case and air-circuit breakers, safety
products including sensors, switches, contactors,
relays, and power protection solutions such as
uninterruptible power supply (UPS) solutions,
status transfer switches and power distribu-
tion units.
The Smart Buildings Division helps optimize
efficiency, safety, security and comfort in homes
and other buildings. The Division offers digitally
enabled controls for HVAC, lighting, shutters, and
security in addition to low-voltage products
including conventional wiring accessories, indus-
trial plugs and sockets, emergency lighting,
DIN-rail products, and enclosures ideal for single
family homes, multiple dwellings, commercial
buildings, infrastructure and industrial applica-
tions. The Division’s highly innovative solutions
serve rising global demand among developers,
owners, and investors for smart building technol-
ogy, offering significant sustainable and financial
benefits, as well as answering social and environ-
mental needs, and addressing customers’ carbon
reduction strategies.
The Installation Products Division helps manage
the connection, protection and distribution of
electrical power. The Division’s products are
engineered to provide ease of installation and
perform in demanding and harsh conditions,
helping to ensure safety and continuous opera-
tion for our customers and people around the
world. The commercial essentials product seg-
ment includes electrical junction boxes,
commercial fittings, strut and cable tray metal
framing systems for commercial and residential
construction. The premier industrial product
segment includes multiple product lines, such as
Ty-Rap®, T&B Liquidtight Systems®, PVC coated
and nylon conduit systems, power connection and
grounding systems, cable protection systems of
conduits and fittings for harsh and industrial
applications. The Division also manufactures
solutions for medium-voltage applications used
in utility and industrial applications under its
marquee brands including ElastimoldTM reclosers
and switchgear, capacitor switches, current
limiting fuses, the High Tech ValiantTM full-range
current limiting fuse for fire mitigation, faulted
current indicators and distribution connectors,
cable accessories and apparatus with products
for overhead and underground distribution.
The Power Conversion Division supplies innova-
tive critical power solutions to infrastructure
customers and manufacturers of a wide range of
equipment. The Division supports its customers
in telecom/5G, networking, data centers, and
industrial applications (such as oil and gas, utility,
power generation, and robotics) in rapidly chang-
ing, disruptive environments where information,
access and response times are redefining the
markets. The Power Conversion Division also
provides customers with reliable and efficient
power that supports increasing infrastructure
requirements, ensuring that data flows 24/7,
while optimizing footprint, energy costs and
operations. The Division supports customers by
providing the latest industry insights and technol-
ogy, partnering to co-develop solutions to tackle
evolving challenges.
The E-mobility Division engineers electrification
solutions to enable global, accessible, reliable,
smart and emission-free mobility. The Division
offers to its customers a total electric vehicle
charging solution from compact AC wall boxes
and DC fast charging stations to on-demand
electric bus charging systems. The Division also
provides customers with services such as infra-
structure installation and maintenance to meet
the requirements of the next generation of
smarter mobility. ABB Ability™ connected char-
gers enable fast global service and pro-active
maintenance.
Sales and Marketing
The Electrification Business Area’s global markets
common sales and marketing organization cre-
ates demand across all channels and products,
with a range of promotional activities and sup-
port services including account, channel, and
segment sales management, commercial opera-
tions, and digital expertise.
Competition
The Electrification Business Area’s principal
competitors vary by product group and include
Chint, Eaton, Hubbell, Legrand, LS Electric, Pana-
sonic, Rittal, Schneider Electric and Siemens.
Capital Expenditures
The Electrification Business Area’s capital expen-
ditures for property, plant and equipment totaled
$345 million in 2021, compared to $316 million in
2020. Investments in 2021 were higher than in
2020 as some investments were previously de-
layed in 2020 due to the COVID-19 pandemic.
Investments in 2021 principally related to capacity
expansion for e-mobility products, including the
construction of a new factory in Italy, and to
footprint changes, equipment replacement and
upgrades. Geographically, in 2021, Europe repre-
sented 54 percent of the capital expenditures,
120
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
followed by the Americas (34 percent) and Asia,
Middle East and Africa (12 percent).
Motion Business Area
Overview
The Motion Business Area provides pioneering
technology, products, solutions and related
services to industrial customers to increase
energy efficiency, improve safety and reliability,
and maintain precise control over processes. The
portfolio includes motors, generators and drives
for a wide range of applications in all industrial
sectors.
The Motion Business Area had approximately
20,000 employees as of December 31, 2021, and
generated around $6.9 billion of revenues in 2021.
Products and Services
The Motion Business Area designs, manufactures
and sells drives, motors, generators and traction
converters. Building on long-standing experience
in electric powertrains, the Business Area com-
bines domain expertise and technology to deliver
the optimum solution for a wide range of applica-
tions for a comprehensive range of industrial
segments. In addition, the Business Area, along
with its channel partners, has an industry-leading
global service presence.
At December 31, 2021, the Motion Business Area’s
products and services are delivered through
seven operating Divisions. The Business Area
divested its Mechanical Power Transmission
Division on November 1, 2021, which designed,
manufactured and sold various mechanical power
transmission products sold under the Dodge®
brand.
The Drive Products Division serves the industries
and infrastructure segments with world-class
drives and programmable logic controllers (PLC).
With its products, global scale and local presence,
the Division helps customers to improve energy
efficiency, productivity and safety.
The System Drives Division supplies high-power,
high-performance drives, drive systems and
packages for industrial process and large infra-
structure applications. The Division offers global
support to help customers, partners and equip-
ment manufacturers with asset reliability,
performance improvement and energy efficiency
in mission critical applications.
The Service Division serves customers worldwide
and aims to help customers by maximizing
uptime, extending life cycle and enhancing the
performance and energy efficiency of their elec-
trical motion solutions. The Division is leading the
way in digitalization by securely connecting
motors and drives to help customers prevent
expensive downtime while also optimizing opera-
tions’ profitably, safely and reliably.
The Traction Division is a recognized leader in
traction technologies that drive innovation in rail,
bus and other modes of electric transporta-
tion. A comprehensive range of high performance
propulsion, auxiliary and energy storage solutions
help improve energy efficiency and contributes to
making transportation more sustainable.
The IEC Low Voltage Motors Division is a global
market leader that provides a full range of energy
efficient low voltage motors, including
ultra-efficient motors such as synchronous
reluctance motors (SynRM) to help customers
reduce power bills and cut emissions.
Through a global footprint, application expertise
and with rugged designs, the Division’s products
support customers with IEC low-voltage motor
solutions that improve reliability and productivity
in the most demanding applications.
The Large Motors and Generators Division
offers a comprehensive product portfolio of large
AC motors and generators. The Division’s robust,
reliable and highly efficient offerings power
critical infrastructure and transportation across
all major industries and applications often in
remote and demanding locations.
The NEMA Motors Division is a marketer, designer
and manufacturer that offers Baldor-Reliance®
industrial electric motors, primarily in North
America. The Division focuses on quality, reliabil-
ity and efficiency to provide a comprehensive
offering of NEMA motors in the market across
most industrial segments and applications.
Customers
The Motion Business Area serves a wide range of
customers in different industrial segments such
as pulp and paper, oil and gas, metals and mining,
food and beverage, HVAC, water and wastewater,
transportation, power generation, marine and
offshore.
Sales and Marketing
Sales are made both through direct sales forces
and through channel partners, such as distribu-
tors and wholesalers, as well as installers, OEMs
and system integrators. The proportion of direct
sales to end users compared to channel partner
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
121
sales varies among the different industries,
products and geographic markets.
Customers
Competition
The principal competitors of the Motion Business
Area include Schneider, Siemens, Toshiba, WEG
Industries, SEW EURODRIVE and Danfoss.
Capital Expenditures
Capital expenditures in the Motion Business Area
for property, plant and equipment totaled
$230 million in 2021, compared to $118 million in
2020. Principal investments in 2021 related to the
purchase of a formerly leased property in China as
well as equipment replacement, footprint adjust-
ments and automation upgrades. Geographically,
in 2021, Asia, Middle East and Africa represented
49 percent of the capital expenditures, followed
by Europe (34 percent) and the Americas
(17 percent).
—
Process Automation Business
Area
Overview
In 2021, the former Industrial Automation Busi-
ness Area was renamed Process Automation and
there was no change in the composition of the
Divisions. The Process Automation Business Area
offers customers in process, hybrid and maritime
industries a broad range of integrated automa-
tion, electrical, motion and digital systems,
solutions and related services that are designed
to optimize productivity, energy efficiency,
sustainability and safety of industrial processes
and operations, based on the Business Area’s
deep domain knowledge and expertise of each
end market.
The Business Area’s offering can be grouped, with
about half relating to solutions for new and
brownfield projects and half relating to service,
mainly for installed own products. In some cases,
the Business Area integrates offerings from the
Electrification, Motion and Robotics & Discrete
Automation Business Areas into its integrated
systems. The Business Area’s offerings are sold
primarily through its direct sales force
with a smaller share through partners and
distributors.
The Business Area had approximately
22,000 employees as of December 31, 2021, and
generated revenues of $6.3 billion in 2021.
The Process Automation Business Area’s end
customers include companies across process,
hybrid and maritime industries. These industries
include oil, gas, chemicals and plastics, mining
and minerals, metals, pulp and paper, pharmaceu-
ticals, food and beverage, power generation,
marine and ports.
Products and Services
The offering of the Process Automation Business
Area includes an extensive portfolio of products,
solutions, digital applications and services for the
control of the simplest to the most complex and
critical of processes and infrastructure. These
systems can link various process and information
flows, allowing customers to manage and control
their entire business process based on real-time
information. The Business Area’s control platform
includes ABB Ability™ Distributed Control
System (DCS), System 800xA®, which is also an
electrical control system, a safety system
and a collaboration enabler with the capacity to
improve engineering efficiency, operator perfor-
mance and asset utilization. Other control
solutions include Symphony® Plus (designed to
address the open automation platform needs of
the Hydropower and Water industry segments)
and our Freelance DCS solution. Components for
basic automation solutions, process controllers,
I/O modules, panels, and Human Machine Inter-
faces (HMI), are available through the Compact
Product Suite offering. The product portfolio is
complemented by a suite of ABB Ability™
Advanced Digital Services and by ABB Care, a
subscription-based lifecycle management
program that provides services to maintain and
continually advance and enhance ABB’s distrib-
uted control systems and optimize customers’
lifecycle costs. The ABB Ability™ Genix Industrial
Analytics and Artificial Intelligence Suite unlocks
greater value by contextualizing and integrating
data from IT, engineering, and operations sys-
tems to provide deep, meaningful and actionable
insights. The portfolio is complemented
by a range of industry-specific products in each
Division.
The Process Automation Business Area has five
operating Divisions.
The Energy Industries Division enables safe,
smart, and sustainable projects and operations
for businesses across the oil and gas, chemicals,
life sciences, power generation and water sectors.
It is committed to driving more sustainable use
of our planet’s resources through innovative
solutions that enable energy efficient and low
carbon operations across traditional industries
122
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
and support the development of new and renew-
able energy models. The Division serves the
energy market with leading integrated solutions
that automate, digitalize and electrify operations
across industries. The Division’s goal is to help
customers adapt and succeed in the rapidly
changing global energy transition. Harnessing
data, machine learning and AI, the Division brings
over 50 years of domain expertise delivering
solutions designed to improve energy, process
and production efficiency, as well as reduce risk,
operational cost and capital cost, while minimiz-
ing waste for all customers, from project start-up
and throughout the entire plant lifecycle.
The Process Industries Division serves the mining,
minerals processing, metals, aluminum, cement,
pulp and paper, battery manufacturing, and food
and beverage, as well as their associated service
industries. The Division brings deep industry
domain expertise coupled with the ability to
integrate both automation and electrical, increase
productivity and reduce overall capital and
operating costs for customers. For mining, metals
and cement customers, solutions include special-
ized products and services, as well as total
production systems. The Division designs, plans,
engineers, supplies, erects and commissions
integrated electrical and motion systems, includ-
ing electric equipment, drives, motors, high
power rectifiers and equipment for automation
and supervisory control within a variety of areas
including mineral handling, mining operations,
aluminum smelting, hot and cold steel applica-
tions and cement production. The offering for the
pulp and paper industries includes control sys-
tems, quality control systems, drive systems,
on-line sensors, actuators and field instruments.
Digitalization solutions, including collaborative
operations and augmented reality, help improve
plant and enterprise productivity, and reduce
maintenance and energy costs.
The Marine & Ports Division serves the shipping
industry through its extensive portfolio of inte-
grated marine systems and solutions that
improve the flexibility, reliability and energy
efficiency of vessels. By coupling power, propul-
sion, automation, marine software and services
that ensure maximum vessel uptime, we are well
positioned to help improve the profitability and
sustainability of our customers’ business
throughout the entire lifecycle of a fleet. With
ABB Ability™ Marine software solutions and
ABB Ability™ Collaborative Operations Centers
around the world, shipowners and operators can
run their fleets at lower fuel and maintenance
costs, while improving crew, passenger and cargo
safety as well as overall productivity of their
operations. Further, the Division delivers
automation, electrical systems and digital solu-
tions for container and bulk cargo handling, from
ship to gate. These solutions help terminal opera-
tors meet the challenge of larger ships, taller
cranes and bigger volumes per call, and make
terminal operations safer, greener and more
productive.
The portfolio of the Measurement & Analytics
Division consists of analyzers (measuring compo-
sitions of gases and liquids), instrumentation
(measuring the typical process variables of tem-
perature, pressure, flow, and level) as well as
specialized measurements for specific industries.
With this offering the Division serves virtually all
process, hybrid and marine industries, the largest
among them being the oil, gas and chemical value
chain, water and power generation industries. The
Division also provides advanced digital solutions
to help customers improve productivity, safety
and environmental sustainability.
The Turbocharging Division manufactures and
services turbochargers for diesel and gas engines
with power levels ranging from 500 kilowatts to
over 80 megawatts. Key end sectors are marine-
and land-based power generation. The Division
provides engine builders and operators advanced
solutions and services for efficient and flexible
application operations, in compliance with the
most stringent environmental requirements.
Sales and Marketing
The Process Automation Business Area’s sales are
primarily made through its direct sales force as
well as third-party channel partners, such as
distributors, system integrators and OEMs. The
majority of revenues are derived through the
Business Area’s own direct sales channels.
Competition
The Process Automation Business Area’s principal
competitors vary by industry or product group.
Competitors include: Emerson, Honeywell,
Schneider Electric, Siemens, Siemens Energy,
Yokogawa, Endress + Hauser, Kongsberg, Valmet
and Garrett.
Capital Expenditures
The Process Automation Business Area’s capital
expenditures for property, plant and equipment
totaled $85 million in 2021, compared to $75 mil-
lion in 2020. Principal investments in 2021 were in
the Turbocharging and the Measurement & Ana-
lytics Divisions. Geographically, in 2021, Europe
represented 73 percent of the capital
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
123
expenditures, followed by Asia, Middle East and
Africa (18 percent) and the Americas (9 percent).
—
Robotics & Discrete Automation
Business Area
Overview
The Robotics & Discrete Automation Business
Area provides robotics, and machine and factory
automation including products, software, solu-
tions and services. Revenues are generated both
from direct sales to end users as well as from
indirect sales mainly through system integrators
and machine builders.
The Robotics & Discrete Automation Business
Area had approximately 10,600 employees as of
December 31, 2021, and generated $3.3 billion of
revenues in 2021.
Products and Services
The Robotics & Discrete Automation Business
Area’s products and services are delivered
through two operating Divisions.
The Robotics Division offers a wide range of
products, solutions and services including robots,
robotics application cells and smart systems,
field services, spare parts, digital services, engi-
neering and operations software. This offering
provides customers with increased productivity,
quality, flexibility and simplicity for operations,
e.g. to meet the challenge of making smaller lots
of a larger number of specific products in shorter
cycles for today’s dynamic global markets and
coping with increasing uncertainty. Robots are
also used in activities or environments which may
be hazardous to employee health and safety, such
as repetitive or strenuous lifting, dusty, hot or
cold rooms, or painting booths and can help
customers address labor shortages. Robotics
solutions are used in a wide range of segments
from automotive OEMs, automotive suppliers,
electronics, general industry, consumer goods,
food and beverage, and warehouse/logistics
center automation. They are increasingly de-
ployed in service applications for health care,
restaurants and retail. Typical robotic applica-
tions include welding, material handling, machine
tending, machining, painting, picking, packing,
palletizing and assembly. In 2021, we acquired
ASTI Mobile Robotics Group (ASTI) adding a broad
portfolio of autonomous mobile robot vehicles
and solutions.
The Machine Automation Division offers inte-
grated automation solutions based on
programmable logical controllers, industrial PCs,
servo motion, industrial transport systems and
machine vision. It also provides software for
engineering and optimization. The range of
solutions are mainly used by machine builders for
various types of series machines, e.g. for plastics,
metals, printing and packaging.
Customers
Robotics & Discrete Automation serves a wide
range of customers. The main customers are
active in industries such as automotive, machine
building, metalworking, electronics, food and
beverage and logistics. They include end-users
such as manufacturers, system integrators and
machine builders.
Sales and Marketing
Sales are made both through direct sales as well
as through third-party channel partners, such as
system integrators and machine builders. The
proportion of direct sales compared to channel
partner sales varies among the different indus-
tries, product technologies and geographic
markets.
Competition
Competitors of the Robotics & Discrete Automa-
tion Business Area vary by offering and include
companies such as Fanuc, Kuka, Yaskawa, Epson,
Dürr, Stäubli, Universal Robots, Rockwell Automa-
tion, Siemens, Mitsubishi Electric and Beckhoff.
Capital Expenditures
The Robotics & Discrete Automation Business
Area’s capital expenditures for property, plant
and equipment totaled $96 million in 2021,
compared to $65 million in 2020. Principal invest-
ments in 2021 were primarily related to research
and development and training facilities, especially
the new Machine Automation Division global
innovation and training campus in Austria, and
upgrades and equipment replacement. In 2021,
Europe represented 75 percent of capital expendi-
tures, followed by Asia, Middle East and Africa
(23 percent) and the Americas (2 percent).
—
Corporate and Other
Corporate and Other includes core headquarter
functions, real estate activities, Corporate Trea-
sury Operations, Global Business Services (GBS),
the investment in Hitachi Energy and other minor
business activities. Certain strategic investments
managed by ABB Technology Ventures are also
124
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
included in Corporate. The remaining activities of
certain EPC projects which we are completing and
are in a wind-down phase are reported as
non-core businesses within Corporate and Other.
In addition, the historical business activities of
certain divested businesses are presented in
Corporate and Other. These include the
high-voltage cables business, steel structures and
certain EPC contracts relating to the oil and gas
industry.
Corporate headquarters and stewardship activi-
ties include the operations of our corporate
headquarters in Zurich, Switzerland, as well as
limited corporate-related activities in some
countries. These activities cover staff functions
with group-wide responsibilities, such as
accounting and financial reporting, corporate
finance and corporate treasury, taxes, financial
planning and analysis, internal audit, legal and
integrity, compliance, risk management and
insurance, corporate communications, informa-
tion systems and investor relations.
GBS operates shared service centers globally
through a network of five hubs and consists of
both expert and transactional services in the
areas of human resources, finance, information
services, legal, real estate, customer contact
centers, global travel services and other ancillary
activities. GBS also staffs and maintains front
offices in most countries. The costs in GBS are
incurred primarily for the benefit of the Business
Areas, who are charged for their use of the
services and the related number of employees are
allocated to the Business Areas. GBS also provides
services to third-parties under transitional
service agreements in relation to certain divested
businesses, the largest of which is the Power
Grids business.
A significant portion of the costs for GBS and
other shared corporate overhead costs are
charged to the operating businesses. Up until the
divestment of the Power Grids business on July 1,
2020, overhead and other management costs,
including GBS costs, which would have been
allocated or charged to our Power Grids business,
and which were not directly attributable to this
business, have not been allocated to the discon-
tinued operation and are included in Corporate
and Other as “stranded costs”.
Corporate and Other had approximately
1000 employees at December 31, 2021, of which
approximately 200 pertain to our non-core
businesses.
—
Discontinued operations
In July 2020, we divested 80.1 percent of our
Power Grids business to Hitachi Ltd. As a result,
the Power Grids business is reported as discon-
tinued operations in the Consolidated Financial
Statements for all years presented. See “Note 3
- Discontinued operations” to our Consolidated
Financial Statements.
Power Grids business
The former Power Grids business of ABB delivered
products, systems, software and service solu-
tions across the power value chain for utility,
industry and transport & infrastructure
customers.
The Power Grids business operated worldwide
with a globally diversified manufacturing, engi-
neering, and research and development footprint.
Direct sales accounted for the majority of total
revenues generated by the business while exter-
nal channel partners such as EPCs, wholesalers,
distributors and OEMs accounted for the rest.
Products and Services
The Grid Automation operation supplied substa-
tion automation products, systems and services.
It also provided Supervisory Control and Data
Acquisition (SCADA) systems for transmission
and distribution networks as well as a range of
wireless, fiber optic and powerline carrier-based
telecommunication technologies for
mission-critical applications and also offered
grid-edge and microgrid solutions. Its enterprise
software portfolio provided solutions for manag-
ing and optimizing assets, operations, logistics,
financials and HR, reducing operating costs and
improving productivity for customers.
The Grid Integration operation was a leading
provider of integration and transmission solu-
tions such as High Voltage Direct Current (HVDC).
Another key part of the portfolio was the Flexible
Alternating Current Transmission Systems
(FACTS) business, which comprises Static Var
Compensation (SVC) and static compensator
(STATCOM) technologies to address stability and
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
125
power quality issues. The Grid Integration opera-
tion’s portfolio also included a range of
high-power semiconductors, a core technology
for power electronics deployed in HVDC, FACTS
and rail applications. The Grid Integration opera-
tion also provided transmission and distribution
substations and associated lifecycle services.
These substations are used in utility and
non-utility applications including rail, data cen-
ters and various industries. Battery energy
storage solutions and shore-to-ship power supply
were also part of the customer offering.
The High Voltage products operation was a
provider of high voltage switchgear up to 1200 kV
AC and 1100 kV DC with a portfolio spanning
air-insulated, gas-insulated and hybrid technolo-
gies. It also manufactured generator circuit
breakers, a key product for integrating large
power plants into the grid. The portfolio also
included a broad range of capacitors and filters
that facilitate power quality, instrument trans-
formers and other substation components.
The Transformers operation supplied transform-
ers that are an integral component found across
the power value chain, enabling the reliable,
efficient and safe conversion of voltage levels.
The product range included dry- and
liquid-distribution transformers, traction trans-
formers for rail applications and special
application transformers plus related compo-
nents, for example, insulation kits, bushings and
other transformer accessories.
The Power Grids business also had an extensive
portfolio of service offerings across the value
chain. The portfolio included spare parts, condi-
tion monitoring and maintenance services,
on- and off-site repairs as well as retrofits and
upgrades. Advanced software-based monitoring
and advisory services further enhanced the
portfolio.
—
Capital expenditures
Total capital expenditures for property, plant and
equipment and intangible assets (excluding
intangibles acquired through business combina-
tions) amounted to $820 million, $694 million and
$762 million in 2021, 2020 and 2019, respectively.
In 2021 and 2020, capital expenditures were
8 percent and 24 percent lower, respectively, than
depreciation and amortization. Excluding
acquisition-related amortization, capital expendi-
tures were 28 percent higher in 2021 and 6 percent
higher in 2020, respectively, than depreciation
and amortization.
Capital expenditures in 2021 remained primarily
focused in mature markets, reflecting the geo-
graphic distribution of our existing production
facilities. Capital expenditures in Europe and
North America in 2021 were driven primarily by
upgrades and maintenance of existing production
facilities, mainly in the U.S., Austria, Italy, Switzer-
land, Finland and Sweden. Capital expenditures in
Austria included continued investment in the
state-of-the-art innovation and training campus,
which is planned to become one of our largest
research and development centers for new auto-
mation technologies. We also are
constructing a new facility in Italy for our
E-mobility Division. This investment aims to serve
as a global center of excellence and production
site for electric vehicle charging infrastructure.
Our capital expenditures in emerging markets
continued to remain primarily concentrated in
China and focus on increasing existing produc-
tion capacity. In Asia, we continued our significant
investments in China investing in the new auto-
mated and flexible robotics factory and also
purchasing a significant formerly leased property.
The share of emerging markets capital expendi-
tures as a percentage of total capital
expenditures in 2021 and 2020 was 33 percent and
22 percent, respectively.
At December 31, 2021, construction in progress
for property, plant and equipment was $522 mil-
lion, mainly in the U.S., Switzerland, Germany,
Sweden, Italy, China and India while at Decem-
ber 31, 2020, construction in progress for
property, plant and equipment was $505 million,
mainly in the U.S., Switzerland, Austria, Germany
and China.
Our capital expenditures relate primarily to
property, plant and equipment and are funded
primarily through cash flows from operating
activities. For 2022, we estimate the expenditures
for property, plant and equipment will be higher
than our annual depreciation and amortization
charge, excluding acquisition-related
amortization.
126
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Supplies and raw materials
a stable cost base during order execution. In
addition to using derivatives to reduce our expo-
sure to fluctuations in raw materials prices, in
some cases we can reduce this risk by incorporat-
ing changes in raw materials prices into the prices
of our end products (through price escala-
tion clauses).
Overall, during 2021, supply chain management
personnel in our businesses, and in the countries
in which we operate, along with the category
teams, continued to focus on value chain optimi-
zation efforts in all areas, while maintaining and
improving quality and delivery performance.
Responding to the challenges of overall global
supply chain constraints, each Business Area
quickly implemented a task force to mitigate
supply chain shortages. The Business Areas
experienced some delays in supplier deliveries
and product shortages for various categories
such as semiconductors and other raw materials
as well as constraints in the transportation of
inbound supplies. However, we responded to
these challenges and took mitigating actions
such as building up buffer stocks, approving new
suppliers, changing supplier splits, combined
with daily, weekly and monthly task force project
follow ups. We have, to a large extent, been able
to mitigate most disruptions, maintain a competi-
tive service level and support our business
growth, while maintaining delivery schedules to
our customers.
In August 2012, the SEC issued its final rules
regarding “Conflict Minerals”, as required by
section 1502 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act. We initi-
ated conflict minerals processes in 2013 and have
continuously aimed at improving and tailoring the
processes to our value chain. We continue to work
with our suppliers and customers, to enable us to
comply with the rules and disclosure obligations.
Further information on ABB’s Conflict Minerals
policy and supplier requirements can be found
under “Material Compliance” at global.abb/
group/en/about.supplying.
We purchase a variety of supplies and products
which contain raw materials for use in our produc-
tion and project execution processes. The primary
materials used in our products, by weight, are
copper, aluminum, steel, mineral oil and various
plastics. We also purchase a wide variety of
fabricated products, electronic components and
systems. We operate a worldwide supply chain
management network with employees dedicated
to this function in our Business Areas, Divisions
and in key countries. Our supply chain operations
consists of a number of teams, each focusing on
different product categories. These category
teams take advantage of opportunities to lever-
age the scale of ABB on a global, Business Area
and/or Division level, as appropriate, to optimize
the efficiency of our supply networks in a sustain-
able manner.
Our supply chain management organization’s
activities and objectives include:
• pool and leverage procurement of materials
and services,
• provide transparency of ABB’s global spending
through a comprehensive performance and
reporting system linked to our enterprise
resource planning (ERP) systems,
• strengthen ABB’s supply chain network by
implementing an effective product category
management structure and extensive
competency-based training, and
• monitor and develop our supply base to ensure
sustainability, both in terms of materials and
processes used.
We buy many categories of products which con-
tain steel, copper, aluminum, crude oil and other
commodities. Continuing global economic growth
in many emerging economies, coupled with the
volatility in foreign currency exchange rates, has
led to significant fluctuations in these raw mate-
rial costs over the last few years. While we expect
global commodity prices to remain highly volatile,
we expect to offset some market volatility
through the use of long-term contracts and global
sourcing.
We seek to mitigate the majority of our exposure
to commodity price risk by entering into deriva-
tive contracts. For example, we manage copper,
silver and aluminum price risk using principally
swap contracts based on prices for these com-
modities quoted on leading exchanges. ABB’s
hedging policy is designed to safeguard margins
by minimizing price volatility and providing
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
127
—
Patents and trademarks
While we are not materially dependent on any one
of our intellectual properties, as a
technology-driven company, we believe that
intellectual property rights are crucial to protect
the assets of our business. Over the past ten
years, we have continued to substantially add new
applications to our existing first patent filings,
and we intend to continue our aggressive
approach to seeking patent protection. As of
December 31, 2021, we have approximately
25,000 patent applications and registrations, of
which approximately 5,500 are pending applica-
tions. These patents include more than
3,500 utility model and design applications and
registrations, of which approximately 200 are
pending applications. In 2021, we filed more than
2,250 patents, utility model and design applica-
tions for more than 1,250 inventions. Based on
our existing intellectual property strategy, we
believe that we have adequate control over our
core technologies. The “ABB” trademarks and
logo are protected in all of the countries in which
we operate. We proactively assert our intellectual
property rights to safeguard the reputation
associated with the ABB technology and brand.
While these intellectual property rights are funda-
mental to all of our businesses, there is no
dependency of the business on any single patent,
utility model or design application.
—
Management overview
During 2021, we saw a strong recovery from the
pandemic-related disruptions of 2020. It also was
the first full fiscal year where we operated under
our decentralized operating model, the ABB Way.
In 2021, we have seen improved efficiencies from
this new way of operating and we expect the
increased transparency, accountability and speed
to further support future growth and profitability.
Additionally, we made progress in reshaping our
business portfolio, completing the divestment of
the Mechanical Power Transmission business, as
we continue to be fully focused on electrification
and automation. This transaction completes the
first of the three planned Divisional exits previ-
ously announced in 2020.
Active portfolio management is part of our per-
formance culture. On the back of systematic
portfolio reviews we ascertain whether ultimately
ABB is the best owner of the different businesses.
As a result, we have successfully divested the
Mechanical Power Transmission Division during
2021. We continue to make progress on the exit of
the Turbocharging Division, where we are cur-
rently running a dual track process for a spin-off
or divestment, and plan to exit the Power Conver-
sion Division. At the same time, we are
carving-out the E-mobility Division and work
towards an initial public offering to create a
platform for accelerated growth and value cre-
ation. We plan to remain a majority owner of the
new company.
In addition, our active portfolio management
process is driving decisions within the Divisions
to improve or exit areas of underperformance,
supporting improved performance ambitions.
Further, we intend to pursue strategic partner-
ships as well as bolt-on acquisitions driven by the
Divisions. In 2021, we acquired ASTI Mobile Robot-
ics Group, a global leader in the high-growth
autonomous mobile robots market with a broad
portfolio of vehicles and software. As part of our
future strategy we aim to complete five or more
bolt-on acquisitions each year.
Business progress
During 2021, demand for ABB’s offering recovered
from the low level in 2020 when the adverse
business impact of the pandemic was most
significant. Orders and revenues increased in all
Business Areas. Demand increased year-on-year in
all regions with the Americas seeing the highest
growth, while the increase was lower in Asia,
Middle East and Africa as China had already
started to recover in 2020. While short-cycle
product demand recovered relatively quickly from
the sharp downturn seen at the onset of the
pandemic, project activities, particularly in pro-
cess industries, predominantly picked-up during
the second half of 2021. The loosening of various
pandemic-related travel restrictions allowed
for a more significant improvement in
service-related activities.
128
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
While our orders increased 20 percent in 2021,
revenues only grew by 11 percent. Supply chain
constraints, and imbalances in the overall supply
chain limited our ability to convert orders into
actual deliveries resulting in an increase of our
order backlog by 16 percent to $16.6 billion at the
end of the year.
0.82 Swiss francs per share. We also plan to
continue our announced share buyback to return
$7.8 billion of cash proceeds from the Power Grids
divestment to shareholders. At December 31,
2021, under the initial and follow-up share buy-
back programs, we had cumulatively purchased
shares for approximately $5.5 billion.
Group profitability showed strong improvement
during 2021 with segment profit (Operational
EBITA) higher in all Business Areas and continued
progress towards a lean corporate function. The
result was driven by better volumes, continuous
improvements, improved internal efficiency and
the absence of certain larger non-core project
losses incurred in 2020. Active price management
and productivity gains were able to offset in-
creasing raw material costs and general cost
inflation emphasized by the tight supply situation
over the year. While some costs such as discre-
tionary travel or certain marketing costs are still
expected to rebalance from low pandemic levels,
we believe we are on track to achieve our future
business targets.
The profitability improvement as well as lower
cash costs for transformation initiatives have also
allowed us to achieve strong cash generation,
with cash flows from operating activities in
continuing operations improving to $3.3 billion in
2021, an increase of 78 percent compared to 2020.
We continued to make organic growth invest-
ments in a disciplined manner, prioritizing
research and development while reducing admin-
istrative costs. Total non-order related research
and development was $1.2 billion in 2021, or
4.2 percent of revenues. We also completed key
acquisitions and divestments in 2021, strengthen-
ing our portfolio.
Capital allocation
Our capital allocation priorities are unchanged:
• funding organic growth, research and
development, and capital expenditures at
attractive returns,
• paying a rising, sustainable dividend per share
over time,
• investing in value-creating acquisitions, and
• returning additional cash to shareholders.
We expect that our improved cash generation, on
the back of the ABB Way operating model, will
enhance our flexibility to invest in both organic
growth and bolt-on acquisitions, while providing
attractive returns to shareholders.
At the 2022 Annual General Meeting (AGM), the
Board of Directors is proposing a dividend of
Updated financial target framework
During 2021, we raised our growth target to
4 to 7 percent (up from 3 to 5 percent) annual
average revenue growth, through an economic
cycle and in constant currencies. This includes
3 to 5 percent organic growth and 1 to 2 percent
from acquired growth.
For the Operational EBITA margin, we have re-
moved the previous margin ranges and raised our
target to at least 15 percent as from 2023 (from
upper half of 13 to 16 percent range in 2023).
The other targets within our financial framework
remain unchanged:
• Return on Capital Employed (ROCE) of 15 to
20 percent,
• Cash conversion to net income of approximately
100 percent, and
• Basic EPS growth above revenue growth.
Sustainability strategy 2030
With our 2030 sustainability strategy, we are
actively contributing to a more sustainable world,
leading by example in our own operations and
partnering with customers and suppliers to
enable a low-carbon society, preserve resources
and promote social progress. Our sustainability
focus is part of ABB’s commitment to responsible
business practices, which are at the center of our
comprehensive governance framework, based on
integrity and transparency.
Amongst other focus areas in 2021, we unveiled,
at the Capital Markets Day 2021, our circularity
framework covering every stage of the product
lifecycle to preserve resources. It includes four
stages: circular design and sourcing, resource
efficient operations, optimized use phase and
responsible end of life. The goal is to have
80 percent of ABB products, solutions and ser-
vices covered by the circularity framework by
2030, with our progress measured against a set of
KPIs. For further information on sustainability see
the Sustainability section in the Introduction to
this Annual Report.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
129
—
Critical accounting policies and
estimates
General
We prepare our Consolidated Financial State-
ments in accordance with U.S. GAAP and present
these in U.S. dollars unless otherwise stated.
The preparation of our financial statements
requires us to make assumptions and estimates
that affect the reported amounts of assets,
liabilities, revenues and expenses and the related
disclosure of contingent assets and liabilities. We
evaluate our estimates on an ongoing basis (see
“Note 2 - Significant accounting policies” to our
Consolidated Financial Statements for a listing of
our most significant accounting estimates).
Where appropriate, we base our estimates on
historical experience and on various other as-
sumptions that we believe to be reasonable under
the circumstances, the results of which form the
basis for making judgments about the carrying
values of assets and liabilities that are not readily
apparent from other sources. Actual results may
differ from our estimates and assumptions.
We deem an accounting policy to be critical if it
requires an accounting estimate to be made
based on assumptions about matters that are
highly uncertain at the time the estimate is made
and if different estimates that reasonably could
have been used, or if changes in the accounting
estimates that are reasonably likely to occur
periodically, could materially impact our Consoli-
dated Financial Statements. We also deem an
accounting policy to be critical when the applica-
tion of such policy is essential to our ongoing
operations. We believe the following critical
accounting policies require us to make subjective
judgments, often as a result of the need to make
estimates regarding matters that are inherently
uncertain and material to our Consolidated Finan-
cial Statements. These policies should be
considered when reading our Consolidated Finan-
cial Statements.
arrangement with a customer, we determine
which revenue recognition method applies.
We recognize revenues when control of goods or
services is transferred to customers in an amount
that reflects the consideration we expect to be
entitled to in exchange for these goods or ser-
vices. Control is transferred when the customer
has the ability to direct the use and obtain the
benefits from the goods or services.
The percentage-of-completion method of ac-
counting is generally used when recognizing
revenue on an over time basis and involves the use
of assumptions and projections, principally
relating to future material, labor, subcontractor
and project-related overhead costs as well as
estimates of the amount of variable consideration
to which we expect to be entitled. As a conse-
quence, there is a risk that total contract costs or
the amount of variable consideration will, respec-
tively, either exceed or be lower than those we
originally estimated (based on all information
reasonably available to us) and the margin will
decrease or the contract may become unprofit-
able. This risk increases if the duration
of a contract increases because there is a higher
probability that the circumstances upon which we
originally developed our estimates will change,
resulting in increased costs that we may not
recover. Factors that could cause costs to in-
crease include:
• unanticipated technical problems with
equipment supplied or developed by us which
may require us to incur additional costs
to remedy,
• changes in the cost of components, materials
or labor,
• difficulties in obtaining required governmental
permits or approvals,
• project modifications creating
unanticipated costs,
• suppliers’ or subcontractors’ failure to perform,
and
• delays caused by unexpected conditions
Revenue recognition
or events.
A customer contract exists if collectability under
the contract is considered probable, the contract
has commercial substance, contains payment
terms, the rights and commitments of both
parties, and has been approved. By analyzing the
type, terms and conditions of each contract or
Changes in our initial assumptions, which we
review on a regular basis between balance sheet
dates, may result in revisions to estimated costs,
current earnings and anticipated earnings. We
recognize these changes in the period in which
the changes in estimates are determined. By
130
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
recognizing changes in estimates cumulatively,
recorded revenue and costs to date reflect the
current estimates of the stage of completion of
each project. Additionally, losses on such con-
tracts are recognized in the period when they are
identified and are based upon the anticipated
excess of contract costs over the related contract
revenues.
Pension and other
postretirement benefits
As more fully described in “Note 17 - Employee
benefits” to our Consolidated Financial State-
ments, we have a number of defined benefit
pension and other postretirement plans and
recognize an asset for a plan’s overfunded status
or a liability for a plan’s underfunded status in our
Consolidated Balance Sheets. We measure
such a plan’s assets and obligations that deter-
mine its funded status as of the end of the year.
Significant differences between assumptions and
actual experience, or significant changes in
assumptions, may materially affect the pension
obligations. The effects of actual results differing
from assumptions and the changing of assump-
tions are included in net actuarial loss within
“Accumulated other comprehensive loss”.
We recognize actuarial gains and losses gradually
over time. Any cumulative unrecognized actuarial
gain or loss that exceeds 10 percent of the greater
of the present value of the projected benefit
obligation (PBO) and the fair value of plan assets
is recognized in earnings over the expected
average remaining working lives of the employees
participating in the plan, or the expected average
remaining lifetime of the inactive plan partici-
pants if the plan is comprised of all or almost all
inactive participants. Otherwise, the actuarial
gain or loss is not recognized in the Consolidated
Income Statements.
We use actuarial valuations to determine our
pension and postretirement benefit costs and
credits. The amounts calculated depend on a
variety of key assumptions, including discount
rates, mortality rates and expected return on plan
assets. Under U.S. GAAP, we are required to
consider current market conditions in making
these assumptions. In particular, the discount
rates are reviewed annually based on changes in
long-term, highly-rated corporate bond yields.
Decreases in the discount rates result in an in-
crease in the PBO and in pension costs.
Conversely, an increase in the discount rates
results in a decrease in the PBO and in pension
costs. The mortality assumptions are reviewed
annually by management. Decreases in mortality
rates result in an increase in the PBO and in pen-
sion costs. Conversely, an increase in mortality
rates results in a decrease in the PBO and in
pension costs.
Holding all other assumptions constant, a
0.25 percentage-point decrease in the discount
rate would have increased the PBO related to our
defined benefit pension plans by $262 million
while a 0.25 percentage-point increase in the
discount rate would have decreased the PBO
related to our defined benefit pension plans by
$254 million.
The expected return on plan assets is reviewed
regularly and considered for adjustment annually
based upon the target asset allocations and
represents the long-term return expected to be
achieved. Decreases in the expected return on
plan assets result in an increase to pension costs.
Holding all other assumptions constant, an in-
crease or decrease of 0.25 percentage points in
the expected long-term rate of asset return would
have decreased or increased, respectively, the net
periodic benefit cost in 2021 by $21 million.
The funded status, which can increase or decrease
based on the performance of the financial mar-
kets or changes in our assumptions, does not
represent a mandatory short-term cash obliga-
tion. Instead, the funded status of a defined
benefit pension plan is the difference between
the PBO and the fair value of the plan assets. At
December 31, 2021, our defined benefit pension
plans were $27 million overfunded compared to
an underfunding of $656 million at December 31,
2020. Our other postretirement plans were under-
funded by $71 million and $98 million at
December 31, 2021 and 2020, respectively.
Income taxes
In preparing our Consolidated Financial State-
ments, we are required to estimate income taxes
in each of the jurisdictions in which we operate.
Tax expense from continuing operations is recon-
ciled from the weighted-average global tax rate
(rather than from the Swiss domestic statutory
tax rate). As the parent company of the ABB
Group, ABB Ltd, is domiciled in Switzerland,
income which has been generated in jurisdictions
outside of Switzerland (hereafter “foreign juris-
dictions”) and has already been subject to
corporate income tax in those foreign jurisdic-
tions is, to a large extent, tax exempt in
Switzerland. Therefore, generally no or only
limited Swiss income tax has to be provided for
on the repatriated earnings of foreign subsidiar-
ies. There is no requirement in Switzerland
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
131
for a parent company of a group to file a tax
return of the group determining domestic and
foreign pre-tax income and as our consolidated
income from continuing operations is predomi-
nantly earned outside of Switzerland, corporate
income tax in foreign jurisdictions largely deter-
mines our global weighted-average tax rate.
We account for deferred taxes by using the asset
and liability method. Under this method, we
determine deferred tax assets and liabilities
based on temporary differences between the
financial reporting and the tax bases of assets
and liabilities. Deferred tax assets and liabilities
are measured using the enacted tax rates and
laws that are expected to be in effect when the
differences are expected to reverse. We recog-
nize a deferred tax asset when it is more likely
than not that the asset will be realized. We regu-
larly review our deferred tax assets for
recoverability and establish a valuation allowance
based upon historical losses, projected future
taxable income and the expected timing of the
reversals of existing temporary differences. To
the extent we increase or decrease this allowance
in a period, we recognize the change in the allow-
ance within “Income tax expense” in the
Consolidated Income Statements unless the
change relates to discontinued operations, in
which case the change is recorded in “Income
from discontinued operations, net of tax”. Unfore-
seen changes in tax rates and tax laws, as well as
differences in the projected taxable income as
compared to the actual taxable income, may
affect these estimates.
Certain countries levy withholding taxes, dividend
distribution taxes or additional corporate income
taxes (hereafter “withholding taxes”) on dividend
distributions. Such taxes cannot always be fully
reclaimed by the shareholder, although they have
to be declared and withheld by the subsidiary.
Switzerland has concluded double taxation
treaties with many countries in which we operate.
These treaties either eliminate or reduce such
withholding taxes on dividend distributions. It is
our policy to distribute retained earnings of
subsidiaries, insofar as such earnings are not
permanently reinvested or no other reasons exist
that would prevent the subsidiary from distribut-
ing them. No deferred tax liability is set up, if
retained earnings are considered as indefinitely
reinvested, and used for financing current opera-
tions as well as business growth through working
capital and capital expenditure in those countries.
We operate in numerous tax jurisdictions and,
as a result, are regularly subject to audit by tax
authorities, including for transfer pricing. We
provide for tax contingencies whenever it is
deemed more likely than not that a tax asset has
been impaired or a tax liability has been incurred
for events such as tax claims or changes in tax
laws. Contingency provisions are recorded based
on the technical merits of our filing position,
considering the applicable tax laws and OECD
guidelines and are based on our evaluations of the
facts and circumstances as of the end of each
reporting period. Changes in the facts and cir-
cumstances could result in a material change to
the tax accruals. Although we believe that our tax
estimates are reasonable and that appropriate
tax reserves have been made, the final determina-
tion of tax audits and any related litigation could
be different than that which is reflected in our
income tax provisions and accruals.
An estimated loss from a tax contingency must be
accrued as a charge to income if it is more likely
than not that a tax asset has been impaired
or a tax liability has been incurred and the amount
of the loss can be reasonably estimated. We
apply a two-step approach to recognize and
measure uncertainty in income taxes. The first
step is to evaluate the tax position for recognition
by determining if the weight of available evidence
indicates that it is more likely than not that the
position will be sustained on audit, including
resolution of related appeals or litigation pro-
cesses, if any. The second step is to measure the
tax benefit as the largest amount which is more
than 50 percent likely of being realized upon
ultimate settlement. The required amount of
provisions for contingencies of any type may
change in the future due to new developments.
Goodwill and intangible assets
We review goodwill for impairment annually as of
October 1, or more frequently if events or circum-
stances indicate the carrying value may not be
recoverable. We use either a qualitative or quanti-
tative assessment method for each reporting
unit.
As each of our Divisions have full ownership and
accountability for their respective strategies,
performance and resources, we have determined
our reporting units to be at the Division level,
which is one level below our operating segments
of Electrification, Motion, Process Automation
and Robotics & Discrete Automation.
When performing the qualitative assessment, we
first determine, for a reporting unit, factors which
would affect the fair value of the reporting unit
including: (i) macroeconomic conditions related
to the business, (ii) industry and market trends,
and (iii) the overall future financial performance
and future opportunities in the markets in which
the business operates. We then consider how
132
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
these factors would impact the most recent
quantitative analysis of the reporting unit’s fair
value. Key assumptions in determining the fair
value of the reporting unit include the projected
level of business operations, the reporting unit’s
weighted-average cost of capital, the income tax
rate and the terminal growth rate.
During 2021, we added three new Divisions by
splitting two existing ones into multiple stand-
alone Divisions and announced (in July 2021) the
divestment of the Mechanical Power Transmission
Division, resulting in twenty reporting units in
total for the Group at October 1, 2021. For each
change in reporting unit which arose during 2021,
an interim quantitative impairment test was
conducted before and after the change. In both
the “before” and “after” tests, it was concluded
that the fair value of the reporting units exceeded
the carrying value by a significant amount.
In 2020, prior to the adoption of the new “ABB
Way” operating model on July 1, 2020, goodwill
was generally assessed at the level of ABB’s
operating segments (one level above the Division,
with the exception of Process Automation where
the reporting units were the same as the Divi-
sions) while after the change, goodwill
impairment was assessed at the Division level.
Although the new operating model resulted only
in an allocation of goodwill within the operating
segments and did not change the segment level
goodwill, an interim quantitative impairment test
was conducted before and after the July 1 change.
In the “before” test, it was concluded that the fair
value of our reporting units exceeded the carrying
value under the historical reporting unit structure.
For the impairment test performed immediately
after the change in reporting units, the fair value
of each of the eighteen reporting units was
determined using a discounted cash flow fair
value estimate based on objective information at
the measurement date. The significant assump-
tions used to develop the estimates of fair value
for each reporting unit included our best esti-
mates of the expected future results and discount
rates specific to the reporting unit. Determining
the projected future cash flows required signifi-
cant judgments and estimates involving variables
such as future sales volumes, sales prices, pro-
duction and other operating costs, capital
expenditures, net working capital requirements
and other economic factors such as the continued
impact of the COVID-19 pandemic. The fair value
estimates were based on assumptions that we
believed to be reasonable, but which were inher-
ently uncertain and thus, actual results may differ
from those estimates. Sensitivity analyses were
performed around certain of these assumptions
in order to assess the reasonableness of the
assumptions and the resulting estimated
fair values.
The 2020 interim quantitative impairment test
indicated that, with the exception of the Machine
Automation reporting unit within the Robotics &
Discrete Automation operating segment, the
estimated fair values of our reporting units were
substantially in excess of their carrying value. The
contraction of the global economy in 2020, partic-
ularly in end-customer industries and
considerable uncertainty around the continued
pace of macroeconomic recovery generally led
to a reduction in the fair values of the reporting
units, thus also affecting the Machine Automation
reporting unit. At the Division level, this reporting
unit does not benefit from shared cash flows
generated within an entire operating segment. In
addition, the book value of the Machine Automa-
tion Division includes a significant amount of
intangible assets recognized in past acquisitions,
resulting in a proportionately higher book value
than the other reporting unit within the Robotics
& Discrete Automation operating segment. These
factors led to the carrying value of the Machine
Automation reporting unit exceeding its fair
value. During 2020, a goodwill impairment charge
of $290 million was recorded to reduce the carry-
ing value of this reporting unit to its implied fair
value. The remaining goodwill for the Machine
Automation reporting unit was $554 million as of
December 31, 2020. Since the carrying value of
this reporting unit was reduced to its fair value as
of July 1, 2020, any material adverse changes such
as market deterioration or changes in the com-
petitive landscape could result in future
impairment charges.
At October 1, 2021 and 2020, respectively, we
performed qualitative assessments and deter-
mined that it was not more likely than not that the
fair value for each of these reporting units was
below the carrying value. As a result, we con-
cluded that it was not necessary to perform the
quantitative impairment test.
Intangible assets are reviewed for recoverability
upon the occurrence of certain triggering events
(such as a decision to divest a business or pro-
jected losses of an entity) or whenever events or
changes in circumstances indicate that the carry-
ing amount may not be recoverable. We record
impairment charges other than impairments of
goodwill in “Other income (expense), net” in our
Consolidated Income Statements, unless they
relate to a discontinued operation, in which case
the charges are recorded in “Income from discon-
tinued operations, net of tax”.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
133
—
New accounting pronouncements
For a description of accounting changes and
recent accounting pronouncements, including
the expected dates of adoption and estimated
effects, if any, on our Consolidated Financial
Statements, see “Note 2 - Significant accounting
policies” to our Consolidated Financial
Statements.
—
Research and development
Each year, we invest significantly in research and
development. Our research and development
focuses on developing and commercializing the
technologies, products and solutions of our
businesses that are of strategic importance to our
future growth. In 2021, we invested $1,219 million,
or approximately 4.2 percent of our 2021 consoli-
dated revenues, on research and development
activities in our continuing operations. We also
had expenditures of $53 million, or approximately
0.2 percent of our 2021 consolidated revenues, on
order-related development activities. These are
customer- and project-specific development
efforts that we undertake to develop or adapt
equipment and systems to the unique needs of
our customers in connection with specific orders
or projects.
In addition to continuous product development,
and order-related engineering work, we develop
platforms for technology applications in our
businesses in our research and development
laboratories, which operate on a global basis,
such as our ABB Ability™ platform. Through active
management of our investment in research and
development, we seek to maintain a balance
between short-term and long-term research and
development programs and optimize our return
on investment. We protect these results by hold-
ing patents, copyrights and other appropriate
intellectual property protection.
To complement our business-focused product
development, our businesses invest together in
collaborative research activities covering topics
such as artificial intelligence, software, sensors,
control and optimization, mechatronics and
robotics, power electronics, communication
technologies, material and manufacturing, elec-
trodynamics and electrical switching
technologies. This results in advancing the
state-of-the-art technologies used in our prod-
ucts and in common technology platforms that
can be applied in multiple product lines.
Universities are incubators of future technology,
and one task of our research and development
teams is to transform university research into
industry-ready technology platforms. We collabo-
rate with multiple universities and research
institutions to build research networks and foster
new technologies. We believe these collaborations
shorten the amount of time required to turn basic
ideas into viable products, and they additionally
help us to recruit and train new personnel. We
have built numerous university collaborations in
several continents, including long-term, strategic
relationships with a number of leading institu-
tions in the U.S., the United Kingdom, Sweden,
Germany, Switzerland, Poland, India and China.
We are also leveraging our ecosystem to enhance
our innovation efforts and gain speed with strate-
gic partners with complementary competencies.
In addition, we invest and collaborate with
start-ups worldwide via our corporate venture
arm ABB Technology Ventures and our start-up
collaboration arm SynerLeap.
The result of our investment in research and
development is that ABB is widely recognized for
its world-class technology. Technology has been
deeply embedded in our DNA since our founding
and has carried us through our century-long
history. It is one of the main reasons why custom-
ers and partners turn to us for help on their
biggest challenges. Together with them, we
continuously push technology frontiers to make
things possible that were not possible before. We
are committed to stay ahead to help our custom-
ers address the world’s energy challenges,
transform industries to reach new levels of per-
formance and embed sustainability, all to leave
behind a world for future generations that is at
least as healthy and prosperous as the one we
inherited.
134
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Acquisitions and divestments
Acquisitions
During 2021 and 2020, ABB paid $212 million and
$79 million to purchase two and three businesses,
respectively.
The principal acquisition in 2021 was ASTI Mobile
Robotics Group SL (ASTI). ASTI, headquartered in
Burgos, Spain, is a global autonomous mobile
robot (AMR) manufacturer and employs approxi-
mately 300 people. See “Note 4 - Acquisitions,
divestments and equity-accounted companies” to
our Consolidated Financial Statements.
There were no significant acquisitions in 2020 or
2019.
Divestments
Divestment of Mechanical Power Transmission
Division
In November 2021, we completed the sale of our
Mechanical Power Transmission Division (Dodge)
to RBC Bearings Inc. for cash proceeds of
$2,862 million, net of transactions costs and cash
disposed and recognizing a net gain on sale of
$2,195 million. Prior to its disposal, the Dodge
business was part of our Motion operating
segment. See “Note 4 - Acquisitions, divestments
and equity-accounted companies” to our Consoli-
dated Financial Statements.
Divestment of Power Grids
On July 1, 2020, ABB completed the divestment of
80.1 percent of its former Power Grids business to
—
Exchange rates
We report our financial results in U.S. dollars. Due
to our global operations, a significant amount of
our revenues, expenses, assets and liabilities are
denominated in other currencies. As a conse-
quence, movements in exchange rates between
currencies may affect: (i) our profitability, (ii) the
comparability of our results between periods and
(iii) the reported carrying value of our assets and
liabilities.
Hitachi. As this divestment represented a strate-
gic shift that had a major effect on our operations
and financial results, the results of operations for
this business are presented as discontinued
operations and the assets and liabilities are
reflected as held for sale for all periods presented.
For more information on the divestment of the
Power Grids business see “Note 3 - Discontinued
operations” to our Consolidated Financial
Statements.
Divestment of solar inverters
In February 2020, ABB completed the sale of its
solar inverters business to FIMER S.p.A. (Italy) for
no consideration. Under the agreement, which
was reached in July 2019, ABB was obligated to
transfer $143 million of cash to the buyer on the
closing date. In addition, further payments total-
ing EUR 132 million ($145 million at the divestment
date) are required to be transferred to the buyer
from 2020 through 2025. In connection with this
divestment, in 2019, we recorded a loss of
$421 million, representing the excess of the
carrying value over the estimated fair value of this
business. In 2020, a further $33 million was
recorded for additional changes in fair value
occurring prior to the date of sale. Both amounts,
in the respective years are reported in “Other
income (expense), net”. See “Note 4 - Acquisitions,
divestments and equity-accounted companies” to
our Consolidated Financial Statements.
Other
In 2019, we recorded net gains (including transac-
tion costs) of $55 million, primarily due to the
divestment of two businesses in China.
We translate non-USD denominated results of
operations, assets and liabilities to USD in our
Consolidated Financial Statements. Balance sheet
items are translated to USD using year-end cur-
rency exchange rates. Income statement and cash
flow items are translated to USD using the rele-
vant monthly average currency exchange rate.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
135
In 2021, approximately 74 percent of our cost of
sales and selling, general and administrative
expenses were reported in currencies other than
the USD. The following percentages of consoli-
dated cost of sales and selling, general and
administrative expenses were reported in the
following currencies:
• Euro, approximately 20 percent, and
• Chinese renminbi, approximately 14 percent.
We also incur expenses other than cost of sales
and selling, general and administrative expenses
in various currencies.
The results of operations and financial position of
our subsidiaries outside of the U.S. are generally
accounted for in the currencies of the countries in
which those subsidiaries are located. We refer to
these currencies as “local currencies”. Local
currency financial information is then translated
into USD at applicable exchange rates for inclu-
sion in our Consolidated Financial Statements.
The discussion of our results of operations below
provides certain information with respect to
orders, revenues, income from operations and
other measures as reported in USD (as well as in
local currencies). We measure period-to-period
variations in local currency results by using a
constant foreign exchange rate for all periods
under comparison. Differences in our results of
operations in local currencies as compared to our
results of operations in USD are caused exclu-
sively by changes in currency exchange rates.
While we consider our results of operations as
measured in local currencies to be a significant
indicator of business performance, local currency
information should not be relied upon to the
exclusion of U.S. GAAP financial measures. In-
stead, local currencies reflect an additional
measure of comparability and provide a means of
viewing aspects of our operations that, when
viewed together with the U.S. GAAP results,
provide a more complete understanding of fac-
tors and trends affecting the business. As local
currency information is not standardized, it may
not be possible to compare our local currency
information to other companies’ financial mea-
sures that have the same or a similar title. We
encourage investors to review our financial state-
ments and publicly filed reports in their entirety
and not to rely on any single financial measure.
Increases and decreases in the value of the USD
against other currencies will affect the reported
results of operations in our Consolidated Income
Statements and the value of certain of our assets
and liabilities in our Consolidated Balance Sheets,
even if our results of operations or the value of
those assets and liabilities have not changed in
their original currency. As foreign exchange rates
impact our reported results of operations and the
reported value of our assets and liabilities,
changes in foreign exchange rates could signifi-
cantly affect the comparability of our reported
results of operations between periods and result
in significant changes to the reported value of our
assets, liabilities and stockholders’ equity.
While we operate globally and report our financial
results in USD, exchange rate movements
between the USD and the EUR, the CNY and the
CHF are of particular importance to us due to
(i) the location of our significant operations and
(ii) our corporate headquarters being in
Switzerland.
The exchange rates between the USD and the
EUR, the USD and the CHF and the USD and the
CNY at December 31, 2021, 2020 and 2019, were as
follows:
Exchange rates into $
2021
2020
2019
EUR 1.00
CHF 1.00
CNY 1.00
1.13
1.10
0.16
1.23
1.14
0.15
1.12
1.03
0.14
The average exchange rates between the USD and
the EUR, the USD and the CHF and the USD and
the CNY for the years ended December 31, 2021,
2020 and 2019, were as follows:
Exchange rates into $
2021
2020
2019
EUR 1.00
CHF 1.00
CNY 1.00
1.18
1.09
0.16
1.14
1.07
0.14
1.12
1.01
0.14
When we incur expenses that are not denomi-
nated in the same currency as the related
revenues, foreign exchange rate fluctuations
could affect our profitability. To mitigate the
impact of exchange rate movements on our
profitability, it is our policy to enter into forward
foreign exchange contracts to manage the foreign
exchange transaction risk of our operations.
In 2021, approximately 77 percent of our consoli-
dated revenues were reported in currencies other
than the USD. The following percentages of
consolidated revenues were reported in the
following currencies:
• Euro, approximately 23 percent, and
• Chinese renminbi, approximately 17 percent.
136
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Orders
Our policy is to book and report an order
when a binding contractual agreement has been
concluded with a customer covering, at a mini-
mum, the price and scope of products or services
to be supplied, the delivery schedule and the
payment terms. The reported value of an order
corresponds to the undiscounted value of reve-
nues that we expect to recognize following
delivery of the goods or services subject to the
order, less any trade discounts and excluding any
value added or sales tax. The value of orders
received during a given period of time represents
the sum of the value of all orders received during
the period, adjusted to reflect the aggregate
value of any changes to the value of orders re-
ceived during the period and orders existing at
the beginning of the period. These adjustments,
which may in the aggregate increase or decrease
the orders reported during the period, may
include changes in the estimated order price up to
the date of contractual performance, changes in
the scope of products or services ordered and
cancellations of orders. The undiscounted value of
future revenues we expect to generate from our
orders at any point in time is represented by our
order backlog.
The level of orders fluctuates from year to year.
Portions of our business involve orders for
long-term projects that can take months or years
to complete and many larger orders result in
revenues in periods after the order is booked.
Consequently, the level of orders generally cannot
be used to accurately predict future revenues or
operating performance. Orders that have been
placed can often be cancelled, delayed or modi-
fied by the customer. These actions can reduce or
delay any future revenues from the order or may
result in the elimination of the order.
—
Transactions with affiliates and
associates
In the normal course of our business, we purchase
products from, sell products to and engage in
other transactions with entities in which we hold
an equity interest. The amounts involved in these
transactions are not material to ABB Ltd. Our
most significant equity method investment is in
Hitachi Energy Ltd (see “Note 4 - Acquisitions,
divestments and equity-accounted companies”
for details). Also, in the normal course of our
business, we engage in transactions with busi-
nesses that we have divested. We believe that the
terms of the transactions we conduct with these
companies are negotiated on an arm’s
length basis.
—
Performance measures
We evaluate the performance of our operating
segments based on orders received, revenues and
Operational EBITA.
Operational EBITA represents income from opera-
tions excluding:
• amortization expense on intangibles arising
upon acquisitions
(acquisition-related amortization),
• restructuring, related and
implementation costs,
• changes in the amount recorded for obligations
related to divested businesses occurring after
the divestment date (changes in obligations
related to divested businesses),
• changes in estimates relating to opening
balance sheets of acquired businesses (changes
in pre-acquisition estimates),
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
137
• gains and losses from sale of businesses
(including fair value adjustment on assets and
liabilities held for sale),
• acquisition- and divestment-related expenses
and integration costs,
• other income/expense relating to the Power
Grids joint venture,
• certain other non-operational items, as well as
• foreign exchange/commodity timing
differences in income from operations
consisting of: (a) unrealized gains and losses on
derivatives (foreign exchange, commodities,
embedded derivatives), (b) realized gains and
losses on derivatives where the underlying
hedged transaction has not yet been realized,
and (c) unrealized foreign exchange movements
on receivables/payables (and related assets/
liabilities).
Certain other non-operational items generally
includes: certain regulatory, compliance and legal
costs, certain asset write downs/impairments
(including impairment of goodwill) and certain
other fair value changes, as well as other items
which are determined by management
on a case-by-case basis.
See “Note 23 - Operating segment and geographic
data” to our Consolidated Financial Statements
for a reconciliation of the total Operational EBITA
to income from continuing operations
before taxes.
138
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Analysis of results of operations
The discussion in the following sections below
provides a comparative analysis between 2021
and 2020. See the sections under “Operating and
financial review and prospects“ in our 2020
Annual Report for a comparative discussion and
analysis between 2020 and 2019.
Our consolidated results from operations were as
follows:
A more detailed discussion of the orders, reve-
nues, income from operations and Operational
EBITA for our Business Areas follows in the sec-
tions of “Business analysis” below for
Electrification, Motion, Process Automation,
Robotics & Discrete Automation and Corporate
and Other. Orders and revenues of our businesses
include intersegment transactions which are
eliminated in the “Corporate and Other” line in the
tables below.
Income statement data:
($ in millions, except
per share data in $)
2021
2020
2019
Orders
($ in millions)
2021
2020
2019
2021
2020
Electrification
14,381 11,884 13,050
Motion
7,616
6,574
6,782
21%
16%
(9)%
(3)%
% Change
Process
Automation
Robotics &
Discrete
Automation
Total Business
Areas
6,779
6,144
6,432
10%
(4)%
3,844
2,868
3,260
34% (12)%
32,620 27,470 29,524
19%
(7)%
Corporate and Other
Non-core and
divested
businesses
Intersegment
eliminations
and other
(10)
(31)
(91)
n.a.
n.a.
(742)
(927)
(845)
n.a.
n.a.
Total
31,868 26,512 28,588
20%
(7)%
In 2021, total orders increased 20 percent com-
pared to 2020 (17 percent in local currencies).
Total orders reflect the growth across all Business
Areas as the pandemic-related slowdown affected
most of our businesses across all regions in the
previous year. The growth rate was highest in the
Robotics & Discrete Automation Business Area,
while the amount of orders increased the most in
Electrification, our largest Business Area. Order
growth rates were also strong in the Motion and
Process Automation Business Areas. The increase
in orders was most significant in the second
quarter of the year with growth rates declining
over the remainder of the year. The significant
growth was visible across all regions. For addi-
tional information about individual Business Area
order performance, refer to the relevant sections
of “Business analysis” below.
Revenues
Cost of sales
Gross profit
28,945
26,134 27,978
(19,478) (18,256) (19,072)
9,467
7,878
8,906
Selling, general and
administrative expenses
Non-order related research and
development expenses
(5,162)
(4,895)
(5,447)
(1,219)
(1,127)
(1,198)
Impairment of goodwill
—
(311)
—
Other income (expense), net
2,632
48
(323)
Income from operations
5,718
1,593
1,938
Interest and dividend income
51
51
67
Interest and other finance
expense
Losses from extinguishment of
debt
Non-operational pension (cost)
credit
(148)
(240)
(215)
—
(162)
166
(401)
—
72
Income tax expense
(1,057)
(496)
(772)
Income from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income
Net income attributable to
noncontrolling interests
4,730
345
1,090
(80)
4,860
438
4,650
5,205
1,528
(104)
(59)
(89)
Net income attributable to ABB
4,546
5,146
1,439
Amounts attributable
to ABB shareholders:
Income from continuing
operations, net of tax
4,625
294
1,043
Income (loss) from discontinued
operations, net of tax
Net income
(79)
4,852
396
4,546
5,146
1,439
Basic earnings per share attributable
to ABB shareholders:
Income from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income
2.31
0.14
0.49
(0.04)
2.27
2.30
2.44
0.19
0.67
Diluted earnings per share attributable
to ABB shareholders:
Income from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income
2.29
0.14
0.49
(0.04)
2.25
2.29
2.43
0.19
0.67
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
139
Areas with a moderate growth in the Process
Automation Business Area. The order backlog in
the Motion Business Area was driven by both
short and long-cycle business order growth in
most Divisions. Order backlog increased across all
Divisions in the Electrification Business Area
with a very strong order intake, but also reflecting
execution challenges. Growth was strong in the
E-mobility and Power Conversion Divisions but
grew only moderately in the Distribution Solu-
tions Division. The growth in the Process
Automation Business Area was driven by a strong
order increase in most Divisions except the
Marine & Ports Division, which decreased, mainly
on the execution of large orders received in 2020.
The increase in the order backlog in the Robotics
& Discrete Automation Business Area was driven
by strong growth in the Machine Automation
Division, while the Robotics Division decreased
slightly due to lower demand from the automotive
systems end market.
Revenues
($ in millions)
2021
2020
2019
2021
2020
Electrification
13,187
11,924 12,728
Motion
6,925
6,409
6,533
11%
8%
(6)%
(2)%
% Change
Process
Automation
Robotics &
Discrete
Automation
Total Business
Areas
6,259
5,792
6,273
8%
(8)%
3,297
2,907
3,314
13% (12)%
29,668
27,032 28,848
10%
(6)%
Corporate and Other
11
(6)
37
n.a.
n.a.
Non-core and
divested
businesses
Intersegment
eliminations
and other
(734)
(892)
(907)
Total
28,945
26,134 27,978
n.a.
11%
n.a.
(7)%
In 2021, revenues increased 11 percent (8 percent
in local currencies). Revenues increased across all
Business Areas, recovering from the
pandemic-related impacts of the previous year.
The Electrification and Robotics & Discrete Auto-
mation Business Areas reported strong growth,
largely driven by the short-cycle businesses. For
additional analysis of revenues for each of the
Business Areas, refer to the relevant sections of
"Business analysis" below.
We determine the geographic distribution of our
orders based on the location of the ultimate
destination of the products’ end use, if known, or
the location of the customer. The geographic
distribution of our consolidated orders was as
follows:
($ in millions)
2021
2020
2019
2021
Europe
11,857
9,618 10,509
23%
2020
(8)%
The Americas
9,940
7,956
9,057
25% (12)%
% Change
7,453
5,971
6,804
25% (12)%
10,071
8,938
9,022
13%
(1)%
of which:
United States
Asia, Middle
East and Africa
of which:
China
5,036
4,121
4,118
Total
31,868 26,512 28,588
22%
20%
0%
(7)%
In 2021, total orders increased in all regions as all
regions made strong recoveries from the
pandemic-related downturn in the previous year.
In the Americas, orders increased 25 percent (24
percent in local currencies) and increased across
all Business Areas. Orders grew in the U.S.,
Canada, Brazil and Mexico. In Europe, orders
increased 23 percent (19 percent in local curren-
cies) with all Business Areas reporting order
growth. Orders increased in Germany, France,
Switzerland, Italy and Finland while they declined
in Poland. In Asia, Middle East and Africa, orders
increased 13 percent (8 percent in local curren-
cies) and were higher across all Business Areas.
Total orders increased in China, India and Austra-
lia while they decreased in South Korea, Singapore
and Saudi Arabia.
Order backlog
December 31,
% Change
($ in millions)
2021
2020
2019
2021
2020
Electrification
5,458
4,358
4,488
Motion
3,749
3,320
2,967
25%
13%
(3)%
12%
Process
Automation
Robotics &
Discrete
Automation
Total Business
Areas
6,079
5,805
5,077
5%
14%
1,919
1,403
1,356
37%
17,205 14,886 13,888
16%
3%
7%
Corporate and Other
Non-core and
divested
businesses
Intersegment
eliminations
114
139
192
(18)% (28)%
(712)
(722)
(756)
Total
16,607
14,303 13,324
n.a.
16%
n.a.
7%
At December 31, 2021, consolidated order backlog
was 16 percent higher (21 percent in local curren-
cies) compared to December 31, 2020. Order
backlog increased significantly in most Business
140
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
We determine the geographic distribution of our
revenues based on the location of the ultimate
destination of the products’ end use, if known, or
the location of the customer. The geographic
distribution of our consolidated revenues was as
follows:
($ in millions)
2021
2020
2019
2021
Europe
10,529
9,764 10,097
8%
2020
(3)%
The Americas
8,686
7,949
8,955
9% (11)%
% Change
6,397
6,027
6,753
6%
(11)%
9,730
8,421
8,926
16%
(6)%
of which:
United States
Asia, Middle
East and Africa
of which:
China
4,932
4,098
4,047
Total
28,945
26,134 27,978
20%
11%
1%
(7)%
In 2021, revenues increased across all regions,
reflecting the recovery from the pandemic-related
challenges of the previous year. In the Americas
revenues increased 9 percent (9 percent in local
currencies) and were higher across all Business
Areas. Revenues increased in the U.S., Canada,
Brazil, Mexico, Argentina and Chile while they
decreased slightly in Peru and Panama. In Europe
revenues increased 8 percent (5 percent in local
currencies) and increased across all Business
Areas except the Process Automation Business
Area. Sales were lower in Finland and France while
revenues grew in Germany, the United Kingdom,
Italy, Sweden, Turkey, Austria, Netherlands and
Switzerland. In Asia, Middle East and Africa reve-
nues increased 16 percent (11 percent in local
currencies) and increased across all Business
Areas. Revenues increased in China, India, Austra-
lia and South Korea while they decreased in Japan.
Cost of sales
Cost of sales consists primarily of labor, raw
materials and component costs but also includes
indirect production costs, expenses for warran-
ties, contract and project charges, as well as
order-related development expenses incurred in
connection with projects for which corresponding
revenues have been recognized.
In 2021, cost of sales increased 7 percent (4 per-
cent in local currencies) to $19,478 million. Cost of
sales as a percentage of revenues decreased to
67.3 percent from 69.9 percent in 2020, an
increase in the gross margin of 2.6 percent,
primarily driven by lower losses in non-core
businesses, and because 2020 included signifi-
cant warranty charges related to a divested
business as well as losses on specific projects.
The increase in gross margin also reflects higher
revenue volumes, a positive portfolio mix as well
as price increases and certain cost savings ac-
tions taken to mitigate higher commodity prices
and freight costs. In 2021, gross margin percent-
ages were higher in the Electrification, Robotics &
Discrete Automation and Process Automation
Business Areas. The gross margin percentage in
the Motion Business Area was lower in 2021
compared to 2020 due to the impact of higher
commodity prices. For ABB, the gross margin did
benefit partially from the results of saving initia-
tives in the areas of supply chain and operational
excellence.
Selling, general and
administrative expenses
The components of selling, general and adminis-
trative expenses were as follows:
($ in millions)
Selling expenses
General and administrative
expenses
Total
2021
2020
2019
3,281
3,087
3,383
1,881
1,808
2,064
5,162
4,895
5,447
In 2021, general and administrative expenses
increased 4 percent (1 percent in local currencies)
compared to 2020. As a percentage of revenues,
general and administrative expenses decreased
to 6.5 percent from 6.9 percent in 2020. General
and administrative expenses in 2021 benefited
partially from a $40 million reduction of stranded
corporate costs compared to 2020 but continue
to include the ongoing costs required to deliver
services to Hitachi Energy Ltd under transition
service agreements, for which we are compen-
sated and recorded $173 million in Other income
(expense), net during 2021 compared to $91 mil-
lion in the previous year. Stranded costs were
overhead and other management costs which
could previously be allocated to the Power Grids
business.
In 2021, selling expenses increased 6 percent
(3 percent in local currencies) compared to 2020
across all Business Areas as pandemic-related
restrictions were gradually relaxed and we in-
creased sales activities to keep pace with the
strong recovery in demand. Selling expenses
as a percentage of orders received decreased
from 11.6 percent in 2020 to 10.3 percent in 2021
mainly due to strong order growth.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
141
Non-order related research and
development expenses
In 2021, non-order related research and develop-
ment expenses increased 8 percent (4 percent in
local currencies) compared to 2020. Non-order
related research and development expenses
increased mainly due to higher investment activi-
ties related to selective growth areas in certain
operating Divisions such as Distribution Solu-
tions, Robotics, Process Industries, Smart
Buildings and E-mobility.
In 2021, the higher non-order related research and
development expenses were consistent with the
higher revenues and as a percentage of revenues
these expenditures decreased in 2021 to 4.2 per-
cent from 4.3 percent compared to the
previous year.
In 2021, Other income (expense), net, was an
income of $2,632 million compared to $48 million
in 2020. In 2021, we recorded gains of $2,193 mil-
lion in Other income (expense), net for net gains
from sales of businesses. This is primarily due to
the divestment of the Dodge business. In 2021, we
also recorded a full year of both brand income and
income for provision of transition services relat-
ing to Hitachi Energy, compared to only six
months of income in 2020. In 2021, we recorded
higher increases in the fair value of various equity
investments in our ABB Technology Ventures
portfolio, the most significant of which related to
CMR Surgical Ltd. The amount in 2021 also reflects
lower restructuring and restructuring-related
expenses and lower asset impairments. Partially
offsetting this were higher losses from
equity-accounted companies mainly reflecting the
loss recorded from the Hitachi Energy joint
venture.
Impairment of goodwill
Income from operations
In 2020, as a result of the new composition of the
reporting units and reallocation of goodwill, we
recorded an impairment charge of $311 million,
the majority of which related to our Machine
Automation Division within the Robotics & Dis-
crete Automation Business Area. In 2021, no
impairment was recorded as a result of the annual
review. See “Note 11 - Goodwill and intangible
assets” to our Consolidated Financial Statements.
Other income (expense), net
($ in millions)
2021
2020
2019
Net gain (loss) from sale of
businesses
Income from provision of
services under transition
services agreements
Gain (loss) from change in fair
value of investments in equity
securities
Brand income from Hitachi
Energy
Net gain from sale of property,
plant and equipment
Favorable resolution of an
uncertain purchase price
adjustment
Fair value adjustment on assets
and liabilities held for sale
Asset impairments
Restructuring and restructuring-
related expenses(1)
Income (loss) from equity-
accounted companies
Other income (expense)
Total
(1) Excluding asset impairments
2,193
(2)
55
173
91
—
105
89
38
6
—
—
71
60
37
(5)
—
51
36
92
(33)
(35)
(421)
(56)
(48)
(87)
(69)
(100)
176
2,632
(66)
(24)
8
22
48
(323)
% Change
($ in millions)
2021
2020 2019
2021
2020
Electrification
1,841
1,335 1,049
38%
Motion
3,276
989 1,009 231%
27%
(2)%
Process Automation
713
344
700 107% (51)%
Robotics & Discrete
Automation
Total Business
Areas
Corporate
and Other
Intersegment
elimination
269
(163)
298
n.a.
n.a.
6,099
2,505 3,056 143% (18)%
(385)
(927) (1,113)
n.a.
n.a.
4
15
(5)
n.a.
n.a.
Total
5,718
1,593 1,938 259% (18)%
In 2021 and 2020, changes in income from opera-
tions were a result of the factors discussed above
and in “Business analysis” below.
Financial income and expenses
Financial income and expenses include “Interest
and dividend income”, “Interest and other finance
expense” and “Losses from extinguishment
of debt”.
“Interest and other finance expense” includes
interest expense on our debt, the amortization of
upfront transaction costs associated with
long-term debt and committed credit facilities,
commitment fees on credit facilities, foreign
exchange gains and losses on financial items and
gains and losses on marketable securities. In
addition, interest accrued relating to uncertain
tax positions is included within interest expense.
“Interest and other finance expense” excludes
142
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
interest expense which has been allocated to
discontinued operations.
($ in millions)
2021
2020
2019
Interest and dividend income
51
51
67
Interest and other finance
expense
Losses from extinguishment
of debt
(148)
(240)
(215)
—
(162)
—
In 2020, we redeemed the full amount outstand-
ing for two bonds according to the terms of the
instruments and executed public tenders for two
additional bonds resulting in a partial reduction
of the principal outstanding. These transactions
resulted in losses on extinguishment of debt in
2020 totaling $162 million (see “Note 12 - Debt” to
our Consolidated Financial Statements). The
reduction of outstanding debt from these public
tenders as well as maturities of bonds in both
2021 and 2020 reduced “Interest and other fi-
nance expense” by approximately $70 million
compared to 2020. This was partially offset by
higher interest expense for income tax related
contingencies and the elimination of the alloca-
tion of interest expense to discontinued
operations subsequent to the divestment of the
Power Grids business.
Non-operational pension (cost)
credit
A non-operational pension credit of $166 million
was recorded in 2021 compared to a $401 million
cost in 2020. Non-operational pension credits
primarily result from higher expected returns on
plan assets compared to interest costs on benefit
obligations. The net cost in 2020 was mainly due
to charges of $520 million for settlements of
certain international pension plans (see “Note 17
- Employee benefits” to our Consolidated Finan-
cial Statements).
Income tax expense
($ in millions)
2021
2020
2019
Income from continuing
operations before taxes
5,787
841
1,862
Income tax expense
(1,057)
(496)
(772)
Effective tax rate for the year
18.3% 59.0% 41.5%
In 2021, the effective tax rate decreased from 59.0
percent in 2020 to 18.3 percent primarily due to
specific items which increased the effective tax
rate in 2020. In 2020, the income tax rate was
higher by 9 percent due to the impairment of
non-deductible goodwill, 10 percent due to
non-deductible charges relating to the settlement
of certain defined benefit pension plans and
5 percent due to losses from extinguishment of
debt which were incurred in jurisdictions
with a full valuation allowance. In 2021, the tax
impacts related to the sale of the Dodge business
reduced the effective tax rate by approximately
5 percent. We also realized certain benefits from
internal reorganizations in anticipation of this
divestment which reduced the effective tax rate
by a further 4 percent.
See “Note 16 - Income taxes” to our Consolidated
Financial Statements for additional information.
Income from continuing
operations, net of tax
As a result of the factors discussed above,
compared to 2020, Income from continuing
operations, net of tax, increased by $4,385 million
to $4,730 million in 2021.
Income from discontinued
operations, net of tax
Income (loss) from discontinued operations, net
of tax, in 2021, 2020 and 2019 was as follows:
($ millions)
Total revenues
Total cost of sales
Gross profit
Expenses
Change to net gain recognized
on sale of the Power Grids
business
Income (loss) from operations
Net interest income (expense)
and other finance expense
Non-operational pension (cost)
credit
Income (loss) from discontinued
operations before taxes
Income tax
2021
2020
2019
— 4,008
9,037
— (3,058)
(6,983)
—
950
2,054
(18)
(808)
(1,394)
(65)
(83)
5,141
5,282
—
660
2
—
(5)
(61)
(94)
5
(81)
5,182
605
1
(322)
(167)
Income (loss) from discontinued
operations, net of tax
(80)
4,860
438
On July 1, 2020, we completed the divestment of
80.1 percent of our former Power Grids business
to Hitachi. As a result of the sale, substantially all
Power Grids related assets and liabilities have
been sold. As this divestment represented a
strategic shift that would have a major effect on
our operations and financial results, the results of
operations for this business have been presented
as discontinued operations for all periods pre-
sented. In addition, we also have retained
obligations (primarily for environmental and
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
143
taxes) related to other businesses disposed or
otherwise exited that qualified as discontinued
operations. Changes to these retained obliga-
tions are also included in Income (loss) from
discontinued operations, net of tax.
In 2020, as a result of the sale of the Power Grids
business, we recognized a net gain of $5,141 mil-
lion, net of transaction costs, for the sale of the
entire Power Grids business which is included in
Income from discontinued operations, net of tax.
Certain amounts included in the net gain are
estimated or otherwise subject to change in value
and, as a result, we have recorded additional
adjustments in 2021, primarily due to the impacts
of the final purchase price settlement agreed with
Hitachi and net foreign currency losses on certain
obligations. We may record additional adjust-
ments in future periods to the gain which are not
expected to have a material impact on the Consol-
idated Financial Statements.
The amounts shown in the table above for the
full-year 2020 primarily represent the operations
of the Power Grids business for six months,
compared to a full year of operations for 2019.
Income from discontinued operations for 2020
included income from operations, before tax, of
$5,182 million. In 2020, we recorded $322 million
as income tax expense within discontinued
operations, which included $262 million in Income
tax within discontinued operations in connection
with the reorganization of the legal entity struc-
ture of the Power Grids business required to
facilitate its sale.
For additional information on the divestment and
discontinued operations, see “Note 3 - Discontin-
ued operations” to our Consolidated Financial
Statements.
Net income attributable to ABB
As a result of the factors discussed above,
compared to 2020, Net income attributable to
ABB decreased by $600 million to $4,546 million
in 2021.
Earnings per share attributable
to ABB shareholders
(in $)
2021
2020
2019
Basic earnings per share
attributable to ABB shareholders:
Income from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income
Diluted earnings per share
attributable to ABB shareholders:
Income from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income
2.31
0.14
0.49
(0.04)
2.27
2.30
2.44
0.19
0.67
2.29
0.14
0.49
(0.04)
2.25
2.29
2.43
0.19
0.67
Basic earnings per share is calculated by dividing
income by the weighted-average number of
shares outstanding during the year. Diluted
earnings per share is calculated by dividing
income by the weighted-average number of
shares outstanding during the year, assuming
that all potentially dilutive securities were exer-
cised, if dilutive. Potentially dilutive securities
comprise: outstanding written call options and
outstanding options and shares granted subject
to certain conditions under our share-based
payment arrangements. See “Note 20 - Earnings
per share” to our Consolidated Financial
Statements.
144
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Business analysis
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
The financial results of our Electrification
Business Area were as follows:
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
Orders and Revenues
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
3,600
3,600
15,000
15,000
600
3,200
3,200
2,800
2,800
14,000
14,000
13,000
13,000
12,000
12,000
450
300
150
0
600
450
300
150
0
-150
20%
20%
15%
10%
5%
0%
-5%
2,400
2,400
11,000
11,000
-150
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2020
2021
2021
2019
2019
2020
2020
2021
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
($ in millions)
2021
2020 2019
2021
2020
% Change
Motion Business Area
Motion Business Area
Orders
14,381 11,884 13,050
21%
(9)%
Order backlog at
December 31,
Orders and Revenues
Orders and Revenues
Revenues
Income from
operations
$ in millions
Operational EBITA
2,500
Orders
2,000
5,458
4,358 4,488
13,187 11,924 12,728
1,841
1,335 1,049
2,121
12M $ in millions
1,681 1,688
8,000
7,500
25%
11%
(3)%
(6)%
27%
38%
12M $ in millions
0%
26%
8,000
7,500
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
500
7,000
6,500
6,500
Approximately two-thirds of the Business Area’s
7,000
1,500
orders are for products with short delivery times;
orders are usually recorded and delivered
1,000
within a three-month period and thus are gener-
ally considered as short-cycle. The remainder of
orders is comprised of smaller projects that
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
require longer lead times, as well as larger solu-
tions requiring engineering and installation.
Approximately half of the Business Area’s orders
are received via third-party distributors; as a
consequence, end-customer market data is based
partially on management estimates.
Orders 12M rolling
Revenues
6,000
6,000
Orders
2020
2021
2019
2021
2019
Orders
Revenues
Orders 12M rolling
Process Automation Business Area
Process Automation Business Area
Orders and Revenues
Orders and Revenues
In 2021, orders increased 21 percent (18 percent in
local currencies) as demand improved across
most end-user segments and markets in both
short-cycle and long-cycle businesses. Although
$ in millions
12M $ in millions
global economic output recovered during the year
7,500
2,000
and is now above the pre-pandemic level of 2019,
growth was geographically uneven, largely due to
7,000
diverse ongoing pandemic impacts, especially in
1,500
emerging economies. Demand in the buildings
12M $ in millions
7,000
7,500
Motion Business Area
Motion Business Area
Income from operation & Operational EBITA
segment, the Electrification Business Area’s
largest end-user segment, was robust with strong
growth in the residential market and recovery of
the non-residential building sector with increas-
ing investments in commercial and healthcare.
Income from operation & Operational EBITA
Substantial growth continues in the e-mobility
segment along with strong growth in food and
beverage, utilities, renewables and data centers.
$ in millions
Additionally, demand in the oil and gas segment
145%
2,500
increased following higher oil prices.
2,400
$ in millions
140%
2,400
2,500
400
The geographic distribution of orders for our
400
Electrification Business Area was as follows:
300
300
20%
15%
($ in millions)
200
Europe
100
The Americas
200
100
2021
2020
2019
10%
5,022
4,149
5,199
4,033
4,281
5%
4,653
0
of which: United States
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
3,891
3,065
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
Asia, Middle East and Africa
2019
2020
4,160
3,702
2021
0%
3,501
2021
4,116
2020
Operational EBITA
of which: China
Operational EBITA
Income from operations
2,141
1,819
1,885
Total
Income from operations
Income from operations %
Income from operations %
14,381 11,884 13,050
Process Automation Business Area
Income from operation & Operational EBITA
In 2021, orders increased in all regions. Orders in
the Americas increased 29 percent (28 percent in
Process Automation Business Area
local currencies), with strong growth in Mexico,
Canada and in the U.S. Orders in Europe increased
Income from operation & Operational EBITA
21 percent (18 percent in local currencies) with
widespread demand pickup across the region
including key markets such as Germany and Italy.
Demand in Asia, Middle East and Africa increased
$ in millions
12 percent (8 percent in local currencies) with
300
China and India contributing strongly despite
continuing pandemic-related challenges.
$ in millions
20%
300
15%
200
200
1,000
500
1,000
800
600
400
6,500
6,000
5,500
2021
6,500
6,000
100
5,500
0
4,000
3,500
3,000
2,500
3,500
3,000
2,500
2,000
120
80
40
0
-40
-240
100
0
80
40
0
-40
-240
10%
5%
0
15%
0%
-15%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
2019
2021
2021
2019
Operational EBITA
2020
2021
2019
Orders
Revenues
Orders 12M rolling
Orders
2020
Revenues
Orders 12M rolling
Operational EBITA
Income from operations
Income from operations %
Income from operations
Income from operations %
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
12M $ in millions
$ in millions
$ in millions
1,200
12M $ in millions
4,000
$ in millions
120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
2,000
2021
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
2020
-30%
2021
2019
Orders
2020
Revenues
Orders 12M rolling
2021
2019
Orders
Revenues
Orders 12M rolling
2019
Operational EBITA
2020
Income from operations
2021
Operational EBITA
Income from operations %
Income from operations
Income from operations %
$ in millions
2,500
2,000
1,500
1,000
500
$ in millions
2,000
1,500
1,000
500
1,200
1,000
800
600
400
15%
10%
5%
0%
-5%
145%
140%
20%
15%
10%
5%
0%
20%
15%
10%
5%
0
15%
0%
-15%
-30%
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
145
Order backlog
In 2021, the order backlog increased 25 percent
(29 percent in local currencies). The order backlog
benefited from the strong order intake, but also
reflected execution challenges caused by material
shortages, transportation constraints as well as
pandemic-related production pressures in some
local markets.
Revenues
In 2021, revenues increased 11 percent (8 percent
in local currencies). Revenues increased in all
Divisions reflecting widespread market recovery
across all regions, however growth was hampered
by component shortage and logistic challenges,
particularly for the project business. Revenue
growth in short-cycle businesses was higher than
in long-cycle businesses, reflecting some cus-
tomer stockpiling. Pricing actions taken to
mitigate increasing material and transportation
costs also contributed to the higher revenue level.
The revenue growth rate was led by the E-mobility
Division mirroring the very high demand in this
segment. There was also double-digit revenue
growth in the Installation Products Division
reflecting demand recovery in the U.S. and
Canada, as well as in the Smart Power Division.
Revenue growth was solid for the Smart Buildings
Division, whereas revenues grew more modestly
for the Distribution Solutions and Power Conver-
sion Divisions.
The geographic distribution of revenues for our
Electrification Business Area was as follows:
($ in millions)
Europe
The Americas
2021
2020
2019
4,628
4,190
4,251
4,503
4,093
4,635
of which: United States
3,322
3,115
3,555
Asia, Middle East and Africa
4,056
3,641
3,842
of which: China
Total
2,110
1,858
1,749
13,187
11,924 12,728
In 2021, revenues in the Americas increased
10 percent (9 percent in local currencies) led
by a strong recovery in Canada and Mexico, while
revenues in the U.S. recorded high single-digit
growth. Revenues increased 11 percent (7 percent
in local currencies) in Asia, Middle East and Africa,
driven by growth in China and India. Revenues in
Europe increased 10 percent (8 percent in local
currencies) reflecting widespread growth across
the region, including key markets such as Ger-
many and Italy.
Income from operations
In 2021, income from operations increased 38 per-
cent, supported by higher revenues. Pricing
actions across the product businesses and the
benefits of savings realized from ongoing restruc-
turing and cost savings programs also positively
influenced the income from operations. Restruc-
turing related expenses and implementation
costs in our operating Divisions were lower in
2021 than in 2020, mainly as the integration of
GEIS is nearing completion. These positives were
partially dampened by higher commodity prices
in 2021, as well as increased costs for transporta-
tion and logistics. The income from operations
was burdened by higher personnel expenses
driven by a ramp-up of manufacturing capacity to
meet higher demand. There was also negative
comparable impact from the discontinuance of
various pandemic-related government support
programs that were more significant in 2020
compared to 2021. Changes in foreign currencies,
including the impacts from FX/commodity timing
differences summarized in the table below, posi-
tively impacted the income from operations by
approximately 1 percentage point.
Operational EBITA
The reconciliation of Income from operations to
Operational EBITA for the Electrification Business
Area was as follows:
($ in millions)
2021
2020
2019
Income from operations
1,841
1,335
1,049
Acquisition-related amortization
117
115
115
Restructuring, related and
implementation costs
Changes in obligations related to
divested businesses
Changes in pre-acquisition
estimates
Gains and losses from sale of
businesses
Fair value adjustment on assets
and liabilities held for sale
Favorable resolution of an
uncertain purchase price
adjustment
Acquisition- and divestment-
related expenses and integration
costs
Certain other non-operational
items
FX/commodity timing
differences in income from
operations
66
—
(6)
13
—
145
112
15
11
—
22
4
(42)
33
421
(5)
(36)
(92)
70
—
71
119
9
3
25
(21)
(19)
Operational EBITA
2,121
1,681
1,688
In 2021, Operational EBITA increased 26 percent
(20 percent excluding the impact from changes in
foreign currency exchange rates) compared to
2020, primarily due to the reasons described
under “Income from operations”, excluding the
explanations related to the reconciling items in
the table above.
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
12M $ in millions
12M $ in millions
$ in millions
$ in millions
$ in millions
$ in millions
3,600
3,600
3,200
3,200
2,800
2,800
600
450
300
150
0
15,000
15,000
14,000
14,000
13,000
13,000
12,000
12,000
600
450
300
150
0
11,000
11,000
-150
2,400
-150
2,400
20%
15%
10%
5%
0%
-5%
20%
15%
10%
5%
0%
-5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
146
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2021
2020
A B B A N N U A L R E P O R T 2 0 2 1
2021
2019
2021
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
2020
2019
2020
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
Motion Business Area
Motion Business Area
Motion Business Area
Motion Business Area
Motion Business Area
The financial results of our Motion Business Area
were as follows:
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
Orders and Revenues
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
2,500
2,500
8,000
8,000
2,500
2,000
2,000
7,500
7,500
1,500
1,500
7,000
7,000
1,000
1,000
6,500
6,500
2,500
2,400
400
300
200
100
0
2,400
400
300
200
100
0
145%
145%
140%
140%
20%
15%
10%
5%
0%
20%
15%
10%
5%
0%
500
500
6,000
6,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2020
2021
2021
2019
2019
2020
2020
2021
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
($ in millions)
2021
2020 2019
2021
2020
% Change
Process Automation Business Area
Process Automation Business Area
Orders
7,616
6,574 6,782
16%
(3)%
Orders and Revenues
Order backlog at
December 31,
Orders and Revenues
Revenues
Income from
operations
$ in millions
Operational EBITA
2,000
$ in millions
2,000
Orders
1,500
3,749
3,320 2,967
13%
6,925
6,409 6,533
8%
12%
(2)%
3,276
1,183
989 1,009 231%
12M $ in millions
(2)%
12M $ in millions
1,075 1,082
7,500
10%
(1)%
7,500
7,000
7,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
500
6,500
6,000
In 2021, orders increased 16 percent (13 percent in
6,500
local currencies) compared to 2020. Order devel-
1,000
opment had a strong performance across most of
6,000
the market segments and Divisions. The Business
Area benefited from high demand in food and
5,500
beverage, HVACR (heating, ventilation, air condi-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
tioning and refrigeration), chemicals, metals, pulp
and paper, cement, mining, wind and water seg-
ments. Oil and gas demand was flat but showed
signs of recovery due to higher oil prices and
emerging trends.
Orders 12M rolling
Revenues
5,500
Orders
2020
2019
2021
2021
2019
Orders
Revenues
Orders 12M rolling
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
The geographic distribution of orders for our
Motion Business Area was as follows:
Orders and Revenues
Orders and Revenues
Process Automation Business Area
Poland. In Asia, Middle East and Africa, orders
increased 12 percent (7 percent in local curren-
cies) driven by growth in China and India. In the
Process Automation Business Area
Americas, orders increased 18 percent (17 percent
in local currencies) as a result of recoveries in the
U.S., Canada and Mexico.
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
Order backlog
300
300
$ in millions
20%
20%
200
The order backlog in 2021 increased 13 percent
(19 percent in local currencies) compared to 2020.
15%
The order backlog increased across most Divi-
sions, driven by both short and long-cycle
order growth.
100
10%
200
100
Revenues
5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
0
0
2019
2019
Operational EBITA
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
0
In 2021, revenues increased 8 percent (5 percent
2020
in local currencies) compared to 2020 and were
higher across all Divisions, recovering from the
pandemic-related decline in 2020. Revenues also
reflected strong execution from the order backlog
as well as resilience in the short-cycle business.
Income from operations %
Income from operations %
Income from operations
Income from operations
Operational EBITA
2020
2021
2021
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
The geographic distribution of revenues for our
Motion Business Area was as follows:
Income from operation & Operational EBITA
Income from operation & Operational EBITA
($ in millions)
2021
2020
2019
($ in millions)
$ in millions
$ in millions
Europe
2,617
12M $ in millions
2,219
12M $ in millions
2,355
Europe
$ in millions
$ in millions
The Americas
1,200
of which: United States
Asia, Middle East and Africa
1,000
of which: China
Total
800
2,677
2,276
4,000
2,437
4,000
2,200
2,322
1,897
2,048
2,079
3,500
1,990
3,500
1,232
1,077
987
7,616
6,574
3,000
6,782
3,000
The Americas
120
120
of which: United States
Asia, Middle East and Africa
80
80
of which: China
40
40
Total
0
0
2021
2020
2019
2,258
2,196
2,162
2,396
2,225
2,378
15%
1,974
1,867
2,009
2,271
1,988
1,993
1,256
1,040
955
0%
6,925
6,409
6,533
600
In 2021, orders increased 18 percent (14 percent in
2,500
local currencies) in Europe as orders increased
mainly in Switzerland, Spain, Italy, Austria, Turkey
2,000
400
and France partially offset by a decrease in
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2,000
2,500
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-40
-40
In 2021, revenues in Europe increased 3 percent
(flat in local currencies) driven by increases in
Turkey, Germany, Poland, Switzerland, Austria and
Spain while sales volumes declined in Sweden,
-30%
-240
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-15%
-240
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
Orders
Revenues
Orders 12M rolling
2019
2020
Orders
Revenues
Orders 12M rolling
2020
2021
2021
2019
Operational EBITA
2019
2020
Operational EBITA
Income from operations
Income from operations %
Income from operations
Income from operations %
2020
2021
2021
1,500
1,000
500
1,200
1,000
800
600
400
15%
10%
5%
0
15%
0%
-15%
-30%
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
3,600
$ in millions
3,600
A B B A N N U A L R E P O R T 2 0 2 1
12M $ in millions
$ in millions
15,000
14,000
12M $ in millions
600
15,000
$ in millions
600
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
450
450
14,000
300
300
20%
147
15%
10%
3,200
2,800
2,400
3,200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
13,000
12,000
12,000
13,000
Estonia, Italy and Finland. In Asia, Middle East and
Africa revenues increased 14 percent (9 percent in
2,800
local currencies) compared to 2020 driven by
strong revenue growth in China, India and Austra-
lia. In the Americas, revenues increased 8 percent
11,000
2,400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
(7 percent in local currencies) on higher revenues
2020
in the U.S., particularly in the book-and-bill busi-
ness in the NEMA Motors Division. The Mechanical
Power Transmission Division also reported strong
order growth prior to its divestment in Novem-
ber 2021.
Orders 12M rolling
Revenues
11,000
Orders
2020
2019
2021
2021
2019
Orders
Revenues
Orders 12M rolling
Motion Business Area
Motion Business Area
Income from operations
Orders and Revenues
Orders and Revenues
$ in millions
2,500
2,000
1,500
1,000
500
8,000
12M $ in millions
12M $ in millions
In 2021, income from operations increased
231 percent compared to 2020 and included the
gain of $2,195 million recognized on sale of the
$ in millions
Mechanical Power Transmission Division. Exclud-
8,000
2,500
ing this gain, income from operations increased
9 percent driven primarily by higher revenues. The
7,500
2,000
higher business volumes reflect the recovery from
the pandemic-related slowdown in 2020. Profit-
1,500
ability was also supported by active price
management, continued cost discipline, a focus
on operational performance and a positive divi-
1,000
sional mix which offset increasing commodities
and freight expenses and other cost inflation.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Changes in foreign currencies, including the
2020
impacts from FX/commodity timing differences
6,000
6,500
6,000
6,500
7,000
7,000
7,500
Orders
2020
2019
2021
2021
500
2019
Orders
Revenues
Revenues
Orders 12M rolling
Orders 12M rolling
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
summarized in the table below, had no significant
5%
150
impact on the change in income from operations.
150
0
0
Operational EBITA
-150
0%
-5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-150
2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
The reconciliation of Income from operations to
2020
Operational EBITA for the Motion Business Area
was as follows:
Income from operations %
Income from operations
Income from operations
Operational EBITA
Operational EBITA
2020
2019
2021
Income from operations %
2021
($ in millions)
2021
2020
2019
Income from operations
3,276
989
1,009
Acquisition-related amortization
Motion Business Area
Motion Business Area
Restructuring, related and
implementation costs
22
Income from operation & Operational EBITA
43
Gains and losses from sale of
businesses
Income from operation & Operational EBITA
(2,196)
—
52
44
53
12
—
Acquisition- and divestment-
related expenses and integration
$ in millions
$ in millions
costs
2,500
2,500
Certain other non-operational
items
2,400
FX/commodity timing
differences in income from
400
operations
300
Operational EBITA
2,400
400
300
26
1
—
—
145%
17
140%
14
11
(27)
1,183
1,075
20%
(6)
15%
1,082
10%
0
100
200
200
In 2021, Operational EBITA increased 10 percent
5%
100
(6 percent excluding the impact from changes in
foreign currency exchange rates) primarily due to
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
the reasons described under “Income from opera-
2020
2021
tions”, excluding the explanations related to the
Operational EBITA
reconciling items in the table above.
Income from operations
Income from operations
Operational EBITA
Income from operations %
2020
2019
Income from operations %
2019
2021
0%
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
20%
15%
10%
5%
0%
-5%
145%
140%
20%
15%
10%
5%
0%
Process Automation Business Area
Process Automation Business Area
Process Automation Business Area
Process Automation Business Area
Process Automation Business Area
The financial results of our Process Automation
Business Area were as follows:
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
Orders and Revenues
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
2,000
2,000
7,500
7,500
300
300
20%
20%
1,500
1,500
200
200
7,000
7,000
1,000
1,000
6,500
6,500
6,000
6,000
100
100
15%
10%
5%
500
500
5,500
5,500
0
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
0
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2020
2021
2021
2019
2019
2020
2020
2021
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
1,200
1,000
800
600
400
1,200
1,000
800
600
400
4,000
3,500
3,000
2,500
4,000
120
3,500
3,000
2,500
2,000
80
40
0
-40
-240
120
80
40
0
-40
-240
15%
0%
-15%
-30%
2021
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2020
2021
2021
2019
2019
2020
Operational EBITA
2020
2021
Operational EBITA
Income from operations
Income from operations %
Income from operations
Income from operations %
15%
10%
5%
0
15%
0%
-15%
-30%
148
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
($ in millions)
2021
2020 2019
2021
2020
Orders
6,779
6,144 6,432
10%
(4)%
% Change
in order backlog for all Divisions except the
Marine & Ports Division which decreased mainly
on lower orders and strong backlog execution.
Order backlog at
December 31,
Revenues
Income from
operations
Operational EBITA
Orders
6,079
5,805 5,077
6,259
5,792 6,273
5%
8%
14%
(8)%
Revenues
713
801
344
451
700 107% (51)%
732
78% (38)%
In 2021, orders increased 10 percent (7 percent in
local currencies) compared to 2020. Orders grew
double digit in almost all Divisions except the
Marine & Ports Division where orders declined
due to the receipt of a large capital investment
order in 2020. Markets recovered to pre-pandemic
levels and customers made capital and opera-
tional investments across almost all market
segments. Demand for products, systems and
services improved in the process-related seg-
ments like mining, pulp and paper, chemicals, and
oil and gas. Demand for products and services
recovered in the power generation market and
operational investments improved in the
marine sector.
The geographic distribution of orders for our
Process Automation Business Area was as
follows:
($ in millions)
Europe
The Americas
2021
2020
2019
2,614
2,365
2,599
1,645
1,360
1,627
of which: United States
1,047
770
995
Asia, Middle East and Africa
2,520
2,419
2,206
of which: China
Total
821
590
631
6,779
6,144
6,432
Orders in Europe increased 11 percent (6 percent
in local currencies) driven by strong orders in the
process-related businesses and increases in
service activity. In local currencies, orders
increased in Germany, Norway, France, Russia and
the United Kingdom while orders decreased in
Sweden and Italy. Orders in Asia, Middle East and
Africa increased 4 percent (remained flat in local
currencies). Higher orders in China, India and
Australia were partly offset primarily by the lower
order volumes in South Korea and Singapore due
to large orders booked in 2020. In the Americas,
orders increased 21 percent (20 percent in local
currencies) supported by strong investments in
the U.S. across all Divisions.
Order backlog
In 2021, the order backlog increased 5 percent
(10 percent in local currencies) compared to 2020.
Strong order growth drove significant increases
In 2021, revenues increased 8 percent (5 percent
in local currencies) compared to 2020. Revenues
increased in all Divisions, reflecting strong execu-
tion of the order backlog in the long-cycle
businesses, partially offset by challenges from
supply chain constraints.
The geographic distribution of revenues for our
Process Automation Business Area was as
follows:
($ in millions)
Europe
The Americas
2021
2020
2019
2,439
2,395
2,494
1,439
1,329
1,595
of which: United States
836
808
950
Asia, Middle East and Africa
2,381
2,068
2,184
of which: China
Total
742
629
612
6,259
5,792
6,273
In 2021, revenues were 15 percent higher (11 per-
cent in local currencies) in Asia, Middle East and
Africa, 8 percent higher (7 percent in local curren-
cies) in the Americas and 2 percent higher
(decrease of 2 percent in local currencies) in
Europe compared to 2020. In Asia, Middle East
and Africa, the Marine & Ports Division registered
strong growth in South Korea and China while
revenues also increased in the United Arab Emir-
ates and South Africa in the Energy Industries
Division. In Europe, revenues were higher in
Russia and the United Kingdom while lower in
France, Finland and Germany. In the Americas,
revenues were higher in the U.S., Brazil and
Canada while revenues declined in Mexico.
Income from operations
In 2021, income from operations increased 107
percent compared to 2020 primarily due to the
significant charges recorded in 2020 for the Kusile
power generation project in South Africa, legacy
projects in India and other significant restructur-
ings. This was partially offset by higher
divestment-related expenses, mainly related to
the planned exit of the Turbocharging Division.
Excluding these items, income from operations
improved significantly driven by volume, strong
execution, savings from supply and operation
excellence initiatives and continued overhead cost
structure improvements. Changes in foreign
currencies, including the effect from changes in
the FX/commodity timing differences summa-
rized in the table below,
decreased income from operations by 3 percent
compared to 2020.
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Electrification Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
3,600
3,600
15,000
15,000
600
3,200
3,200
2,800
2,800
14,000
14,000
13,000
13,000
12,000
12,000
450
300
150
0
2,400
2,400
11,000
11,000
-150
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020
2021
2021
2019
2019
2020
2020
2021
2021
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
Motion Business Area
Motion Business Area
Motion Business Area
Motion Business Area
Orders and Revenues
Orders and Revenues
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
2,500
2,500
8,000
8,000
2,500
2,000
2,000
7,500
7,500
1,500
1,500
7,000
7,000
1,000
1,000
6,500
6,500
600
450
300
150
0
-150
2,500
2,400
400
300
200
100
20%
15%
10%
5%
0%
-5%
145%
140%
20%
15%
10%
5%
0%
20%
15%
10%
5%
0%
-5%
145%
140%
20%
15%
10%
5%
0%
2,400
400
300
200
100
6,000
0
6,000
500
500
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
A B B A N N U A L R E P O R T 2 0 2 1
2020
2020
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019
2019
2021
2021
Orders
Revenues
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
Operational EBITA
Process Automation Business Area
Process Automation Business Area
The reconciliation of Income from operations to
Operational EBITA for the Process Automation
Business Area was as follows:
Orders and Revenues
Orders and Revenues
($ in millions)
2021
2020
2019
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
2020
2020
2019
2019
2021
149
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
Process Automation Business Area
In 2021, Operational EBITA increased 78 percent
(70 percent excluding the impacts from changes
in foreign currencies) compared to 2020. The
Process Automation Business Area
change is due to the reasons described under
“Income from operations”, excluding the explana-
tions related to the reconciling items in the
table above.
Income from operation & Operational EBITA
Income from operation & Operational EBITA
$ in millions
Income from operations
$ in millions
713
12M $ in millions
700
344
12M $ in millions
$ in millions
$ in millions
2,000
Acquisition-related amortization
2,000
5
7,500
4
4
7,500
300
300
20%
20%
1,500
1,000
500
800
600
400
15%
15%
10%
10%
5%
0
5%
0
15%
15%
0%
0%
-15%
-15%
-30%
-30%
Restructuring, related and
implementation costs
Gains and losses from sale of
1,500
businesses
Acquisition- and divestment-
related expenses and integration
costs
1,000
Certain other non-operational
items
48
7,000
125
21
7,000
(13)
—
—
6,500
35
6,000
1
6,500
—
6,000
2
2
1
200
200
100
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
5,500
5,500
0
0
2020
2021
12
2021
(25)
5
2019
2019
2020
2020
2021
2021
801
451
732
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
500
FX/commodity timing
differences in income from
2019
operations
2020
2019
Orders
Operational EBITA
Orders
Revenues
Revenues
Orders 12M rolling
Orders 12M rolling
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
The financial results of our Robotics & Discrete
Automation Business Area were as follows:
Orders and Revenues
Orders and Revenues
Robotics & Discrete Automation Business Area
Robotics & Discrete Automation Business Area
Income from operation & Operational EBITA
Income from operation & Operational EBITA
Orders and Revenues
Income from operation & Operational EBITA
$ in millions
$ in millions
12M $ in millions
12M $ in millions
$ in millions
$ in millions
1,200
1,200
4,000
4,000
120
1,000
1,000
3,500
3,500
800
600
3,000
3,000
2,500
2,500
120
80
40
0
-40
80
40
0
-40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
400
2,000
2,000
-240
-240
2019
Orders
Revenues
2019
2020
Orders
Revenues
Orders 12M rolling
Orders 12M rolling
2020
2021
2021
2019
2019
2020
2020
2021
2021
Operational EBITA
Operational EBITA
Income from operations
Income from operations
Income from operations %
Income from operations %
% Change
($ in millions)
2021
2020 2019
2021
2020
Orders
3,844 2,868 3,260
34% (12)%
Order backlog at
December 31,
1,919 1,403 1,356
37%
3%
Revenues
3,297 2,907 3,314
13% (12)%
Income (loss) from
operations
Operational EBITA
269
355
(163)
237
298
393
n.a. (155)%
50% (40)%
Orders
In 2021, orders increased 34 percent (29 percent
in local currencies). Demand levels in both the
Robotics and Machine Automation Divisions
recovered in 2021 after 2020 was impacted by the
COVID-19 pandemic. Commencing in the second
quarter, both Divisions reported significant
increases in demand, including from traditional
automotive and automotive-related sectors,
general industry, machine builders and electron-
ics market sectors. Orders continued to grow in
the second half of the year benefiting from larger
investments by customers in the machine auto-
mation sector.
150
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The geographic distribution of orders for our
Robotics & Discrete Automation Business Area
was as follows:
($ in millions)
Europe
The Americas
of which: United States
2021
2020
2019
1,978
1,424
1,717
530
371
388
277
457
310
Asia, Middle East and Africa
1,336
1,056
1,086
of which: China
Total
976
781
729
3,844
2,868
3,260
In 2021, orders increased in all regions. Orders in
Europe increased 39 percent (35 percent in local
currencies) driven by increases in demand in
Germany, Italy, Netherlands and Austria. Orders in
the Americas increased 37 percent (35 percent in
local currencies) compared to 2020, driven by the
strong order intake in the U.S. in both Divisions.
Orders in Asia, Middle East and Africa increased
27 percent (20 percent in local currencies) with
strong demand in China and India.
Order backlog
In 2021, the order backlog increased 37 percent
(43 percent in local currencies) compared to 2020.
The order backlog increased in the Machine
Automation Division, but was negatively im-
pacted by our selectivity of orders in the
automotive segment partially offset by positive
momentum in the general industry and consumer
segments.
Revenues
In 2021, revenues increased 13 percent (9 percent
in local currencies) compared to 2020. Revenues
increased in both Divisions due to higher volumes
from book-and-bill business, however growth was
hampered by component shortages (primarily
related to semiconductors), logistic challenges
which triggered longer lead times for some
customer deliveries and a tight labor market.
Service revenues also increased, driven by strong
demand from all industry segments but especially
from general industry.
The geographic distribution of revenues for our
Robotics & Discrete Automation Business Area
was as follows:
($ in millions)
Europe
The Americas
of which: United States
2021
2020
2019
1,582
1,481
1,680
441
309
389
273
464
293
Asia, Middle East and Africa
1,274
1,037
1,170
of which: China
Total
950
719
829
3,297
2,907
3,314
In 2021, revenues increased in all regions. The
revenues from Asia, Middle East and Africa in-
creased 23 percent (17 percent in local currencies)
compared to 2020 due to higher book-and-bill
revenues and a higher level of execution of auto-
motive segment orders, particularly in China.
Revenues in Europe increased 7 percent (4 percent
in local currencies) with Austria and Spain per-
forming strongly while revenues declined in the
United Kingdom and France. In the Americas,
revenues increased 13 percent (12 percent in local
currencies) due to strong demand in the U.S. in
both Divisions after recovery from the low levels
in 2020.
Income (loss) from operations
In 2021, the Business Area recorded income from
operations of $269 million compared to a loss of
$163 million in 2020, as the improvement in under-
lying operating performance in 2020 was more
than offset by the $290 million impairment of
goodwill recorded in the Machine Automation
Division in 2020. The operational performance in
2021 reflected improved sales volumes, a favor-
able change in the revenue mix and the benefit of
cost reduction measures taken in 2020. Changes
in foreign currencies, including the impacts from
FX/commodity timing differences summarized in
the table below, positively impacted the income
from operations by approximately 6 percent.
Operational EBITA
The reconciliation of Income (loss) from opera-
tions to Operational EBITA for the Robotics &
Discrete Automation Business Area was as
follows:
($ in millions)
Income (loss) from operations
Acquisition-related amortization
Restructuring, related and
implementation costs
Acquisition- and divestment-
related expenses and integration
costs
Impairment of goodwill
Certain other non-operational
items
FX/commodity timing
differences in income from
operations
Operational EBITA
2021
269
83
7
1
—
—
(5)
355
2020
(163)
78
26
—
290
5
1
2019
298
77
12
1
—
4
1
237
393
In 2021, Operational EBITA increased 50 percent
(41 percent excluding the impact from changes in
foreign currency exchange rates) compared to
2020, primarily due to the reasons described
under “Income (loss) from operations”, excluding
the explanations related to the reconciling items
in the table above.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
151
Corporate and Other
Net loss from operations for Corporate and Other
was as follows:
($ in millions)
2021
2020
2019
Corporate headquarters and
stewardship
Income (loss) from equity-
accounted companies
Other corporate costs
Restructuring
Fair value adjustment on equity
securities
Corporate brand income from
Hitachi Energy
Corporate real estate
Costs for divestment of Power
Grids
Corporate research and
development
Digital program costs
OS implementation costs
Stranded corporate costs
(399)
(334)
(334)
(102)
(32)
(5)
94
89
41
—
—
—
—
—
(68)
(63)
(46)
71
60
54
1
56
(60)
(5)
—
60
(86)
(141)
(49)
(45)
(24)
(40)
(185)
(33)
(83)
(225)
Divested businesses and other
non-core activities
(67)
(342)
(164)
Total Corporate and Other
(381)
(912)
(1,113)
In 2021, the net loss from operations within
Corporate and Other decreased by $531 million to
$381 million compared to 2020. This reflected
several items including an elimination of stranded
corporate costs and the high costs in 2020 related
to the divestment of the Power Grids business.
Additionally, corporate costs in 2021 reflect the
ending in 2020 of the remaining corporate
research and development and digital program
costs, which were eliminated as part of the ABB
Way program. In 2021, losses in non-core busi-
nesses decreased compared to 2020 as projects
were completed and certain large losses were not
repeated. This was partially offset by a higher loss
from equity-accounted companies in 2021 com-
pared to 2020 while corporate brand income of
$89 million was higher than 2020 for the use of
the ABB brand by the Hitachi Energy Ltd. joint
venture.
Corporate
In 2021, corporate headquarters and stewardship
costs increased compared to 2020, mainly driven
by residual unallocated costs for the Global
Business Services operations and continuous
implementation of ABB Way.
Our investment in the Hitachi Energy Ltd. joint
venture is accounted for using the equity method
and presented as Income (loss) from
equity-accounted companies. The amount in 2021
is for a full year compared to six months in 2020
and primarily represents the amortization of the
notional purchase price accounting adjustments
(net of tax) which were recorded due to the fair
value accounting applied on initial investment in
the joint venture (see “Note 4 - Acquisitions,
divestments and equity-accounted companies” to
our Consolidated Financial Statements for infor-
mation on the accounting for the investment in
Hitachi Energy Ltd).
During 2021, we recorded net revaluation gains
totaling $94 million on investments in equity
securities in our equity ventures investment
portfolio.
Corporate brand income results from the granting
of the use of the ABB brand to Hitachi Energy Ltd.,
the fair value of which was initially determined on
the date of the divestment. A portion of the
proceeds received for the sale of the Power Grids
business was allocated to the fair value of the
granting of the use of the brand and is being
amortized over the expected period of use by
Hitachi Energy Ltd.
Corporate real estate primarily includes income
from property rentals and gains from the sale of
real estate properties. In 2021, income from
operations in corporate real estate included gains
from the sale of real estate properties of $22 mil-
lion compared to $27 million in 2020.
Other corporate costs consists of operational
costs of our Corporate Treasury Operations and
other minor items including elimination of
changes to eliminated internal profit of Inventory.
Other - Divested businesses and other non-core
activities
The results of operations for certain divested
businesses and other non-core activities are
presented in Corporate and Other. Divested
businesses include the high-voltage cables busi-
ness, steel structures business as well as the oil &
gas EPC business. Other continuing non-core
activities include the execution and wind-down of
certain legacy EPC and other contracts.
In both 2021 and 2020, the amounts represent
charges and losses relating to divested busi-
nesses and the winding down of the remaining
EPC projects. In 2021, we recorded losses of
$67 million which were mostly related to the full
train retrofit business but also related to legacy
EPC projects and the divested oil & gas EPC
business. In 2020, we recorded $143 million for
certain retained warranty obligations relating to
the steel structures business and also recorded
charges for certain retained commitments and
guarantees in connection with the oil & gas EPC
business. The loss in 2020 also reflects further
operational challenges and customer obligations
152
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
relating to several legacy projects including the
full train retrofit business, substations and off-
shore wind.
At December 31, 2021, our remaining non-core
activities primarily include the completion of the
remaining EPC contracts for substations and oil &
gas as well as the completion of the remaining
obligations for the full train retrofit business.
Restructuring and other cost
savings initiatives
OS program
From December 2018 to December 2020, we
executed a two-year restructuring program with
the objective of simplifying our business model
and structure through the implementation
of a new organizational structure driven by our
businesses. The program resulted in the elimina-
tion of the country and regional structures within
the previous matrix organization, including the
elimination of the three regional Executive Com-
mittee roles. The operating businesses are now
responsible for both their customer-facing activi-
ties and business support functions, while the
remaining Group-level corporate activities pri-
marily focus on Group strategy, portfolio and
performance management and capital allocation.
As of December 31, 2020, we had incurred sub-
stantially all restructuring and related expenses
related to the OS program.
During the course of the program, we imple-
mented and executed various restructuring
initiatives across all business support functions
and all operating segments. The cumulative
restructuring and related expenses under this
program, originally estimated to be $350 million,
were reduced by $41 million to $309 million,
mainly due to the reductions in both estimated
costs and number of projects planned.
The following table outlines the costs incurred in
2020, 2019 and the cumulative costs incurred
under the program per operating segment and
Corporate and Other as of December 31, 2020:
Costs incurred in
2020
2019
Cumulative
costs incurred
up to December
31, 2020
35
18
37
10
49
149
18
6
3
8
54
89
85
25
61
18
114
303
($ in millions)
Electrification
Motion
Process
Automation(1)
Robotics & Discrete
Automation
Corporate and Other
Total
(1) Formerly named the Industrial Automation operating segment.
The restructuring program resulted in run-rate
cost savings of approximately $590 million,
impacting all Business Areas and Corporate and
Other. These cost savings were realized mainly as
reductions in cost of sales, selling, general and
administrative expenses, and non-order related
research and development expenses.
The majority of the remaining cash outlays at
December 31, 2020, occurred in 2021 and were
primarily for employee severance benefits.
—
Liquidity and capital resources
Principal sources of funding
We meet our liquidity needs principally using cash
from operations, proceeds from the issuance of
debt instruments (bonds and commercial paper),
and short-term bank borrowings. In 2021, we also
received significant funds from the sale of the
Mechanical Power Transmission Division, which
was completed on November 1, 2021.
Our net debt/cash is shown in the table below:
December 31, ($ in millions)
2021
2020
Short-term debt and current maturities of
long-term debt
Long-term debt
Cash and equivalents
Restricted cash - current
Marketable securities and short-term
investments
Restricted cash - non-current
Net debt (cash) (defined as the sum
of the above lines)
1,384
1,293
4,177
4,828
(4,159)
(3,278)
(30)
(323)
(1,170)
(2,108)
(300)
(300)
(98)
112
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
153
During 2021, we benefited from a significant
increase in cash provided by operating activities
compared to 2020 and cash proceeds from sales
of businesses. A significant amount of these
funds was paid to shareholders during 2021
through both the payment of the annual dividend
and the continuation of share buyback activities.
During 2021, we changed from a net debt position
of $112 million at December 31, 2020, to a net cash
position of $98 million at December 31, 2021.
Approximately $170 million of this movement is
due to movements in foreign exchange rates with
several other significant movements mostly
offsetting over the year. In 2021, we received net
proceeds of $2,862 million for the sale of the
Dodge business later in the year. We generated
cash flows from operating activities during 2021
of $3,330 million and sold treasury stock in rela-
tion to our employee share plans for $826 million.
Mostly offsetting these items were amounts for
purchases of treasury shares of $3,708 million,
including $2,680 million relating to the announced
buybacks of our shares, as well as $1,726 million
for the payment of the dividend to our sharehold-
ers. We made net purchases of property, plant and
equipment and intangible assets of $727 million
and made payments of dividends to noncon-
trolling shareholders totaling $98 million. See
“Financial position”, “Investing activities” and
“Financing activities” for further details.
Our Corporate Treasury Operations is responsible
for providing a range of treasury management
services to our group companies, including in-
vesting cash in excess of current business
requirements. At December 31, 2021 and 2020, the
proportion of our aggregate “Cash and equiva-
lents” (including restricted cash) and “Marketable
securities and short-term investments” managed
by our Corporate Treasury Operations amounted
to approximately 44 percent and 47 percent,
respectively.
Our investment strategy for cash (in excess of
current business requirements) has generally
been to invest in short-term time deposits with
maturities of less than 3 months, supplemented
at times by investments in money market funds,
and in some cases, government securities. We
actively monitor credit risk in our investment
portfolio and derivative portfolio. Credit risk
exposures are controlled in accordance with
policies approved by our senior management to
identify, measure, monitor and control credit
risks. We have minimum rating requirements for
our counterparts and closely monitor develop-
ments in the credit markets making appropriate
changes to our investment policy as deemed
necessary. In addition to minimum rating criteria,
we have strict investment parameters and
specific approved instruments as well as restric-
tions on the types of investments we make. These
parameters are closely monitored on an ongoing
basis and amended as we consider necessary.
Our cash is held in various currencies around the
world. Approximately 40 percent of our cash and
cash equivalents held at December 31, 2021, was
in U.S. dollars, while the most significant foreign
currency cash and cash equivalents were held in
Chinese renminbi (17 percent).
We believe the ongoing cash flows generated
from our business, supplemented, when neces-
sary, through access to the capital markets
(including short-term commercial paper) and our
credit facilities are sufficient to support business
operations, capital expenditures, business acqui-
sitions, the payment of dividends to shareholders
and contributions to pension plans. Consequently,
we believe that our ability to obtain funding from
these sources will continue to provide the cash
flows necessary to satisfy our working capital and
capital expenditure requirements, as well as meet
our debt repayments and other financial commit-
ments for the next 12 months. See “Contractual
obligations and commitments”.
Due to the nature of our operations, including the
timing of annual incentive payments to employ-
ees, our cash flow from operations generally
tends to be weaker in the first half of the year
than in the second half of the year.
Debt and interest rates
Total outstanding debt was as follows:
December 31, ($ in millions)
2021
2020
Short-term debt and current maturities of
long-term debt
1,384
1,293
Long-term debt:
Bonds
Other long-term debt
Total debt
3,984
4,580
193
248
5,561
6,121
The increase in short-term debt in 2021 was due
to the reclassification to short-term of the
USD 1,250 million 2.875% Notes mostly offset by
the repayment at maturity of both the
USD 650 million 4.0% Notes and the CHF 350 mil-
lion 2.25% Bonds.
At December 31, 2021, Long-term debt decreased
$651 million compared to the end of 2020 due to
the reclassification to short-term described
above offset partly by the issuance in 2021 of
EUR 800 million 0% Notes.
154
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Our debt has been obtained in a range of curren-
cies and maturities and with various interest rate
terms. For certain of our debt obligations, we use
derivatives to manage the fixed interest rate
exposure. For example, we use interest rate swaps
to effectively convert fixed rate debt into floating
rate liabilities. After considering the effects of
interest rate swaps, at December 31, 2021, the
effective average interest rate on our floating rate
long-term debt (including current maturities) of
$3,598 million and our fixed rate long-term debt
(including current maturities) of $1,885 million
was 0.3 percent and 3.1 percent, respectively. This
compares with an effective rate of 0.2 percent for
floating rate long-term debt of $3,330 million and
3.3 percent for fixed rate long-term debt of
$2,638 million at December 31, 2020.
For a discussion of our use of derivatives to
modify the interest characteristics of certain of
our individual bond issuances, see “Note 12
- Debt” to our Consolidated Financial Statements.
Credit facility
In December 2019, we replaced our previous
multicurrency revolving credit facility with a new
$2 billion multicurrency revolving credit facility,
maturing in 2024. In 2021 we exercised our option
to further extend the maturity to 2026. No
amount was drawn under the facility at December
31, 2021 and 2020. The facility is available for
general corporate purposes and contains
cross-default clauses whereby an event of default
would occur if we were to default on indebted-
ness, as defined in the facility, at or
above a specified threshold.
The credit facility does not contain financial
covenants that would restrict our ability to pay
dividends or raise additional funds in the capital
markets. For further details of the credit facility,
see “Note 12 - Debt” to our Consolidated Financial
Statements.
Commercial paper
States, compared to $32 million outstanding at
December 31, 2020.
At December 31, 2021 and 2020, no amount was
outstanding under the $2 billion Euro-commercial
paper program.
European program for the
issuance of debt
The European program for the issuance of debt
allows the issuance of up to the equivalent of
$8 billion in certain debt instruments. The terms
of the program do not obligate any third party to
extend credit to us and the terms and possibility
of issuing any debt under the program are deter-
mined with respect to, and as of the date of
issuance of, each debt instrument. At December
31, 2021, three bonds (principal amount of EUR
700 million, due in 2023, principal amount of EUR
750 million, due in 2024, and principal amount of
EUR 800 million, due in 2030) having a combined
carrying amount of $2,522 million were outstand-
ing under the program. The carrying amount of
the bonds outstanding under the program at
December 31, 2020, was $1,821 million.
Credit ratings
Credit ratings are assessments by the rating
agencies of the credit risk associated with ABB
and are based on information provided by us or
other sources that the rating agencies consider
reliable. Higher ratings generally result in lower
borrowing costs and increased access to capital
markets. Our ratings are of “investment grade”
which is defined as Baa3 (or above) from Moody’s
and BBB− (or above) from Standard & Poor’s.
At December 31, 2021 and 2020, our long-term
debt was rated A3 by Moody’s and currently
with a Stable outlook. At December 31, 2021 and
2020, our long-term debt was rated A- by Stan-
dard & Poor’s and currently with a Stable outlook.
At December 31, 2021, we had two commercial
paper programs in place:
Limitations on transfers of
funds
• a $2 billion commercial paper program for the
private placement of U.S. dollar denominated
commercial paper in the United States, and
• a $2 billion Euro-commercial paper program for
the issuance of commercial paper in a variety
of currencies.
At December 31, 2021, no amount was outstand-
ing under the $2 billion program in the United
Currency and other local regulatory limitations
related to the transfer of funds exist in a number
of countries where we operate, including: China,
Egypt, India, Malaysia, the Philippines, the Russian
Federation, South Africa, South Korea, Taiwan
(Chinese Taipei), Thailand and Turkey. Funds,
other than regular dividends, fees or loan repay-
ments, cannot be readily transferred offshore
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
155
from these countries and are therefore deposited
and used for working capital needs in those
countries. In addition, there are certain countries
where, for tax reasons, it is not considered opti-
mal to transfer the cash offshore.
As a consequence, these funds are not available
within our Corporate Treasury Operations to meet
short-term cash obligations outside the relevant
country. The above described funds are reported
as cash in our Consolidated Balance Sheets, but
we do not consider these funds immediately
available for the repayment of debt outside the
respective countries where the cash is situated,
including those described above. At December 31,
2021 and 2020, the balance of “Cash and equiva-
lents” and “Marketable securities and other
short-term investments” under such limitations
(either regulatory or sub-optimal from a tax
perspective) totaled approximately $2,074 million
and $1,751 million, respectively.
During 2021, we continued to direct our subsidiar-
ies in countries with restrictions to place such
cash with our core banks or investment grade
banks, in order to minimize credit risk on such
cash positions. We continue to closely monitor
the situation to ensure bank counterparty risks
are minimized.
—
Financial position
Balance sheets
December 31, ($ in millions)
2021
2020 % Change
Current assets
Cash and equivalents
4,159
3,278
Restricted cash
30
323
Marketable securities and
short-term investments
Receivables, net
Contract assets
Inventories, net
Prepaid expenses
Other current assets
Current assets held for sale
and in discontinued
operations
1,170
2,108
6,551
6,820
990
985
4,880
4,469
206
573
201
760
136
282
Total current assets
18,695
19,226
27%
n.a.
(44)%
(4)%
1%
9%
2%
(25)%
(52)%
(3)%
For a discussion on Cash and equivalents, see
sections “Liquidity and Capital Resources—Prin-
cipal sources of funding” and “Cash flows” for
further details.
In 2021, the amount of cash subject to short-term
restrictions decreased as restrictions on cash of
$290 million were removed upon ABB completing
certain obligations in connection with the sale of
Power Grids to Hitachi. See “Note 3 - Discontinued
operations” to our Consolidated Financial
Statements.
Marketable securities and short-term investments
decreased in 2021. The reduction primarily re-
flects lower amounts placed in money market
funds classified as equity securities (see “Note 5
- Cash and equivalents, marketable securities and
short-term investments” to our Consolidated
Financial Statements).
Receivables, net, decreased 4 percent primarily
due to changes in foreign currencies. In local
currency, Receivables, net, remained flat.
Contract assets increased 1 percent (5 percent in
local currencies). The increase reflects higher
levels in the Process Automation and Motion
Business Areas. This was partially offset by lower
levels in the non-core businesses and in the
Robotics & Discrete Automation Business Area.
Inventories, net, increased 9 percent (15 percent
in local currencies). The increase reflects a signifi-
cant build-up of raw materials and some increases
in the price of components. Supply chain chal-
lenges and shortages in the availability of some
items have created the need to stockpile certain
key components and also have resulted in some
delays in completing and delivering finished
goods.
Current assets held for sale and in discontinued
operations decreased to $136 million from
$282 million. These amounts primarily relate to
working capital for certain contracts which
remain with ABB and are being executed for the
direct benefit of the Power Grids business. For
the details of the assets of the Power Grids busi-
ness see “Note 3 - Discontinued operations” to
our Consolidated Financial Statements.
156
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Restricted cash at December 31, 2021 and 2020,
represents certain amounts received on the sale
of the Power Grids business which have been
placed in escrow, pending resolution of certain of
our contractual obligations to Hitachi Ltd. See
“Note 3 - Discontinued operations” to our Consoli-
dated Financial Statements.
In 2021, Property, plant and equipment, net,
decreased 3 percent (increased 1 percent in local
currencies). The sale of the Mechanical Power
Transmission Division decreased Property, plant
and equipment, net, by 3 percent.
In 2021, Goodwill decreased 3 percent (2 percent
in local currencies). The sale of the Mechanical
Power Transmission Division reduced Goodwill by
3 percent. Acquisitions of businesses increased
Goodwill by 1 percent.
Intangible assets, net, decreased 25 percent
(22 percent in local currencies). The sale of the
Mechanical Power Transmission Division reduced
Intangible assets, net, by 10 percent. Acquisitions
of businesses increased Intangible assets, net, by
3 percent. For additional information on goodwill
and intangible assets see “Note 11 - Goodwill and
intangible assets” to our Consolidated Financial
Statements.
The balance for Investment in equity-accounted
companies at December 31, 2021 and 2020, pri-
marily represents our remaining 19.9 percent
interest in the Hitachi Energy joint venture. For
additional information on investments in
equity-accounted companies see “Note 4 - Acqui-
sitions, divestments and equity-accounted
companies” to our Consolidated Financial
Statements.
Prepaid pension and other employee benefits
increased 148 percent (150 percent in local curren-
cies). For additional information on Pension and
employee benefits see “Note 17 - Employee bene-
fits” to our Consolidated Financial Statements.
In 2021, Deferred taxes, increased 40 percent
(50 percent in local currencies). For details on
deferred tax assets see “Note 16 - Income taxes”
to our Consolidated Financial Statements.
December 31 ($ in millions)
2021
2020 % Change
Current liabilities
Accounts payable, trade
4,921
4,571
Contract liabilities
1,894
1,903
Short-term debt and current
maturities of long-term debt
1,384
1,293
8%
0%
7%
Current operating leases
230
270
(15)%
Provisions for warranties
1,005
1,035
Other provisions
1,386
1,519
Other current liabilities
4,367
4,181
Current liabilities held for
sale and in discontinued
operations
381
644
Total current liabilities
15,568
15,416
(3)%
(9)%
4%
(41)%
1%
Accounts payable, trade, increased 8 percent
(11 percent in local currencies) due primarily to
higher inventory purchases.
The increase in short-term debt in 2021 was due
to the reclassification to short-term of the
USD 1,250 million 2.875% Notes partially offset by
the repayment at maturity of both the USD
650 million 4.0% Notes and the CHF 350 million
2.25% Bonds.
Current operating leases includes the portion of
the operating lease liabilities that are due to be
paid in the next 12 months. For a summary of
operating lease liabilities, see “Note 14 - Leases”
to our Consolidated Financial Statements.
Provisions for warranties decreased 3 percent
(remained flat in local currencies). For details on
the change in the Provisions for warranties, see
“Note 15 - Commitments and contingencies” to
our Consolidated Financial Statements.
Current liabilities held for sale and in discontinued
operations decreased to $381 million from
$644 million. These amounts primarily relate to
certain working capital balances of the Power
Grids business as described above as well as
amounts recorded for certain guarantees pro-
vided for the benefit of Power Grids.
December 31, ($ in millions)
2021
2020 % Change
Non-current assets
Restricted cash, non-current
300
300
0%
Property, plant and
equipment, net
Operating lease right-of-use
assets
Investments in equity-
accounted companies
Prepaid pension and other
employee benefits
4,045
4,174
(3)%
895
969
(8)%
1,670
1,784
n.a.
892
360
Intangible assets, net
1,561
2,078
Goodwill
Deferred taxes
Other non-current assets
10,482
10,850
1,177
543
843
504
Total non-current assets
21,565 21,862
148%
(25)%
(3)%
40%
8%
(1)%
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
157
December 31, ($ in millions)
2021
2020 % Change
Non-current liabilities
Long-term debt
4,177
4,828
(13)%
Non-current operating
leases
Pension and other employee
benefits
689
731
(6)%
1,025
1,231
(17)%
Deferred taxes
685
661
Other non-current liabilities
2,116
2,025
Non-current liabilities held
for sale and in discontinued
operations
43
197
Total non-current liabilities
8,735
9,673
4%
4%
(78)%
(10)%
Long-term debt decreased 13 percent. This de-
crease reflects the reclassification to short-term
described above offset mostly by the issuance in
2021 of EUR 800 million 0% Notes. Long-term
debt also decreased 6 percent due to changes in
currency exchange rates. For additional informa-
tion on Long-term debt, see “Liquidity and Capital
Resources—Debt and interest rates” as well as
“Note 12 - Debt” to our Consolidated Financial
Statements.
Non-current operating leases includes the portion
of the operating lease liabilities that are due to be
paid in more than 12 months.
Pension and employee benefits decreased 17 per-
cent (12 percent in local currencies). For additional
information on Pension and employee benefits
see “Note 17 - Employee benefits” to our Consoli-
dated Financial Statements.
For a breakdown of Other non-current liabilities,
see “Note 13 - Other provisions, other current
liabilities and other non-current liabilities” to our
Consolidated Financial Statements.
Non-current liabilities held for sale and in discon-
tinued operations relate to the sale in 2020 of the
Power Grids business. The balance decreased
compared to 2020 due to reclassification to
current of certain amounts expected to be paid
within the next year. The remaining amount at
December 31, 2021, relates to certain amounts
which are expected to be payable in more than
one year. For the details of the liabilities of the
Power Grids business see “Note 3 - Discontinued
operations” to our Consolidated Financial
Statements.
Cash flows
The Consolidated Statements of Cash Flows are
shown on a continuing operations basis, with the
effects of discontinued operations shown in
aggregate for each major cash flow activity and
also include the impact from changes in re-
stricted cash.
The Consolidated Statements of Cash Flows can
be summarized as follows:
($ in millions)
2021
2020
2019
Net cash provided by operating
activities
Net cash provided by (used in)
investing activities
Net cash used in financing
activities
Effects of exchange rate changes
on cash and equivalents
Net change in cash and
equivalents and restricted cash
3,330
1,693
2,325
2,307
6,760
(815)
(4,968)
(8,175)
(1,383)
(81)
79
(28)
588
357
99
Operating activities
($ in millions)
Net income
2021
2020
2019
4,650
5,205
1,528
Loss (income) from discontinued
operations, net of tax
80 (4,860)
(438)
Depreciation and amortization
893
915
961
Total adjustments to reconcile
net income to net cash provided
by operating activities
(excluding depreciation and
amortization)
Total changes in operating
assets and liabilities
Net cash provided by
operating activities —
continuing operations
Net cash provided by (used
in) operating activities —
discontinued operations
(2,593)
263
220
308
352
(372)
3,338
1,875
1,899
(8)
(182)
426
Cash flows from operating activities in continuing
operations in 2021 provided net cash of
$3,338 million, an increase of 78 percent com-
pared to 2020. In 2021, we had significantly higher
cash effective net income (i.e. net income from
continuing operations adjusted for depreciation,
amortization and other non-cash items). The
higher cash effective net income is due partly to
the negative impacts in 2020 of payments made
to settle certain international pension plans. The
higher amount in 2021 was also driven by gener-
ally higher business volumes and higher
profitability. In 2021, changes in operating assets
and liabilities positively impacted cash flows
primarily due to the timing of payments of higher
accrued liabilities, including employee bonuses.
Cash paid for income taxes increased to
$1,292 million from $905 million, reflecting higher
current income taxes, including tax impacts from
the sales of businesses. In 2020, net cash pro-
vided by operating activities benefited
from a reduction of inventory levels (in local
currencies) and a more favorable timing of cash
flows on long-term projects.
158
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
In 2021, there were no significant cash flows from
operating activities of discontinued operations
while in 2020, there were net outflows of $182 mil-
lion. The amount in 2020 primarily reflects the
cash flows of the Power Grids business in the first
half of the year.
Investing activities
($ in millions)
2021
2020
2019
Purchases of investments
(1,528)
(5,933)
(748)
Purchases of property, plant and
equipment and intangible assets
Acquisition of businesses (net of
cash acquired) and increases in
cost- and equity-accounted
companies
Proceeds from sales of
investments
Proceeds from maturity of
investments
Proceeds from sales of property,
plant and equipment
Proceeds from sales of
businesses (net of transaction
costs and cash disposed) and
cost- and equity-accounted
companies
Net cash from settlement of
foreign currency derivatives
Other investing activities
Net cash provided by (used
in) investing activities —
continuing operations
Net cash provided by (used
in) investing activities —
discontinued operations
(820)
(694)
(762)
(241)
(121)
(22)
2,272
4,341
749
81
93
11
114
80
82
2,958
(136)
69
(121)
(23)
138
8
(76)
(23)
2,671 (2,272)
(651)
(364)
9,032
(164)
Net cash provided by investing activities for
continuing operations in 2021 was $2,671 million
compared to $2,272 million used in investing
activities during 2020. In 2021, we received pro-
ceeds of $2,958 million in connection with sales of
businesses, primarily from the sale of the Dodge
business. The amount in 2020 reflects the net
investment in money market funds of amounts
received from the sale of the Power Grids busi-
ness as well as cash payments for purchases of
property, plant and equipment. In 2021, we also
recorded net investing cash outflows of $121 mil-
lion for settlements of derivatives compared to
net inflows of $138 million in 2020.
The following presents purchases of property,
plant and equipment and intangible assets by
significant asset category:
($ in millions)
2021
2020
2019
Construction in progress
479
493
536
Purchase of machinery and
equipment
Purchase of land and buildings
Purchase of intangible assets
Purchases of property,
plant and equipment and
intangible assets
150
158
33
134
156
17
50
26
44
820
694
762
Cash expenditures for acquisitions of businesses
in 2021 primarily reflects the amount paid to
acquire ASTI. The divestment of the solar invert-
ers business resulted in a net cash outflow of
$143 million in 2020.
Cash flows from investing activities for discontin-
ued operations relates to the Power Grids
business. We sold this business in 2020 and
generated net cash proceeds of $9,168 million.
Certain amounts related to the purchase price
were subject to adjustment, including the final
settlement for working capital balances. In 2021,
certain elements of the purchase price were
finalized and we made payments related to the
purchase price and certain other obligations
totaling $364 million.
Financing activities
($ in millions)
2021
2020
2019
Net changes in debt with
maturities of 90 days or less
Increase in debt
Repayment of debt
Delivery of shares
(83)
(587)
164
1,400
343
2,406
(1,538)
(3,459)
(2,156)
826
412
10
—
Purchase of treasury stock
(3,708)
(3,048)
Dividends paid
(1,726)
(1,736)
(1,675)
Dividends paid to noncontrolling
shareholders
Other financing activities
Net cash used in financing
activities — continuing
operations
Net cash provided by (used
in) financing activities —
discontinued operations
(98)
(41)
(82)
(49)
(90)
13
(4,968)
(8,206) (1,328)
—
31
(55)
Our financing cash flow activities primarily in-
clude debt transactions (both from the issuance
of debt securities and borrowings directly from
banks), share transactions and payments of
distributions to controlling and noncontrolling
shareholders.
In 2021, the net outflow for debt with maturities
of 90 days or less related to net repayments of
amounts outstanding under the U.S. commercial
paper program and various local country
borrowings.
In 2021, “Increase in debt” primarily represents
the issuance of EUR 800 million 0% Notes due
2030 and borrowings under commercial paper
programs for terms longer than 90 days.
In 2021, “Repayment of debt” includes the repay-
ment at maturity of the USD 650 million 4.0%
Notes and the CHF 350 million 2.25% Bonds and
repayments under commercial paper programs
for terms longer than 90 days.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
159
“Delivery of shares” in 2021 reflects cash received
from the exercise of options in connection with
our Management Incentive Plan (resulting in a
delivery of 36 million shares) and in connection
with our Employee Share Acquisition Plan (result-
ing in a delivery of 1.7 million shares). All shares
were delivered out of Treasury stock.
In 2021, “Purchase of treasury stock” reflects
$2,680 million of cash payments to purchase
78 million of our own shares in connection with
both of the announced share buyback programs.
It also reflects $1,028 million paid to purchase
33 million shares on the open market during 2021.
Contractual obligations and
commitments
The contractual obligations presented in the table
below represent our estimates of future pay-
ments under fixed contractual obligations and
commitments. These amounts may differ from
those reported in our Consolidated Balance Sheet
at December 31, 2021. Changes in our business
needs, cancellation provisions and changes in
interest rates, as well as actions by third parties
and other factors, may cause these estimates to
change. Therefore, our actual payments in future
periods may vary from those presented below.
The table below summarizes certain of our cash
requirements for known contractual obligations
and principal and interest payments under our
debt instruments and purchase obligations at
December 31, 2021 and the timing thereof. For
details of future operating and finance lease
payments, see “Note 14 - Leases” to our Consoli-
dated Financial Statements.
December 31, ($ in millions)
Current
Non-
current
Total
Long-term debt obligations
1,271
4,091
5,362
Interest payments related to
long-term debt obligations
Purchase obligations
Total
73
3,500
638
992
711
4,492
4,844
5,721 10,565
In the table above, the Long-term debt obliga-
tions reflect the cash amounts to be repaid upon
maturity of those debt obligations. The cash
obligations above will differ from Long-term debt
due to the impacts of fair value hedge accounting
adjustments and premiums or discounts on
certain debt.
We have determined the interest payments re-
lated to long-term debt obligations by reference
to the payments due under the terms of our debt
obligations at the time such obligations were
incurred. However, we use interest rate swaps to
modify the interest characteristics of certain of
our debt obligations. The net effect of these
swaps may increase or decrease the actual
amount of our cash interest payment obligations,
which may differ from those stated in the above
table. For further details on our debt obligations
and the related hedges, see “Note 12 - Debt” to
our Consolidated Financial Statements.
Purchase obligations are defined as agreements
to purchase goods and services that are enforce-
able and legally binding, that specify all
significant terms, including the quantities to be
purchased, price provisions and the approximate
timing of the transactions. Purchase obligations
includes procurement contracts for raw materials,
sub-contracted work, supplies and services.
Purchase obligations include amounts recorded
as well as amounts that are not recorded in the
Consolidated Balance Sheets.
Off-balance sheet arrangements
Commercial commitments
We disclose the maximum potential exposure of
certain guarantees, as well as possible recourse
provisions that may allow us to recover from third
parties amounts paid out under such guarantees.
The maximum potential exposure does not allow
any discounting of our assessment of actual
exposure under the guarantees. The information
below reflects our maximum potential exposure
under the guarantees, which is higher than our
assessment of the expected exposure.
Guarantees
The following table provides quantitative data
regarding our third-party guarantees. The maxi-
mum potential payments represent a worst-case
scenario, and do not reflect our expected
outcomes.
December 31, ($ in millions)
Performance guarantees
Financial guarantees
Indemnification guarantees(2)
Total
Maximum
potential
payments(1)
2021
2020
4,540
6,726
52
136
339
177
4,728
7,242
(1) Maximum potential payments include amounts in both continu-
ing and discontinued operations.
(2) Certain indemnifications provided to Hitachi in connection with
the divestment of Power Grids are without limit.
The carrying amount of liabilities recorded in the
Consolidated Balance Sheets reflects our best
estimate of future payments, which we may incur
as part of fulfilling our guarantee obligations. In
160
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
respect of the above guarantees, the carrying
amounts of liabilities at December 31, 2021 and
2020, amounted to $156 million and $135 million,
respectively, the majority of which is included in
discontinued operations.
In addition, in the normal course of bidding for
and executing certain projects, we have entered
into standby letters of credit, bid/performance
bonds and surety bonds (collectively “perfor-
mance bonds”) with various financial institutions.
Customers can draw on such performance bonds
in the event that we do not fulfill our contractual
obligations. We would then have an obligation to
reimburse the financial institution for amounts
paid under the performance bonds. At Decem-
ber 31, 2021 and 2020, the total outstanding
performance bonds aggregated to $3.6 billion
and $4.3 billion, respectively, of which $0.1 billion
and $0.3 billion, respectively, relate to discontin-
ued operations. There have been no significant
amounts reimbursed to financial institutions
under these types of arrangements in 2021
and 2020.
For additional descriptions of our performance,
financial and indemnification guarantees see
“Note 15 - Commitments and contingencies” to
our Consolidated Financial Statements.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
161
—
E M P T Y PAG E A D D E D I N T E N T I O N A L LY
162
Consolidated
Financial
Statements
of ABB Group
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
163
—
Report of management on internal
control over financial reporting
The Board of Directors and Management of ABB
Ltd and its consolidated subsidiaries (“ABB”) are
responsible for establishing and maintaining
adequate internal control over financial reporting.
ABB’s internal control over financial reporting is
designed to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation and fair presentation of the
published Consolidated Financial Statements in
accordance with U.S. generally accepted
accounting principles.
Because of its inherent limitations, internal
control over financial reporting may not prevent
or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are
subject to the risk that controls may become
inadequate because of changes in conditions, or
that the degree of compliance with ABB’s policies
and procedures may deteriorate.
Management conducted an assessment of the
effectiveness of internal control over financial
reporting based on the criteria established in
Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework).
Based on this assessment, management has
concluded that ABB’s internal control over
financial reporting was effective as of December
31, 2021.
KPMG AG, the independent registered public
accounting firm who audited the Company’s
consolidated financial statements, has issued an
opinion on the effectiveness of ABB’s internal
control over financial reporting as of December
31, 2021, which is included on page 168-169 of this
Annual Report.
Björn Rosengren
Timo Ihamuotila
Chief Executive Officer
Chief Financial Officer
Zurich, February 24, 2022
164
Report of the Statutory Auditor To the General Meeting of ABB Ltd, Zurich Report of the Statutory Auditor on the Consolidated Financial Statements Opinion As statutory auditor, we have audited the accompanying consolidated financial statements of ABB Ltd and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated income statements, statements of comprehensive income, cash flows and changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements on pages (171 to 243). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in accordance with U.S. Generally Accepted Accounting Principles, and comply with Swiss law. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm and are required to be independent with respect to the Group. We conducted our audits in accordance with Swiss law, Swiss Auditing Standards and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 165
Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue recognition for long-term fixed price contracts using the percentage-of-completion method Valuation of unrecognized tax benefits related to transfer pricing Revenue recognition for long-term fixed price contracts using the percentage-of-completion method Critical Audit Matter Our response As discussed in Note 2 to the consolidated financial statements, revenues from the sale of customized products, including long-term fixed price contracts for integrated automation and electrification systems and solutions are generally recognized on an over time basis using the percentage of completion method of accounting. For the year ended December 31, 2021, the Group reported $23,745 million of revenue from sales of products, a portion of which related to long-term fixed price contracts. We identified the evaluation of estimated costs to complete related to revenue recognition of long-term fixed price contracts using the percentage of-completion method of accounting as a critical audit matter. In particular, a high degree of subjective auditor judgment was required to evaluate the Group’s estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs to complete the contracts. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s revenue process including controls over the development of estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs. We assessed the Group’s historical ability to accurately estimate costs to complete by comparing historical estimates to actual results for a selection of contracts. We evaluated the estimate of remaining costs to be incurred for a selection of contracts by assessing progress to date and the nature and complexity of work to be performed through interviewing project managers and inspecting correspondence, if any, between the Group and the customer and/or subcontractors. For further information on revenue recognition on long-term projects refer to the following: — Note 2 “Significant accounting policies” 166
Valuation of unrecognized tax benefits related to transfer pricing Critical Audit Matter Our response As discussed in Note 2 to the consolidated financial statements, the Group operates across multiple tax jurisdictions, is exposed to numerous tax laws and is regularly subject to tax audits by local tax authorities. As discussed in Note 16, the Group reported total unrecognized tax benefits of $1,322 million, a portion of which related to unrecognized tax benefits related to transfer pricing. We identified the valuation of unrecognized tax benefits related to transfer pricing as a critical audit matter. A high degree of subjective auditor judgment and specialized skills and knowledge was required in assessing the Group’s interpretation of international tax practice and developments in relation to intragroup charges and intragroup sales of goods and services and the Group’s ability to estimate the ultimate resolution of the tax positions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s tax process including controls related to the Group’s interpretation of international tax practice and developments in relation to intragroup charges and intragroup sale of goods and services and the estimate of the related unrecognized tax benefits. We tested the identified costs that have a higher likelihood of being challenged by tax authorities associated with intragroup arrangements and potential price adjustments for intragroup sales of goods and services. We involved tax professionals with specialized skills and knowledge, who assisted in evaluating (1) the Group’s historical ability to accurately estimate the unrecognized tax benefits related to transfer pricing by comparing historical tax positions to subsequent settlements (2) the Group’s transfer pricing documentation and methodology for compliance with applicable laws and regulations by assessing the documentation and relevant agreements, (3) the impact of new information or changes in international tax practice and developments on historical tax positions, and (4) developing an independent expectation of the unrecognized tax benefits estimate relating to current year tax positions in connection with the Group’s intragroup charges and intragroup sales of goods and services and comparing the results to the Group’s assessment. For further information on unrecognized tax benefits refer to the following: — Note 2 “Significant accounting policies” — Note 16 “Income taxes” Report on Other Legal and Regulatory Requirements We are a public accounting firm registered with the Swiss Federal Audit Oversight Authority (FAOA) and the PCAOB and we confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA). We are independent of the Group in accordance with Swiss law (article 728 CO and article 11 AOA) and U.S. federal securities laws as well as the applicable rules and regulations of the Swiss audit profession, the U.S. Securities and Exchange Commission and the PCAOB, and we have fulfilled our other ethical responsibilities in accordance with these requirements. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. 167
We have also audited, in accordance with the standards of the PCAOB, the Group’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2022, expressed an unqualified opinion on the effectiveness of the Group’s internal control over financial reporting. We have served as the Group’s auditor since 2018. KPMG AG Hans-Dieter Krauss Mohammad Nafeie Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 24, 2022 KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich © 2022 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 168
Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ABB Ltd Opinion on Internal Control Over Financial Reporting We have audited ABB Ltd and its subsidiaries’ (the Group) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. We also have audited, in accordance with Swiss law, Swiss Auditing Standards and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Group as of December 31, 2021 and 2020, the related consolidated income statements, statements of comprehensive income, cash flows and changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2022, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Group’s Board of Directors and management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of management on internal control over financial reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 169
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. KPMG AG Hans-Dieter Krauss Mohammad Nafeie Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 24, 2022 KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich © 2022 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 170
—
E M P T Y PAG E A D D E D I N T E N T I O N A L LY
E M P T Y PAG E A D D E D I N T E N T I O N A L LY
—
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
171
—
ABB Ltd Consolidated Income
Statements
Year ended December 31 ($ in millions, except per share data in $)
Sales of products
Sales of services and other
Total revenues
Cost of sales of products
Cost of services and other
Total cost of sales
Gross profit
Selling, general and administrative expenses
Non-order related research and development expenses
Impairment of goodwill
Other income (expense), net
Income from operations
Interest and dividend income
Interest and other finance expense
Losses from extinguishment of debt
Non-operational pension (cost) credit
Income from continuing operations before taxes
Income tax expense
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Net income attributable to noncontrolling interests
Net income attributable to ABB
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
Diluted earnings per share attributable to ABB shareholders
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
2021
23,745
5,200
28,945
(16,364)
(3,114)
(19,478)
9,467
(5,162)
(1,219)
—
2,632
5,718
51
(148)
—
166
5,787
(1,057)
4,730
(80)
4,650
(104)
4,546
4,625
(79)
4,546
2.31
(0.04)
2.27
2.29
(0.04)
2.25
2,001
2,019
2020
21,214
4,920
26,134
2019
22,554
5,424
27,978
(15,229)
(15,811)
(3,027)
(3,261)
(18,256)
(19,072)
7,878
(4,895)
(1,127)
8,906
(5,447)
(1,198)
(311)
48
1,593
51
(240)
(162)
(401)
841
(496)
345
4,860
5,205
(59)
5,146
294
4,852
5,146
0.14
2.30
2.44
0.14
2.29
2.43
2,111
2,119
—
(323)
1,938
67
(215)
—
72
1,862
(772)
1,090
438
1,528
(89)
1,439
1,043
396
1,439
0.49
0.19
0.67
0.49
0.19
0.67
2,133
2,135
172
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
ABB Ltd Consolidated Statements
of Comprehensive Income
Year ended December 31 ($ in millions)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Foreign currency translation adjustments
Changes attributable to divestments
Foreign currency translation adjustments
Available-for-sale securities:
Net unrealized gains (losses) arising during the year
Reclassification adjustments for net (gains) losses included in net income
Changes attributable to divestments
Unrealized gains (losses) on available-for-sale securities
Pension and other postretirement plans:
Prior service credits arising during the year
Net actuarial gains (losses) arising during the year
Amortization of prior service credit included in net income
Amortization of net actuarial loss included in net income
Net losses from settlements and curtailments included in net income
Changes attributable to divestments
Pension and other postretirement plan adjustments
Derivative instruments and hedges:
Net unrealized gains arising during the year
Reclassification adjustments for net (gains) losses included in net income
Changes in derivative instruments and hedges
Total other comprehensive income (loss), net of tax
Total comprehensive income, net of tax
Total comprehensive income attributable to noncontrolling interests, net of tax
Total comprehensive income attributable to ABB, net of tax
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
2021
4,650
2020
5,205
2019
1,528
(521)
(9)
(530)
(10)
(5)
—
(15)
—
411
(14)
69
7
(6)
467
8
(13)
(5)
(83)
4,567
(108)
4,459
498
519
1,017
24
(14)
(3)
7
43
(200)
(11)
88
518
151
589
2
—
2
1,615
6,820
(86)
6,734
(130)
(2)
(132)
14
—
—
14
6
(220)
(28)
68
32
—
(142)
20
(9)
11
(249)
1,279
(83)
1,196
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
173
—
ABB Ltd Consolidated Balance
Sheets
December 31 ($ in millions, except share data)
Cash and equivalents
Restricted cash
Marketable securities and short-term investments
Receivables, net
Contract assets
Inventories, net
Prepaid expenses
Other current assets
Current assets held for sale and in discontinued operations
Total current assets
Restricted cash, non-current
Property, plant and equipment, net
Operating lease right-of-use assets
Investments in equity-accounted companies
Prepaid pension and other employee benefits
Intangible assets, net
Goodwill
Deferred taxes
Other non-current assets
Total assets
Accounts payable, trade
Contract liabilities
Short-term debt and current maturities of long-term debt
Current operating leases
Provisions for warranties
Other provisions
Other current liabilities
Current liabilities held for sale and in discontinued operations
Total current liabilities
Long-term debt
Non-current operating leases
Pension and other employee benefits
Deferred taxes
Other non-current liabilities
Non-current liabilities held for sale and in discontinued operations
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Common stock, CHF 0.12 par value
(2,053 million and 2,168 million shares issued at December 31, 2021 and 2020, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost
(95 million and 137 million shares at December 31, 2021 and 2020, respectively)
Total ABB stockholders’ equity
Noncontrolling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
2021
4,159
30
1,170
6,551
990
4,880
206
573
136
2020
3,278
323
2,108
6,820
985
4,469
201
760
282
18,695
19,226
300
4,045
895
1,670
892
1,561
10,482
1,177
543
300
4,174
969
1,784
360
2,078
10,850
843
504
40,260
41,088
4,921
1,894
1,384
230
1,005
1,386
4,367
381
4,571
1,903
1,293
270
1,035
1,519
4,181
644
15,568
15,416
4,177
689
1,025
685
2,116
43
4,828
731
1,231
661
2,025
197
24,303
25,089
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
40,260
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
41,088
174
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
ABB Ltd Consolidated Statements
of Cash Flows
Year ended December 31 ($ in millions)
2021
2020
2019
Operating activities:
Net income
Loss (income) from discontinued operations, net of tax
Adjustments to reconcile net income to net cash provided by operating activities:
4,650
5,205
80
(4,860)
1,528
(438)
Depreciation and amortization
Impairment of goodwill
Changes in fair values of investments
Pension and other employee benefits
Deferred taxes
Losses from extinguishment of debt
Loss (income) from equity-accounted companies
Net loss (gain) from derivatives and foreign exchange
Net gain from sale of property, plant and equipment
Net loss (gain) from sale of businesses
Fair value adjustment on assets and liabilities held for sale
Other
Changes in operating assets and liabilities:
Trade receivables, net
Contract assets and liabilities
Inventories, net
Accounts payable, trade
Accrued liabilities
Provisions, net
Income taxes payable and receivable
Other assets and liabilities, net
Net cash provided by operating activities — continuing operations
Net cash provided by (used in) operating activities — discontinued operations
Net cash provided by operating activities
Investing activities:
Purchases of investments
Purchases of property, plant and equipment and intangible assets
Acquisition of businesses (net of cash acquired) and increases in cost- and
equity-accounted companies
Proceeds from sales of investments
Proceeds from maturity of investments
Proceeds from sales of property, plant and equipment
Proceeds from sales of businesses (net of transaction costs and cash disposed) and
cost- and equity-accounted companies
Net cash from settlement of foreign currency derivatives
Other investing activities
Net cash provided by (used in) investing activities — continuing operations
Net cash provided by (used in) investing activities — discontinued operations
Net cash provided by (used in) investing activities
893
—
(123)
(216)
(289)
—
100
49
(38)
(2,193)
—
117
(142)
29
(771)
659
454
(48)
117
10
3,338
(8)
3,330
915
311
(99)
50
(280)
162
66
(2)
(37)
2
33
57
(100)
186
196
(13)
(92)
243
(76)
8
1,875
(182)
1,693
(1,528)
(820)
(5,933)
(694)
(241)
2,272
81
93
2,958
(121)
(23)
2,671
(364)
2,307
(121)
4,341
11
114
(136)
138
8
(2,272)
9,032
6,760
961
—
(5)
(102)
(83)
—
(8)
1
(51)
(55)
421
102
(202)
128
(182)
130
(76)
(36)
(3)
(131)
1,899
426
2,325
(748)
(762)
(22)
749
80
82
69
(76)
(23)
(651)
(164)
(815)
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
175
Year ended December 31 ($ in millions)
2021
2020
2019
Financing activities:
Net changes in debt with maturities of 90 days or less
Increase in debt
Repayment of debt
Delivery of shares
Purchase of treasury stock
Dividends paid
Dividends paid to noncontrolling shareholders
Other financing activities
(83)
1,400
(587)
343
(1,538)
(3,459)
826
(3,708)
(1,726)
(98)
(41)
412
(3,048)
(1,736)
(82)
(49)
164
2,406
(2,156)
10
—
(1,675)
(90)
13
Net cash used in financing activities — continuing operations
(4,968)
(8,206)
(1,328)
Net cash provided by (used in) financing activities — discontinued operations
—
31
(55)
Net cash used in financing activities
(4,968)
(8,175)
(1,383)
Effects of exchange rate changes on cash and equivalents and restricted cash
Net change in cash and equivalents and restricted cash
Cash and equivalents and restricted cash, beginning of period
Cash and equivalents and restricted cash, end of period
Supplementary disclosure of cash flow information:
Interest paid
Income taxes paid
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
(81)
588
3,901
4,489
132
1,292
79
357
3,544
3,901
189
905
(28)
99
3,445
3,544
284
1,005
176
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
ABB Ltd Consolidated Statements
of Changes in Stockholders’ Equity
Years ended December 31, 2021, 2020 and 2019 ($ in millions)
Balance at January 1, 2019
Adoption of accounting standard update
Comprehensive income:
Net income
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Total comprehensive income
Changes in noncontrolling interests
Fair value adjustment to noncontrolling interests recognized in business combination
Changes in noncontrolling interests in connection with divestments
Dividends to noncontrolling shareholders
Dividends to shareholders
Share-based payment arrangements
Delivery of shares
Call options
Balance at December 31, 2019
Adoption of accounting standard update
Comprehensive income:
Net income
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Total comprehensive income
Changes in noncontrolling interests
Changes in noncontrolling interests in connection with divestments
Dividends to noncontrolling shareholders
Dividends to shareholders
Share-based payment arrangements
Purchase of treasury stock
Delivery of shares
Other
Balance at December 31, 2020
Comprehensive income:
Net income
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Total comprehensive income
Changes in noncontrolling interests
Dividends to noncontrolling shareholders
Dividends to shareholders
Cancellation of treasury shares
Share-based payment arrangements
Purchase of treasury stock
Delivery of shares
Other
Balance at December 31, 2021
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
Common
stock
188
Additional
paid-in capital
56
Retained
earnings
Accumulated other
comprehensive loss
Treasury stock
stockholders’ equity
(820)
interests
582
Total ABB
Noncontrolling
Total stockholders’
(17)
55
(24)
4
73
(16)
54
(24)
(3)
83
(37)
(17)
60
(84)
16
22
188
188
(10)
178
19,839
36
1,439
(1,675)
19,640
(82)
5,146
(1,758)
22,946
4,546
(20)
(1,730)
(3,130)
(136)
22,477
(5,311)
(36)
(126)
(142)
14
11
(5,590)
990
589
7
2
(4,002)
(534)
(15)
467
(5)
(4,088)
34
(785)
(3,181)
436
(3,530)
3,157
(3,682)
1,046
(3,010)
13,952
—
1,439
(126)
(142)
14
11
1,196
(17)
—
—
—
55
10
4
(1,675)
13,526
(82)
5,146
990
589
7
2
6,734
(16)
—
—
54
(1,758)
(3,181)
412
(3)
15,685
4,546
(534)
(15)
467
(5)
4,459
(57)
—
(1,730)
(3,682)
—
60
826
16
15,579
equity
14,534
—
1,528
(132)
(142)
14
11
1,279
(5)
(44)
(55)
(122)
(1,675)
55
10
4
13,980
(91)
5,205
1,017
589
6,820
7
2
3
(138)
(98)
(1,758)
54
(3,181)
412
(3)
15,999
4,650
(530)
(15)
467
(5)
4,567
(2)
(98)
(1,730)
(3,682)
—
60
826
16
15,957
89
(6)
83
12
(44)
(55)
(122)
454
(9)
59
27
86
19
(138)
(98)
314
104
4
108
55
(98)
378
—
ABB Ltd Consolidated Statements
of Changes in Stockholders’ Equity
Common
stock
188
Additional
paid-in capital
56
Years ended December 31, 2021, 2020 and 2019 ($ in millions)
Balance at January 1, 2019
Adoption of accounting standard update
Comprehensive income:
Net income
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Total comprehensive income
Changes in noncontrolling interests
Fair value adjustment to noncontrolling interests recognized in business combination
Changes in noncontrolling interests in connection with divestments
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Total comprehensive income
Changes in noncontrolling interests
Changes in noncontrolling interests in connection with divestments
Foreign currency translation adjustments, net of tax
Effect of change in fair value of available-for-sale securities, net of tax
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax
Change in derivative instruments and hedges, net of tax
Dividends to noncontrolling shareholders
Dividends to shareholders
Share-based payment arrangements
Delivery of shares
Call options
Balance at December 31, 2019
Adoption of accounting standard update
Comprehensive income:
Net income
Dividends to noncontrolling shareholders
Dividends to shareholders
Share-based payment arrangements
Purchase of treasury stock
Delivery of shares
Other
Balance at December 31, 2020
Comprehensive income:
Net income
Total comprehensive income
Changes in noncontrolling interests
Dividends to noncontrolling shareholders
Dividends to shareholders
Cancellation of treasury shares
Share-based payment arrangements
Purchase of treasury stock
Delivery of shares
Other
Balance at December 31, 2021
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
188
188
(10)
178
(17)
55
(24)
4
73
(16)
54
(24)
(3)
83
(37)
(17)
60
(84)
16
22
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
177
Retained
earnings
Accumulated other
comprehensive loss
19,839
36
1,439
(1,675)
19,640
(82)
5,146
(1,758)
22,946
4,546
(20)
(1,730)
(3,130)
(136)
22,477
(5,311)
(36)
(126)
14
(142)
11
(5,590)
990
7
589
2
(4,002)
(534)
(15)
467
(5)
(4,088)
Treasury stock
(820)
34
(785)
(3,181)
436
(3,530)
3,157
(3,682)
1,046
(3,010)
Total ABB
stockholders’ equity
Noncontrolling
interests
Total stockholders’
equity
13,952
—
1,439
(126)
14
(142)
11
1,196
(17)
—
—
—
(1,675)
55
10
4
13,526
(82)
5,146
990
7
589
2
6,734
(16)
—
—
(1,758)
54
(3,181)
412
(3)
15,685
4,546
(534)
(15)
467
(5)
4,459
(57)
—
(1,730)
—
60
(3,682)
826
16
15,579
582
89
(6)
83
12
(44)
(55)
(122)
454
(9)
59
27
86
19
(138)
(98)
314
104
4
108
55
(98)
378
14,534
—
1,528
(132)
14
(142)
11
1,279
(5)
(44)
(55)
(122)
(1,675)
55
10
4
13,980
(91)
5,205
1,017
7
589
2
6,820
3
(138)
(98)
(1,758)
54
(3,181)
412
(3)
15,999
4,650
(530)
(15)
467
(5)
4,567
(2)
(98)
(1,730)
—
60
(3,682)
826
16
15,957
178
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Notes to the Consolidated
Financial Statements
—
Note 1
The Company
ABB Ltd and its subsidiaries (collectively, the Company) together form a leading global technology
company, connecting software to its electrification, robotics, automation and motion portfolio to drive
performance to new levels.
—
Note 2
Significant accounting policies
The following is a summary of significant accounting policies followed in the preparation of these
Consolidated Financial Statements.
Basis of presentation
The Consolidated Financial Statements are prepared in accordance with United States of America
(United States or U.S.) generally accepted accounting principles (U.S. GAAP) and are presented in United
States dollars ($ or USD) unless otherwise stated. Due to rounding, numbers presented may not add to
the totals provided. The par value of capital stock is denominated in Swiss francs.
Reclassifications
Certain amounts reported for prior years in the Consolidated Financial Statements and the
accompanying Notes have been reclassified to conform to the current year’s presentation. These
changes primarily relate to the reallocation of certain real estate assets, previously reported within
Corporate and Other, into the operating segments which utilize the assets.
Scope of consolidation
The Consolidated Financial Statements include the accounts of ABB Ltd and companies which are
directly or indirectly controlled by ABB Ltd. Additionally, the Company consolidates variable interest
entities if it has determined that it is the primary beneficiary. Intercompany accounts and transactions
are eliminated. Investments in joint ventures and affiliated companies in which the Company has the
ability to exercise significant influence over operating and financial policies (generally through direct or
indirect ownership of 20 percent to 50 percent of the voting rights), are recorded in the Consolidated
Financial Statements using the equity method of accounting.
Translation of foreign currencies and foreign exchange transactions
The functional currency for most of the Company’s subsidiaries is the applicable local currency. The
translation from the applicable functional currencies into the Company’s reporting currency is
performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for
income statement accounts using average exchange rates prevailing during the year. The resulting
translation adjustments are excluded from the determination of earnings and are recognized in
“Accumulated other comprehensive loss” until the subsidiary is sold, substantially liquidated or
evaluated for impairment in anticipation of disposal.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
179
Foreign currency exchange gains and losses, such as those resulting from foreign currency
denominated receivables or payables, are included in the determination of earnings, except as they
relate to intercompany loans that are equity-like in nature with no reasonable expectation of repayment,
which are recognized in “Accumulated other comprehensive loss”. Exchange gains and losses recognized
in earnings are included in “Total revenues”, “Total cost of sales”, “Selling, general and administrative
expenses” or “Interest and other finance expense” consistent with the nature of the underlying item.
Discontinued operations
The Company reports a disposal, or planned disposal, of a component or a group of components
as a discontinued operation if the disposal represents a strategic shift that has or will have a major
effect on the Company’s operations and financial results. A strategic shift could include a disposal
of a major geographical area, a major line of business or other major parts of the
Company. A component may be a reportable segment or an operating segment, a reporting
unit, a subsidiary, or an asset group.
The assets and liabilities of a component reported as a discontinued operation are presented
separately as held for sale and in discontinued operations in the Company’s Consolidated
Balance Sheets.
Interest expense that is not directly attributable to or related to the Company’s continuing business or
discontinued business is allocated to discontinued operations based on the ratio of net assets to be
sold less debt that is required to be paid as a result of the planned disposal transaction to the sum of
total net assets of the Company plus consolidated debt. General corporate overhead is not allocated to
discontinued operations (see Note 3).
Operating cycle
A portion of the Company’s activities (primarily long-term system integration activities) has an
operating cycle that exceeds one year. For classification of current assets and liabilities related to such
activities, the Company elected to use the duration of the individual contracts as its operating cycle.
Accordingly, there are accounts receivable, inventories and provisions related to these contracts which
will not be realized within one year that have been classified as current.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
assumptions and estimates that directly affect the amounts reported in the Consolidated Financial
Statements and the accompanying Notes. These accounting assumptions and estimates include:
• growth rates, discount rates and other assumptions used to determine impairment of long-lived
assets and in testing goodwill for impairment,
• estimates to determine valuation allowances for deferred tax assets and amounts recorded for
unrecognized tax benefits,
• assumptions used in determining inventory obsolescence and net realizable value,
• estimates and assumptions used in determining the initial fair value of retained noncontrolling
interest and certain obligations in connection with divestments,
• estimates and assumptions used in determining the fair values of assets and liabilities assumed in
business combinations,
• assumptions used in the determination of corporate costs directly attributable to
discontinued operations,
• estimates of loss contingencies associated with litigation or threatened litigation and other claims
and inquiries, environmental damages, product warranties, self-insurance reserves, regulatory and
other proceedings,
• estimates used to record expected costs for employee severance in connection with
restructuring programs,
• estimates related to credit losses expected to occur over the remaining life of financial assets such as
trade and other receivables, loans and other instruments,
• assumptions used in the calculation of pension and postretirement benefits and the fair value of
pension plan assets, and
180
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
• assumptions and projections, principally related to future material, labor and project-related
overhead costs, used in determining the percentage-of-completion on projects where revenue is
recognized over time, as well as the amount of variable consideration the Company expects to be
entitled to.
The actual results and outcomes may differ from the Company’s estimates and assumptions.
Cash and equivalents
Cash and equivalents include highly liquid investments with maturities of three months or less at the
date of acquisition.
Currency and other local regulatory limitations related to the transfer of funds exist in a number of
countries where the Company operates. Funds, other than regular dividends, fees or loan repayments,
cannot be readily transferred abroad from these countries and are therefore deposited and used for
working capital needs locally. These funds are included in cash and equivalents as they are not
considered restricted.
Cash and equivalents that are subject to contractual restrictions or other legal obligations and are not
readily available are classified as “Restricted cash”.
Marketable securities and short-term investments
Management determines the appropriate classification of held-to-maturity and available-for-sale debt
securities at the time of purchase. Debt securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity. Held-to-maturity debt securities
are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to
maturity computed under the effective interest method. Such accretion or amortization is included in
“Interest and dividend income”. Marketable debt securities not classified as held-to-maturity are
classified as available-for-sale and reported at fair value.
Unrealized gains and losses on available-for-sale debt securities are excluded from the determination of
earnings and are instead recognized in the “Accumulated other comprehensive loss” component of
stockholders’ equity, net of tax, until realized. Realized gains and losses on available-for-sale debt
securities are computed based upon the historical cost of these securities, using the specific
identification method.
Marketable debt securities are classified as either “Cash and equivalents” or “Marketable securities and
short-term investments” according to their maturity at the time of acquisition.
Marketable equity securities are generally classified as “Marketable securities and short-term
investments”, however, any marketable securities held as a long-term investment rather than as an
investment of excess liquidity are classified as “Other non-current assets”. Equity securities are
measured at fair value with fair value changes reported in net income. Fair value changes for equity
securities are generally reported in “Interest and other finance expense”, however, fair value changes for
certain equity securities classified as long-term investments are reported in “Other income (expense),
net”.
For debt securities classified as available-for-sale where fair value has declined below amortized cost
due to credit losses, the Company records an allowance for expected credit losses and adjusts the
allowance in subsequent periods in “Interest and other finance expense”. All fair value changes other
than those related to credit risk are reported in “Accumulated other comprehensive loss” until the
security is sold.
In addition, equity securities without readily determinable fair values are remeasured if there is an
observable price change in an orderly transaction for the same investment, or if a qualitative
assessment indicates that the investment is impaired and the fair value of the investment is less than
its carrying amount. Similar to other fair value changes as described above, depending on the nature of
the investment, this fair value change is either recorded in “Other income (expense), net” or “Interest
and other finance expense”.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
181
Accounts receivable and allowance for expected credit losses
Accounts receivable are recorded at the invoiced amount. The Company has a group-wide policy on the
management of credit risk. The policy includes a credit assessment methodology to assess the
creditworthiness of customers and assign to those customers a risk category. Third-party agencies’
ratings are considered, if available. For customers where agency ratings are not available, the
customer’s most recent financial statements, payment history and other relevant information are
considered in the assignment to a risk category. Customers are assessed at least annually or more
frequently when information on significant changes in the customer’s financial position becomes
known. In addition to the assignment to a risk category, a credit limit per customer is set.
The Company recognizes an allowance for credit losses to present the net amount of receivables
expected to be collected at the balance sheet date. The allowance is based on the credit losses
expected to arise over the asset’s contractual term taking into account historical loss experience,
customer-specific data as well as forward looking estimates. The Company’s accounts receivable are
first grouped by the individual legal entity which generally has a geographic concentration of
receivables, resulting in different risk levels for different entities. Receivables are then further
subdivided within the entity into pools based on similar risk characteristics to estimate expected credit
losses. Expected credit losses are estimated individually when the related assets do not share similar
risk characteristics.
Accounts receivable are written off when deemed uncollectible and are recognized as a deduction from
the allowance for credit losses. Expected recoveries, which are not to exceed the amount previously
written off, are considered in determining the allowance balance at the balance sheet date.
The Company, in its normal course of business, transfers receivables to third parties, generally without
recourse. The transfer is accounted for as a sale when the Company has surrendered control over the
receivables. Control is deemed to have been surrendered when (i) the transferred receivables have been
put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other
receivership, (ii) the third-party transferees have the right to pledge or exchange the transferred
receivables, and (iii) the Company has relinquished effective control over the transferred receivables
and does not retain the ability or obligation to repurchase or redeem the transferred receivables. At the
time of sale, the sold receivables are removed from the Consolidated Balance Sheets and the related
cash inflows are classified as operating activities in the Consolidated Statements of Cash Flows. Costs
associated with the sale of receivables, including the related gains and losses from the sales, are
included in “Interest and other finance expense”. Transfers of receivables that do not meet the
requirements for treatment as sales are accounted for as secured borrowings and the related cash
flows are classified as financing activities in the Consolidated Statements of Cash Flows.
Concentrations of credit risk
The Company sells a broad range of products, systems, services and software to a wide range of
industrial, commercial and utility customers as well as various government agencies and
quasi-governmental agencies throughout the world. Concentrations of credit risk with respect to
accounts receivable are limited, as the Company’s customer base is comprised of a large number of
individual customers. Ongoing credit evaluations of customers’ financial positions are performed to
determine whether the use of credit support instruments such as guarantees, letters of credit or credit
insurance are necessary; collateral is not generally required. The Company maintains an allowance for
credit losses as discussed above in “Accounts receivable and allowance for expected credit losses”. Such
losses, in the aggregate, are in line with the Company’s expectations.
It is the Company’s policy to invest cash in deposits with banks throughout the world with certain
minimum credit ratings and in high quality, low risk, liquid investments. The Company actively manages
its credit risk by routinely reviewing the creditworthiness of the banks and the investments held. The
Company has not incurred significant credit losses related to such investments.
The Company’s exposure to credit risk on derivative financial instruments is the risk that the
counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that
require the establishment and periodic review of credit limits for individual counterparties. In addition,
the Company has entered into close-out netting agreements with most derivative counterparties.
Close-out netting agreements provide for the termination, valuation and net settlement of some or all
182
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
outstanding transactions between two counterparties on the occurrence of one or more pre-defined
trigger events. Derivative instruments are presented on a gross basis in the Consolidated
Financial Statements.
Revenue recognition
A customer contract exists if collectability under the contract is considered probable, the contract has
commercial substance, contains payment terms, as well as the rights and commitments of both parties,
and has been approved.
The Company offers arrangements with multiple performance obligations to meet its customers’
needs. These arrangements may involve the delivery of multiple products and/or performance of
services (such as installation and training) and the delivery and/or performance may occur at different
points in time or over different periods of time. Goods and services under such arrangements are
evaluated to determine whether they form distinct performance obligations and should be accounted
for as separate revenue transactions. The Company allocates the sales price to each distinct
performance obligation based on the price of each item sold in separate transactions at the inception
of the arrangement.
The Company generally recognizes revenues for the sale of non-customized products including circuit
breakers, modular substation packages, control products, motors, generators, drives, robots,
turbochargers, measurement and analytical instrumentation, and other goods which are manufactured
on a standardized basis at a point in time. Revenues are recognized at the point in time that the
customer obtains control of the goods, which is when it has taken title to the products and assumed
the risks and rewards of ownership of the products specified in the purchase order or sales agreement.
Generally, the transfer of title and risks and rewards of ownership are governed by the contractually
defined shipping terms. The Company uses various International Commercial Terms (as promulgated by
the International Chamber of Commerce) in its sales of products to third party customers, such as Ex
Works (EXW), Free Carrier (FCA) and Delivered Duty Paid (DDP).
Billing terms for these point in time contracts vary but generally coincide with delivery to the customer.
Payment is generally due upon receipt of the invoice, payable within 90 days or less.
The Company generally recognizes revenues for the sale of customized products, including integrated
automation and electrification systems and solutions, on an over time basis using the
percentage-of-completion method of accounting. These systems are generally accounted for as a single
performance obligation as the Company is required to integrate equipment and services into one
deliverable for the customer. Revenues are recognized as the systems are customized during the
manufacturing or integration process and as control is transferred to the customer as evidenced by the
Company’s right to payment for work performed or by the customer’s ownership of the work in process.
The Company principally uses the cost-to-cost method to measure progress towards completion on
contracts. Under this method, progress of contracts is measured by actual costs incurred in relation to
the Company’s best estimate of total costs based on the Company’s history of manufacturing or
constructing similar assets for customers. Estimated costs are reviewed and updated routinely for
contracts in progress to reflect changes in quantity or pricing of the inputs. The cumulative effect of
any change in estimate is recorded in the period when the change in estimate is determined. Contract
costs include all direct materials, labor and subcontract costs and indirect costs related to contract
performance, such as indirect labor, supplies, tools and depreciation costs.
The nature of the Company’s contracts for the sale of customized products gives rise to several types of
variable consideration, including claims, unpriced change orders, liquidated damages and penalties.
These amounts are estimated based upon the most likely amount of consideration to which the
customer or the Company will be entitled. The estimated amounts are included in the sales price to the
extent it is probable that a significant reversal of cumulative revenues recognized will not occur when
the uncertainty associated with the variable consideration is resolved. All estimates of variable
consideration are reassessed periodically. Back charges to suppliers or subcontractors are recognized
as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can
be reliably estimated.
Billing terms for these over-time contracts vary but are generally based on achieving specified
milestones. The differences between the timing of revenues recognized and customer billings result in
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
183
changes to contract assets and contract liabilities. Payment is generally due upon receipt of the invoice,
payable within 90 days or less. Contractual retention amounts billed to customers are generally due
upon expiration of the contractual warranty period.
Service revenues reflect revenues earned from the Company’s activities in providing services to
customers primarily subsequent to the sale and delivery of a product or complete system. Such
revenues consist of maintenance type contracts, repair services, equipment upgrades, field service
activities that include personnel and accompanying spare parts, training, and installation and
commissioning of products as a stand-alone service or as part of a service contract. The Company
generally recognizes revenues from service transactions as services are performed or at the point in
time that the customer obtains control of the spare parts. For long-term service contracts including
monitoring and maintenance services, revenues are recognized on a straight line basis over the term of
the contract consistent with the nature, timing and extent of the services or, if the performance pattern
is other than straight line, as the services are provided based on costs incurred relative to total
expected costs.
In limited circumstances the Company sells extended warranties that extend the warranty coverage
beyond the standard coverage offered on specific products. Revenues for these warranties are
recorded over the length of the warranty period based on their stand-alone selling price.
Billing terms for service contracts vary but are generally based on the occurrence of a service event.
Payment is generally due upon receipt of the invoice, payable within 90 days or less.
Revenues are reported net of customer rebates, early settlement discounts, and similar incentives.
Rebates are estimated based on sales terms, historical experience and trend analysis. The most
common incentives relate to amounts paid or credited to customers for achieving defined
volume levels.
Taxes assessed by a governmental authority that are directly imposed on revenue-producing
transactions between the Company and its customers, such as sales, use, value added and some excise
taxes, are excluded from revenues.
The Company does not adjust the contract price for the effects of a financing component if the
Company expects, at contract inception, that the time between control transfer and cash receipt is less
than 12 months.
Sales commissions are expensed immediately when the amortization period for the costs to obtain the
contract is less than a year.
Contract loss provisions
Losses on contracts are recognized in the period when they are identified and are based upon the
anticipated excess of contract costs over the related contract revenues.
Shipping and handling costs
Shipping and handling costs are recorded as a component of cost of sales.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in,
first-out method, the weighted-average cost method, or the specific identification method. Inventoried
costs are stated at acquisition cost or actual production cost, including direct material and labor and
applicable manufacturing overheads. Adjustments to reduce the cost of inventory to its net realizable
value are made, if required, for decreases in sales prices, obsolescence or similar reductions in value.
Impairment of long-lived assets
Long-lived assets that are held and used are evaluated for impairment for each of the Company’s asset
groups when events or circumstances indicate that the carrying amount of the long-lived asset or asset
group may not be recoverable. If the asset group’s net carrying value exceeds the asset group’s net
184
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
undiscounted cash flows expected to be generated over its remaining useful life including net proceeds
expected from disposition of the asset group, if any, the carrying amount of the asset group is reduced
to its estimated fair value. The estimated fair value is determined using a market, income and/or
cost approach.
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and is depreciated using
the straight-line method. The estimated useful lives of the assets are generally as follows:
• factories and office buildings: 30 to 40 years,
• other facilities: 15 years,
• machinery and equipment: 3 to 15 years,
• furniture and office equipment: 3 to 8 years, and
• leasehold improvements are depreciated over their estimated useful life or, for operating leases, over
the lease term, if shorter.
Goodwill and intangible assets
Goodwill is reviewed for impairment annually as of October 1, or more frequently if events or
circumstances indicate that the carrying value may not be recoverable.
Goodwill is evaluated for impairment at the reporting unit level. A reporting unit is an operating
segment or one level below an operating segment. For the annual impairment reviews performed in
2021 and 2020, respectively, the reporting units were determined to be one level below the
operating segments.
When evaluating goodwill for impairment, the Company uses either a qualitative or quantitative
assessment method for each reporting unit. The qualitative assessment involves determining, based on
an evaluation of qualitative factors, if it is more likely than not that the fair value of a reporting unit is
less than its carrying value. If, based on this qualitative assessment, it is determined to be more likely
than not that the reporting unit’s fair value is less than its carrying value, a quantitative impairment test
is performed, otherwise no further analysis is required. If the Company elects not to perform the
qualitative assessment for a reporting unit, then a quantitative impairment test is performed.
When performing a quantitative impairment test, the Company calculates the fair value of a reporting
unit using an income approach based on the present value of future cash flows, applying a discount rate
that represents the reporting unit’s weighted-average cost of capital, and compares it to the reporting
unit’s carrying value. If the carrying value of the net assets of a reporting unit exceeds the fair value of
the reporting unit then the Company records an impairment charge equal to the difference, provided
that the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit.
The cost of acquired intangible assets with a finite life is amortized using a method of amortization
that reflects the pattern of intangible assets’ expected contributions to future cash flows. If that
pattern cannot be reliably determined, the straight-line method is used. The amortization periods range
from 3 to 5 years for software and from 5 to 20 years for customer-, technology- and marketing-related
intangibles. Intangible assets with a finite life are tested for impairment upon the occurrence of certain
triggering events.
Derivative financial instruments and hedging activities
The Company uses derivative financial instruments to manage currency, commodity, interest rate and
equity exposures, arising from its global operating, financing and investing activities (see Note 6).
The Company recognizes all derivatives, other than certain derivatives indexed to the Company’s own
stock, at fair value in the Consolidated Balance Sheets. Derivatives that are not designated as hedging
instruments are reported at fair value with derivative gains and losses reported through earnings and
classified consistent with the nature of the underlying transaction.
If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair
value of the derivatives will either be offset against the change in fair value of the hedged item
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
185
attributable to the risk being hedged through earnings (in the case of a fair value hedge) or recognized
in “Accumulated other comprehensive loss” until the hedged item is recognized in earnings (in the case
of a cash flow hedge). Where derivative financial instruments have been designated as cash flow hedges
of forecasted transactions and such forecasted transactions are no longer probable of occurring,
hedge accounting is discontinued and any derivative gain or loss previously included in “Accumulated
other comprehensive loss” is reclassified into earnings consistent with the nature of the original
forecasted transaction. Gains or losses from derivatives designated as hedging instruments in a fair
value hedge are reported through earnings and classified consistent with the nature of the underlying
hedged transaction.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other
provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception
of the contract and depending on their characteristics, accounted for as separate derivative
instruments and shown at their fair value in the Consolidated Balance Sheets with changes in their fair
value reported in earnings consistent with the nature of the commercial contract to which they relate.
Derivatives are classified in the Consolidated Statements of Cash Flows in the same section as the
underlying item. Cash flows from the settlement of undesignated derivatives used to manage the risks
of different underlying items on a net basis are classified within “Net cash provided by operating
activities”, as the underlying items are primarily operational in nature. Other cash flows on the
settlement of derivatives are recorded within “Net cash provided by (used in) investing activities”.
Leases
The Company leases primarily real estate, vehicles and machinery.
The Company evaluates if a contract contains a lease at inception of the contract. A contract is or
contains a lease if it conveys the right to control the use of identified property, plant, or equipment (an
identified asset) for a period of time in exchange for consideration. To determine this, the Company
assesses whether, throughout the period of use, it has both the right to obtain substantially all of the
economic benefits from the use of the identified asset and the right to direct the use of the identified
asset. Leases are classified as either finance or operating, with the classification determining the
pattern of expense recognition in the Consolidated Income Statements. Lease expense for operating
leases is recorded on a straight-line basis over the lease term. Lease expense for finance leases is
separated between amortization of right-of-use assets and lease interest expense.
In many cases, the Company’s leases include one or more options to renew, with renewal terms that can
extend up to 5 years. The exercise of lease renewal options is at the Company’s discretion. Renewal
periods are included in the expected lease term if they are reasonably certain of being exercised by the
Company. Certain leases also include options to purchase the leased property. None of the Company’s
lease agreements contain material residual value guarantees or material restrictions or covenants.
Long-term leases (leases with terms greater than 12 months) are recorded in the Consolidated Balance
Sheets at the commencement date of the lease based on the present value of the minimum lease
payments. The present value of the lease payments is determined by using the interest rate implicit in
the lease if available. As most of the Company’s leases do not provide an implicit rate, the Company’s
incremental borrowing rate is used for most leases and is determined for portfolios of leases based on
the remaining lease term, currency of the lease, and the internal credit rating of the subsidiary which
entered into the lease.
Short-term leases (leases with an initial lease term of 12 months or less and where it is reasonably
certain that the property will not be leased for a term greater than 12 months) are not recorded in the
Consolidated Balance Sheets and are expensed on a straight-line basis over the lease term. The majority
of short-term leases relate to real estate and machinery.
Assets under operating lease are included in “Operating lease right-of-use assets”. Operating lease
liabilities are reported both as current and non-current operating lease liabilities. Right-of-use assets
represent the Company’s right to use an underlying asset for the lease term and lease liabilities
represent its obligation to make lease payments arising from the lease.
186
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Assets under finance lease are included in “Property, plant and equipment, net” while finance lease
liabilities are included in “Long-term debt” (including “Current maturities of long-term debt” as
applicable).
Lease and non-lease components for leases other than real estate are not accounted for separately.
Income taxes
The Company uses the asset and liability method to account for deferred taxes. Under this method,
deferred tax assets and liabilities are determined based on temporary differences between the
financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates and laws that are expected to be in effect when the differences are
expected to reverse. The Company records a deferred tax asset when it determines that it is more likely
than not that the deduction will be sustained based upon the deduction’s technical merit. Deferred tax
assets and liabilities that can be offset against each other are reported on a net basis. A valuation
allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to
be realized.
Deferred taxes are provided on unredeemed retained earnings of the Company’s subsidiaries. However,
deferred taxes are not provided on such unredeemed retained earnings to the extent it is expected that
the earnings are permanently reinvested. Such earnings may become taxable upon the sale or
liquidation of these subsidiaries or upon the remittance of dividends.
The Company operates in numerous tax jurisdictions and, as a result, is regularly subject to audit by tax
authorities. The Company provides for tax contingencies whenever it is deemed more likely than not
that a tax asset has been impaired or a tax liability has been incurred. Contingency provisions are
recorded based on the technical merits of the Company’s filing position, considering the applicable tax
laws and Organisation for Economic Co-operation and Development (OECD) guidelines and are based
on its evaluations of the facts and circumstances as of the end of each reporting period.
The Company applies a two-step approach to recognize and measure uncertainty in income taxes. The
first step is to evaluate the tax position for recognition by determining if the weight of available
evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax
benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate
settlement. Uncertain tax positions that could be settled against existing loss carryforwards or income
tax credits are reported net.
Expenses related to tax penalties are classified in the Consolidated Income Statements as “Income tax
expense” while interest thereon is classified as “Interest and other finance expense”. Current income tax
relating to certain items is recognized directly in “Accumulated other comprehensive loss” and not in
earnings. In general, the Company applies the individual items approach when releasing income tax
effects from “Accumulated other comprehensive loss”.
Research and development
Research and development costs not related to specific customer orders are generally expensed
as incurred.
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares
outstanding during the year. Diluted earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during the year, assuming that all potentially dilutive
securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call
options, outstanding options and shares granted subject to certain conditions under the Company’s
share-based payment arrangements. See further discussion related to earnings per share in Note 20
and of potentially dilutive securities in Note 18.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
187
Share-based payment arrangements
The Company has various share-based payment arrangements for its employees, which are described
more fully in Note 18. Such arrangements are accounted for under the fair value method. For awards
that are equity-settled, total compensation is measured at grant date, based on the fair value of the
award at that date, and recorded in earnings over the period the employees are required to render
service. For awards that are cash-settled, compensation is initially measured at grant date and
subsequently remeasured at each reporting period, based on the fair value and vesting percentage of
the award at each of those dates, with changes in the liability recorded in earnings.
Fair value measures
The Company uses fair value measurement principles to record certain financial assets and liabilities
on a recurring basis and, when necessary, to record certain non-financial assets at fair value
on a non-recurring basis, as well as to determine fair value disclosures for certain financial instruments
carried at amortized cost in the financial statements. Financial assets and liabilities recorded at fair
value on a recurring basis include foreign currency, commodity and interest rate derivatives, as well as
cash-settled call options and available-for-sale securities. Non-financial assets recorded at fair value
on a non-recurring basis include long-lived assets that are reduced to their estimated fair value due
to impairments.
Fair value is the price that would be received when selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. In determining fair value,
the Company uses various valuation techniques including the market approach (using observable
market data for identical or similar assets and liabilities), the income approach (discounted cash flow
models) and the cost approach (using costs a market participant would incur to develop a comparable
asset). Inputs used to determine the fair value of assets and liabilities are defined by a three-level
hierarchy, depending on the nature of those inputs. The Company has categorized its financial assets
and liabilities and non-financial assets measured at fair value within this hierarchy based on whether
the inputs to the valuation technique are observable or unobservable. An observable input is based on
market data obtained from independent sources, while an unobservable input reflects the Company’s
assumptions about market data.
The levels of the fair value hierarchy are as follows:
Level 1:
Valuation inputs consist of quoted prices in an active market for identical assets or liabilities
(observable quoted prices). Assets and liabilities valued using Level 1 inputs include exchange-traded
equity securities, listed derivatives which are actively traded such as commodity futures, interest
rate futures and certain actively traded debt securities.
Level 2:
Valuation inputs consist of observable inputs (other than Level 1 inputs) such as actively quoted
prices for similar assets, quoted prices in inactive markets and inputs other than quoted prices such
as interest rate yield curves, credit spreads, or inputs derived from other observable data by
interpolation, correlation, regression or other means. The adjustments applied to quoted prices or
the inputs used in valuation models may be both observable and unobservable. In these cases, the
fair value measurement is classified as Level 2 unless the unobservable portion of the adjustment or
the unobservable input to the valuation model is significant, in which case the fair value
measurement would be classified as Level 3. Assets and liabilities valued or disclosed using Level 2
inputs include investments in certain funds, certain debt securities that are not actively traded,
interest rate swaps, cross-currency interest rate swaps, commodity swaps, cash-settled call options,
forward foreign exchange contracts, foreign exchange swaps and forward rate agreements, time
deposits, as well as financing receivables and debt.
Level 3:
Valuation inputs are based on the Company’s assumptions of relevant market data (unobservable
input).
Investments in private equity, real estate and collective funds held within the Company’s pension plans
are generally valued using the net asset value (NAV) per share as a practical expedient for fair value
188
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
provided certain criteria are met. The NAVs are determined based on the fair values of the underlying
investments in the funds. These assets are not classified in the fair value hierarchy but are
separately disclosed.
Whenever quoted prices involve bid-ask spreads, the Company ordinarily determines fair values based
on mid-market quotes. However, for the purpose of determining the fair value of cash-settled call
options serving as hedges of the Company’s management incentive plan (MIP), bid prices are used.
When determining fair values based on quoted prices in an active market, the Company considers if the
level of transaction activity for the financial instrument has significantly decreased, or would not be
considered orderly. In such cases, the resulting changes in valuation techniques would be disclosed. If
the market is considered disorderly or if quoted prices are not available, the Company is required to use
another valuation technique, such as an income approach.
Disclosures about the Company’s fair value measurements of assets and liabilities are included in
Note 7.
Contingencies
The Company is subject to proceedings, litigation or threatened litigation and other claims and
inquiries, related to environmental, labor, product, regulatory, tax (other than income tax) and other
matters, and is required to assess the likelihood of any adverse judgments or outcomes to these
matters, as well as potential ranges of probable losses. A determination of the provision required, if any,
for these contingencies is made after analysis of each individual issue, often with assistance from both
internal and external legal counsel and technical experts. The required amount of a provision
for a contingency of any type may change in the future due to new developments in the particular
matter, including changes in the approach to its resolution.
The Company records a provision for its contingent obligations when it is probable that a loss will be
incurred and the amount can be reasonably estimated. Any such provision is generally recognized on an
undiscounted basis using the Company’s best estimate of the amount of loss incurred or at the lower
end of an estimated range when a single best estimate is not determinable. In some cases, the
Company may be able to recover a portion of the costs relating to these obligations from insurers or
other third parties; however, the Company records such amounts only when it is probable that they will
be collected.
The Company generally provides for anticipated costs for warranties when it delivers the related
products. Warranty costs include calculated costs arising from imperfections in design, material and
workmanship in the Company’s products. The Company makes individual assessments on contracts
with risks resulting from order-specific conditions or guarantees and assessments on an overall,
statistical basis for similar products sold in larger quantities.
The Company may have legal obligations to perform environmental clean-up activities related to land
and buildings as a result of the normal operations of its business. In some cases, the timing or the
method of settlement, or both, are conditional upon a future event that may or may not be within the
control of the Company, but the underlying obligation itself is unconditional and certain. The Company
recognizes a provision for these obligations when it is probable that a liability for the clean-up activity
has been incurred and a reasonable estimate of its fair value can be made. In some cases, a portion of
the costs expected to be incurred to settle these matters may be recoverable. An asset is recorded
when it is probable that such amounts are recoverable. Provisions for environmental obligations are not
discounted to their present value when the timing of payments cannot be reasonably estimated.
Pensions and other postretirement benefits
The Company has a number of defined benefit pension plans, defined contribution pension plans and
termination indemnity plans. The Company recognizes an asset for such a plan’s overfunded status
or a liability for such a plan’s underfunded status in its Consolidated Balance Sheets. Additionally, the
Company measures such a plan’s assets and obligations that determine its funded status as of the end
of the year and recognizes the changes in the funded status in the year in which the changes occur.
Those changes are reported in “Accumulated other comprehensive loss”.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
189
The Company uses actuarial valuations to determine its pension and postretirement benefit costs and
credits. The amounts calculated depend on a variety of key assumptions, including discount rates and
expected return on plan assets. Current market conditions are considered in selecting
these assumptions.
The Company’s various pension plan assets are assigned to their respective levels in the fair value
hierarchy in accordance with the valuation principles described in the “Fair value measures”
section above.
See Note 17 for further discussion of the Company’s employee benefit plans.
Business combinations
The Company accounts for assets acquired and liabilities assumed in business combinations using the
acquisition method and records these at their respective fair values. Contingent consideration is
recorded at fair value as an element of purchase price with subsequent adjustments recognized
in income.
Identifiable intangibles consist of intellectual property such as trademarks and trade names, customer
relationships, patented and unpatented technology, in-process research and development, order
backlog and capitalized software; these are amortized over their estimated useful lives. Such
intangibles are subsequently subject to evaluation for potential impairment if events or circumstances
indicate the carrying amount may not be recoverable. See “Goodwill and intangible assets” above.
Acquisition-related costs are recognized separately from the acquisition and expensed as incurred.
Upon gaining control of an entity in which an equity method or cost basis investment was held by the
Company, the carrying value of that investment is adjusted to fair value with the related gain or loss
recorded in income.
Deferred tax assets and liabilities based on temporary differences between the financial reporting and
the tax base of assets and liabilities as well as uncertain tax positions and valuation allowances on
acquired deferred tax assets assumed in connection with a business combination are initially estimated
as of the acquisition date based on facts and circumstances that existed at the acquisition date. These
estimates are subject to change within the measurement period (a period of up to 12 months after the
acquisition date during which the acquirer may adjust the provisional acquisition amounts) with any
adjustments to the preliminary estimates being recorded to goodwill. Changes in deferred taxes,
uncertain tax positions and valuation allowances on acquired deferred tax assets that occur after the
measurement period are recognized in income.
New accounting pronouncements
Applicable for current period
Simplifying the accounting for income taxes
In January 2021, the Company adopted a new accounting standard update, which enhances and
simplifies various aspects of the income tax accounting guidance related to intraperiod tax allocations,
ownership changes in investments and certain aspects of interim period tax accounting. Depending on
the amendment, the adoption was applied on either a retrospective, modified retrospective, or
prospective basis. This update does not have a significant impact on the Company’s Consolidated
Financial Statements.
Applicable for future periods
Facilitation of the effects of reference rate reform on financial reporting
In March 2020, an accounting standard update was issued which provides temporary optional
expedients and exceptions to the current guidance on contract modifications and hedge accounting to
ease the financial reporting burdens related to the expected market transition from the London
Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This
update, along with clarifications outlined in a subsequent update issued in January 2021, can be
adopted and applied no later than December 31, 2022, with early adoption permitted. The Company
does not expect this update to have a significant impact on its Consolidated Financial Statements.
190
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Business Combinations — Accounting for contract assets and contract liabilities from contracts with
customers
In October 2021, an accounting standard update was issued which provides guidance on the accounting
for revenue contracts acquired in a business combination. The update requires contract assets and
liabilities acquired in a business combination to be recognized and measured at the date of acquisition
in accordance with the principles for recognizing revenues from contracts with customers. This update
is effective prospectively for the Company for annual and interim reporting periods beginning
January 1, 2023, with early adoption permitted in any interim period. The Company does not expect this
update to have a significant impact on its Consolidated Financial Statements.
Disclosures about government assistance
In November 2021, an accounting standard update was issued which requires entities to disclose certain
types of government assistance. Under the update, the Company is required to annually disclose (i) the
type of the assistance received, including any significant terms and conditions, (ii) its related
accounting policy, and (iii) the effect such transactions have on its financial statements. The update is
effective either prospectively for all in-scope transactions at the date of adoption or retrospectively, for
annual periods beginning January 1, 2022, with early adoption permitted. The Company will adopt this
update prospectively as of January 1, 2022. The Company does not expect this update to have a
significant impact on its Consolidated Financial Statements.
—
Note 3
Discontinued operations
Divestment of the Power Grids business
On July 1, 2020, the Company completed the sale of 80.1 percent of its Power Grids business to Hitachi
Ltd (Hitachi). The transaction was executed through the sale of 80.1 percent of the shares of Hitachi
Energy Ltd, formerly Hitachi ABB Power Grids Ltd (“Hitachi Energy”). Cash consideration received at the
closing date was $9,241 million net of cash disposed. Further, for accounting purposes, the 19.9 percent
ownership interest retained by the Company was deemed to have been both divested and reacquired at
its fair value on July 1, 2020. The Company also obtained a put option, exercisable with three-months’
notice commencing in April 2023 (to be effective from July 2023), allowing the Company to require
Hitachi to purchase the remaining interest for fair value, subject to a minimum floor price equivalent
to a 10 percent discount compared to the price paid for the initial 80.1 percent. The combined fair value
of the retained investment and the related put option, which amounted to $1,779 million, was recorded
as an equity-method investment and also accounted for as part of the proceeds for the sale of the
entire Power Grids business (see Note 4).
In connection with the divestment, the Company recorded liabilities in discontinued operations for
estimated future costs and other cash payments of $487 million for various contractual items relating
to the sale of the business, including required future cost reimbursements payable to Hitachi Energy,
costs to be incurred by the Company for the direct benefit of Hitachi Energy and an amount due to
Hitachi Ltd in connection with the expected purchase price finalization of the closing debt and working
capital balances. In October 2021, the Company and Hitachi concluded an agreement to settle the
various amounts owing by the Company. The net difference between the agreed amounts and the
amounts initially estimated by the Company was recorded in 2021 in discontinued operations as an
adjustment to “Net gain recognized on sale of the Power Grids business” in the table below. During 2021
and 2020, total cash payments (including the amounts paid under the settlement agreement) of
$364 million and $33 million, respectively, were made in connection with these liabilities. At
December 31, 2021, the remaining amount recorded was $150 million.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
191
As a result of the Power Grids sale, the Company recognized an initial net gain of $5,141 million, net of
transaction costs, for the sale of the entire Power Grids business in Income from discontinued
operations, net of tax, in 2020. Included in the calculation of the net gain was a cumulative translation
loss relating to the Power Grids business of $420 million which was reclassified from Accumulated other
comprehensive loss (see Note 21). Certain amounts included in the net gain were estimated or
otherwise subject to change in value and in 2021 the Company recorded adjustments, including the
agreed settlement amount referred to above, reducing the total net gain by $65 million. Certain
remaining minor obligations relating to the divestment continue to be subject to uncertainty and will be
adjusted in future periods but these adjustments are not expected to have a material impact on the
Consolidated Financial Statements.
In 2020, the Company recorded $262 million in Income tax expense within discontinued operations in
connection with the reorganization of the legal entity structure of the Power Grids business required to
facilitate the sale.
Certain entities of the Power Grids business for which the legal process or other regulatory delays
resulted in the Company not yet having transferred legal titles to Hitachi were accounted for as being
sold from the initial divestment date since control of the business as well as all risks and rewards of the
business were fully transferred to Hitachi Energy. At December 31, 2021, substantially all of these
delayed entities have been legally transferred to Hitachi. The proceeds for these entities were included
in the cash proceeds described above and certain funds were placed in escrow pending completion of
the transfer process. At December 31, 2021 and 2020, current restricted cash includes $12 million and
$302 million, respectively, relating to these proceeds.
In connection with the divestment, the Company recognized liabilities in discontinued operations for
certain indemnities (see Note 15 for additional information) and also recorded an initial liability of
$258 million representing the fair value of the right granted to Hitachi Energy for the use of the ABB
brand for up to 8 years.
Upon closing of the sale, the Company entered into various transition services agreements (TSAs).
Pursuant to these TSAs, the Company and Hitachi Energy provide to each other, on an interim,
transitional basis, various services. The services provided by the Company primarily include finance,
information technology, human resources and certain other administrative services. Under the current
terms, the TSAs will continue for up to 3 years, and can only be extended on an exceptional basis for
business-critical services for an additional period which is reasonably necessary to avoid a material
adverse impact on the business. In 2021 and 2020, the Company recognized within its continuing
operations, general and administrative expenses incurred to perform the TSAs, offset by $173 million
and $91 million, respectively, in TSA-related income for such services that is reported in Other income
(expense), net.
Discontinued operations
As a result of the sale of the Power Grids business, substantially all Power Grids-related assets and
liabilities have been sold. As this divestment represented a strategic shift that would have a major
effect on the Company’s operations and financial results, the results of operations for this business
have been presented as discontinued operations and the assets and liabilities are presented as held for
sale and in discontinued operations for all periods presented. Certain of the business contracts in the
Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of
Hitachi Energy. Assets and liabilities relating to, as well as the net financial results of, these contracts
will continue to be included in discontinued operations until they have been completed or otherwise
transferred to Hitachi Energy.
Prior to the divestment, interest expense that was not directly attributable to or related to the
Company’s continuing business or discontinued business was allocated to discontinued operations
based on the ratio of net assets to be sold less debt that was required to be paid as a result of the
planned disposal transaction to the sum of total net assets of the Company plus consolidated debt.
General corporate overhead was not allocated to discontinued operations.
192
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Operating results of the discontinued operations are summarized as follows:
($ in millions)
Total revenues
Total cost of sales
Gross profit
Expenses
Change to net gain recognized on sale of the Power Grids business
Income (loss) from operations
Net interest income (expense) and other finance expense
Non-operational pension (cost) credit
Income (loss) from discontinued operations before taxes
Income tax
Income (loss) from discontinued operations, net of tax
2021
—
—
—
(18)
(65)
(83)
2
—
(81)
1
(80)
2020
4,008
2019
9,037
(3,058)
(6,983)
950
(808)
5,141
5,282
(5)
(94)
5,182
(322)
4,860
2,054
(1,394)
—
660
(61)
5
605
(167)
438
Of the total income (loss) from discontinued operations before taxes in the table above, $(80) million,
$5,170 million and $566 million in 2021, 2020, and 2019, respectively, are attributable to the Company,
while the remainder is attributable to noncontrolling interests.
Until the date of the divestment, Income income (loss) from discontinued operations before taxes
excluded stranded costs which were previously able to be allocated to the Power Grids operating
segment. As a result, $40 million and $225 million in 2020 and 2019, respectively, of allocated overhead
and other management costs which were previously included in the measure of segment profit for the
Power Grids operating segment are now reported as part of Corporate and Other. In the table above,
Net interest income (expense) and other finance expense in 2020 and 2019 includes $20 million and
$44 million, respectively, of interest expense which has been recorded on an allocated basis in
accordance with the Company’s accounting policy election until the divestment date.
Included in the reported Total revenues of the Company for 2020 and 2019 are revenues for sales from
the Company’s operating segments to the Power Grids business of $108 million and $213 million,
respectively, which represent intercompany transactions that, prior to Power Grids being classified
as a discontinued operation, were eliminated in the Company’s Consolidated Financial Statements (see
Note 23). Subsequent to the divestment, sales to Hitachi Energy are reported as third-party revenues.
In addition, the Company also has retained obligations (primarily for environmental and taxes) related
to other businesses disposed or otherwise exited that qualified as discontinued operations. Changes to
these retained obligations are also included in Income (loss) from discontinued operations, net of tax,
above.
The major components of assets and liabilities held for sale and in discontinued operations in the
Company’s Consolidated Balance Sheets are summarized as follows:
December 31, ($ in millions)
Receivables, net
Inventories, net
Other current assets
Current assets held for sale and in discontinued operations
Accounts payable, trade
Other liabilities
Current liabilities held for sale and in discontinued operations
Other non-current liabilities
Non-current liabilities held for sale and in discontinued operations
2021(1)
2020(1)
131
—
5
136
71
310
381
43
43
280
1
1
282
188
456
644
197
197
(1) At December 31, 2021 and 2020, the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and
other obligations which will remain with the Company until such time as the obligation is settled or the activities are fully wound down.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
193
—
Note 4
Acquisitions, divestments and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
($ in millions, except number of acquired businesses)
Purchase price for acquisitions (net of cash acquired)
Aggregate excess of purchase price over fair value of net assets acquired(1)
Number of acquired businesses
2021
2020
2019
212
161
2
79
92
3
—
92
—
(1) Recorded as goodwill (see Note 11). Includes adjustments of $92 million in 2019 arising during the measurement period of acquisitions,
primarily reflecting changes in the valuation of net working capital, deferred tax liabilities and intangible assets acquired.
In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over
fair value of net assets acquired” amounts for 2021, relate primarily to the acquisition of ASTI Mobile
Robotics Group SL (ASTI). In 2020 and 2019, there were no significant acquisitions.
Acquisitions of controlling interests have been accounted for under the acquisition method and have
been included in the Company’s Consolidated Financial Statements since the date of acquisition.
On August 2, 2021, the Company acquired the shares of ASTI. ASTI is headquartered in Burgos, Spain,
and is a global autonomous mobile robot (AMR) manufacturer. The resulting cash outflows for the
Company amounted to $186 million (net of cash acquired). The acquisition expands the Company’s
robotics and automation offering in its Robotics & Discrete Automation operating segment.
While the Company uses its best estimates and assumptions as part of the purchase price allocation
process to value assets acquired and liabilities assumed at the acquisition date, the purchase price
allocation for acquisitions is preliminary for up to 12 months after the acquisition date and is subject to
refinement as more detailed analyses are completed and additional information about the fair values of
the acquired assets and liabilities becomes available. The purchase price allocation relating to the
acquisition in 2018 of GEIS (General Electric’s global electrification solutions business) was finalized
during the second quarter of 2019 and resulted in $92 million of net measurement period adjustments,
increasing goodwill, primarily related to changes in the valuation of net working capital, deferred tax
liabilities and intangible assets acquired.
In addition, in November 2019, the Company recognized a gain of $92 million relating to the receipt of
cash from General Electric for a favorable resolution of an uncertainty with respect to the price paid to
acquire GEIS. This occurred after the end of the measurement period and as a result, the Company
recorded a gain in “Other income (expense), net”.
Acquisition of noncontrolling interests
In connection with the divestment of its Power Grids business to Hitachi (see Note 3), the Company
retained a 19.9 percent interest in the business. For accounting purposes the 19.9 percent interest is
deemed to have been both divested and reacquired, with a fair value at the transaction date of
$1,661 million. The fair value was based on a discounted cash flow model considering the expected
results of the future business operations of Hitachi Energy and using relevant market inputs
including a risk-adjusted weighted-average cost of capital. The Company also obtained a right to
require Hitachi to purchase this investment (see Note 3) with a floor price equivalent to a 10 percent
discount compared to the price paid by Hitachi for the initial 80.1 percent. This option was valued at
$118 million using a standard option pricing model with inputs considering the nature of the investment
and the expected period until option exercise. As this option is not separable from the investment the
value has been combined with the value of the underlying investment and is accounted for together.
Hitachi also holds a call option which would require the Company to sell the remaining 19.9 percent
interest in Hitachi Energy at a price consistent with what was paid by Hitachi to acquire the initial
80.1 percent or at fair value, if higher. The option is exercisable with three-months’ notice from April
2023, to be effective from July 2023.
194
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The Company has concluded that based on its continuing involvement with the Power Grids business,
including membership in its governing board of directors, it has significant influence over Hitachi
Energy. As a result, the investment (including the value of the option) is accounted for using the
equity method.
The difference between the initial carrying value of the Company’s investment in Hitachi Energy at fair
value and its proportionate share of the underlying net assets created basis differences of
$8,570 million ($1,705 million for the Company’s 19.9 percent ownership), which are allocated as follows:
($ in millions)
Inventories
Order backlog
Property, plant and equipment(1)
Intangible assets(2)
Other contractual rights
Other assets
Deferred tax liabilities
Goodwill
Less: Amount attributed to noncontrolling interest
Basis difference
Allocated amounts
Weighted-average
useful life
5 months
2 years
9 years
2 years
169
727
1,016
1,731
251
43
(942)
6,026
(451)
8,570
(1) Property, plant and equipment includes assets subject to amortization having an initial fair value difference of $686 million and
a weighted-average useful life of 14 years.
(2) Intangible assets include brand license agreement, technology and customer relationships.
For assets subject to depreciation or amortization, the Company amortizes these basis differences
over the estimated remaining useful lives of the assets that gave rise to this difference, recording the
amortization, net of related deferred tax benefit, as a reduction of income from equity-accounted
companies. Certain other assets are recorded as an expense as the benefits from the assets are
realized. At December 31, 2021, the Company determined that no impairment of its equity-accounted
investments existed.
The carrying value of the Company’s investments in equity-accounted companies and respective
percentage of ownership is as follows:
($ in millions, except ownership share in %)
Hitachi Energy Ltd
Others
Total
Ownership as of
December 31, 2021
19.9%
Carrying value at December 31,
2021
1,609
61
1,670
In 2021, 2020 and 2019, the Company recorded its share of the earnings of investees accounted for
under the equity method of accounting in Other income (expense), net, as follows:
($ in millions)
Income from equity-accounted companies, net of taxes
Basis difference amortization (net of deferred income tax benefit)
Income (loss) from equity-accounted companies
2021
38
(138)
(100)
2020
29
(95)
(66)
2020
1,710
74
1,784
2019
8
—
8
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
195
Business divestments
In 2021, the Company received proceeds (net of transactions costs and cash disposed) of $2,958 million,
relating to divestments of consolidated businesses and recorded gains of $2,193 million in “Other
income (expense), net” on the sales of such businesses. These are primarily due to the divestment of the
Company’s Mechanical Power Transmission Division (Dodge) to RBC Bearings Inc. Certain amounts
included in the net gain for the sale of the Dodge business are estimated or otherwise subject to change
in value and, as a result, the Company may record additional adjustments to the gain in future periods
which are not expected to have a material impact on the Consolidated Financial Statements. In 2021,
2020 and 2019 “Income from continuing operations before taxes”, included net income of $115 million,
$96 million and $111 million, respectively, from the Dodge business which, prior to its sale was part of
the Company’s Motion operating segment.
In 2020, the Company completed the sale of its Power Grids business (see Note 3 for details) and its
solar inverters business. In 2019, the Company recorded net gains (including transactions costs) of
$55 million, primarily due to the divestment of two businesses in China.
Divestment of the solar inverters business
In February 2020, the Company completed the sale of its solar inverters business for no consideration.
Under the agreement, which was reached in July 2019, the Company was required to transfer
$143 million of cash to the buyer on the closing date. In addition, payments totaling EUR 132 million
($145 million) are required to be transferred to the buyer from 2020 through 2025. In 2019, the Company
recorded a loss of $421 million, in “Other income (expense), net”, representing the excess of the carrying
value, which includes a loss of $99 million arising from the cumulative translation adjustment, over the
estimated fair value of this business. In 2020, a further loss of $33 million was recorded in “Other
income (expense), net” for changes in fair value of this business. The loss in 2020 includes the
$99 million reclassification from other comprehensive income of the currency translation adjustment
related to the business.
The fair value was based on the estimated current market values using Level 3 inputs, considering the
agreed-upon sale terms with the buyer. The solar inverters business, which includes the solar inverter
business acquired as part of the Power-One acquisition in 2013, was part of the Company’s
Electrification operating segment.
As this divestment does not qualify as a discontinued operation, the results of operations for this
business prior to its disposal are included in the Company’s continuing operations for all
periods presented.
Including the above loss of $33 million and $421 million in 2020 and 2019, respectively, Income from
continuing operations before taxes includes net losses of $63 million and $490 million, from the solar
inverters business.
196
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 5
Cash and equivalents, marketable securities and short-term
investments
Cash and equivalents and marketable securities and short-term investments consisted of the following:
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
Cash and
equivalents
Marketable
securities
and
short-term
investments
December 31, 2021 ($ in millions)
Cost basis
Changes in fair value recorded in net income
Cash
Time deposits
Equity securities
2,752
2,037
569
5,358
Changes in fair value recorded in other comprehensive income
Debt securities available-for-sale:
—U.S. government obligations
—Corporate
Total
Of which:
—Restricted cash, current
—Restricted cash, non-current
203
74
277
5,635
18
18
7
1
8
26
—
(1)
(1)
(2)
(2)
2,752
2,037
587
5,376
209
74
283
2,752
1,737
4,489
—
300
587
887
209
74
283
5,659
4,489
1,170
30
300
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
Cash and
equivalents
Marketable
securities
and
short-term
investments
December 31, 2020 ($ in millions)
Cost basis
Changes in fair value recorded in net income
Cash
Time deposits
Equity securities
2,388
1,513
1,704
5,605
Changes in fair value recorded in other comprehensive income
Debt securities available-for-sale:
—U.S. government obligations
—European government obligations
—Corporate
Total
Of which:
—Restricted cash, current
—Restricted cash, non-current
274
24
69
367
5,972
12
12
19
6
25
37
—
—
—
2,388
1,513
1,716
5,617
293
24
75
392
2,388
1,513
3,901
—
6,009
3,901
323
300
1,716
1,716
293
24
75
392
2,108
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
197
Contractual maturities
Contractual maturities of debt securities consisted of the following:
December 31, 2021 ($ in millions)
Less than one year
One to five years
Six to ten years
Due after ten years
Total
Available-for-sale
Cost basis
Fair value
1
178
92
6
277
1
181
94
7
283
At December 31, 2021 and 2020, the Company pledged $66 million and $66 million, respectively, of
available-for-sale marketable securities as collateral for issued letters of credit and other
security arrangements.
—
Note 6
Derivative financial instruments
The Company is exposed to certain currency, commodity, interest rate and equity risks arising from its
global operating, financing and investing activities. The Company uses derivative instruments to
reduce and manage the economic impact of these exposures.
Currency risk
Due to the global nature of the Company’s operations, many of its subsidiaries are exposed to currency
risk in their operating activities from entering into transactions in currencies other than their functional
currency. To manage such currency risks, the Company’s policies require its subsidiaries to hedge their
foreign currency exposures from binding sales and purchase contracts denominated in foreign
currencies. For forecasted foreign currency denominated sales of standard products and the related
foreign currency denominated purchases, the Company’s policy is to hedge up to a maximum of
100 percent of the forecasted foreign currency denominated exposures, depending on the length of the
forecasted exposures. Forecasted exposures greater than 12 months are not hedged. Forward foreign
exchange contracts are the main instrument used to protect the Company against the volatility of
future cash flows (caused by changes in exchange rates) of contracted and forecasted sales and
purchases denominated in foreign currencies. In addition, within its treasury operations, the Company
primarily uses foreign exchange swaps and forward foreign exchange contracts to manage the currency
and timing mismatches arising in its liquidity management activities.
Commodity risk
Various commodity products are used in the Company’s manufacturing activities. Consequently it is
exposed to volatility in future cash flows arising from changes in commodity prices. To manage the
price risk of commodities, the Company’s policies require that its subsidiaries hedge the commodity
price risk exposures from binding contracts, as well as at least 50 percent (up to a maximum of
100 percent) of the forecasted commodity exposure over the next 12 months or longer (up
to a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks
of commodities.
Interest rate risk
The Company has issued bonds at fixed rates. Interest rate swaps and cross-currency interest rate
swaps are used to manage the interest rate and foreign currency risk associated with certain debt and
generally such swaps are designated as fair value hedges. In addition, from time to time, the Company
uses instruments such as interest rate swaps, interest rate futures, bond futures or forward rate
agreements to manage interest rate risk arising from the Company’s balance sheet structure but does
not designate such instruments as hedges.
198
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Equity risk
The Company is exposed to fluctuations in the fair value of its warrant appreciation rights (WARs)
issued under its MIP (Management Incentive Plan) (see Note 18). A WAR gives its holder the right to
receive cash equal to the market price of an equivalent listed warrant on the date of exercise. To
eliminate such risk, the Company has purchased cash-settled call options, indexed to the shares of the
Company, which entitle the Company to receive amounts equivalent to its obligations under the
outstanding WARs.
Volume of derivative activity
In general, while the Company’s primary objective in its use of derivatives is to minimize exposures
arising from its business, certain derivatives are designated and qualify for hedge accounting
treatment while others either are not designated or do not qualify for hedge accounting.
Foreign exchange and interest rate derivatives
The gross notional amounts of outstanding foreign exchange and interest rate derivatives (whether
designated as hedges or not) were as follows:
Type of derivative ($ in millions)
Foreign exchange contracts
Embedded foreign exchange derivatives
Cross-currency interest rate swaps
Interest rate contracts
Total notional amounts
at December 31,
2021
11,276
815
906
2020
12,610
1,134
—
2019
15,015
924
—
3,541
3,227
5,188
Derivative commodity contracts
The Company uses derivatives to hedge its direct or indirect exposure to the movement in the prices of
commodities which are primarily copper, silver and aluminum. The following table shows the notional
amounts of outstanding derivatives (whether designated as hedges or not), on a net basis, to reflect
the Company’s requirements for these commodities:
Type of derivative
Copper swaps
Silver swaps
Aluminum swaps
Unit
metric tonnes
ounces
metric tonnes
Total notional amounts
at December 31,
2021
36,017
2020
2019
39,390
42,494
2,842,533
1,966,677
2,508,770
7,125
8,112
8,388
Equity derivatives
At December 31, 2021, 2020 and 2019, the Company held 9 million, 22 million and 40 million cash-settled
call options indexed to ABB Ltd shares (conversion ratio 5:1) with a total fair value of $29 million,
$21 million and $26 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign
exchange risk of its operations, commodity swaps to manage its commodity risks and cash-settled call
options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited
cases. In these cases, the effective portion of the changes in their fair value is recorded in “Accumulated
other comprehensive loss” and subsequently reclassified into earnings in the same line item and in the
same period as the underlying hedged transaction affects earnings. In 2021, 2020 and 2019, there were
no significant amounts recorded for cash flow hedge accounting activities.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
199
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company
uses interest rate swaps and cross-currency interest rate swaps. Where such instruments are
designated as fair value hedges, the changes in the fair value of these instruments, as well as the
changes in the fair value of the risk component of the underlying debt being hedged, are recorded as
offsetting gains and losses in “Interest and other finance expense”.
The effect of derivative instruments, designated and qualifying as fair value hedges, on the
Consolidated Income Statements was as follows:
($ in millions)
2021
2020
2019
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
Cross-currency interest rate swaps
Designated as fair value hedges
Hedged item
Hedged item
(55)
56
(37)
34
11
(11)
—
—
38
(38)
—
—
Derivatives not designated in hedge relationships
Derivative instruments that are not designated as hedges or do not qualify as either cash flow or fair
value hedges are economic hedges used for risk management purposes. Gains and losses from changes
in the fair values of such derivatives are recognized in the same line in the income statement as the
economically hedged transaction.
Furthermore, under certain circumstances, the Company is required to split and account separately for
foreign currency derivatives that are embedded within certain binding sales or purchase contracts
denominated in a currency other than the functional currency of the subsidiary and the counterparty.
The gains (losses) recognized in the Consolidated Income Statements on derivatives not designated in
hedging relationships were as follows:
Gains (losses) recognized in income
($ in millions)
Type of derivative not designated as a hedge
Location
Foreign exchange contracts
Total revenues
Total cost of sales
SG&A expenses(1)
Non-order related research and
development
Interest and other finance
expense
Embedded foreign exchange contracts
Total revenues
Commodity contracts
Other
Total
Total cost of sales
Total cost of sales
Interest and other finance expense
(1) SG&A expenses represent “Selling, general and administrative expenses”.
2021
3
(53)
11
(2)
(173)
(7)
(2)
78
—
(145)
2020
94
—
(11)
(2)
207
(34)
(1)
56
1
310
2019
(7)
(64)
2
1
(122)
17
(6)
12
—
(167)
200
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
December 31, 2021 ($ in millions)
Derivatives designated as hedging instruments:
Foreign exchange contracts
Interest rate contracts
Cross-currency interest rate swaps
Cash-settled call options
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Commodity contracts
Interest rate contracts
Embedded foreign exchange derivatives
Total
Total fair value
December 31, 2020 ($ in millions)
Derivatives designated as hedging instruments:
Foreign exchange contracts
Interest rate contracts
Cash-settled call options
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Commodity contracts
Interest rate contracts
Embedded foreign exchange derivatives
Total
Total fair value
Derivative assets
Derivative liabilities
Current in
“Other
current
assets”
Non-current
in “Other
non-current
assets”
Current in
“Other
current
liabilities”
Non-current
in “Other
non-current
liabilities”
—
9
—
29
38
108
19
1
10
138
176
—
20
—
—
20
14
—
—
7
21
41
3
—
—
—
3
107
5
2
16
130
133
5
—
109
—
114
7
—
—
10
17
131
Derivative assets
Derivative liabilities
Current
in “Other
current
assets”
Non-current
in “Other
non-current
assets”
Current
in “Other
current
liabilities”
Non-current
in “Other
non-current
liabilities”
—
6
10
16
221
59
2
10
292
308
1
78
11
90
22
—
—
2
24
114
2
—
—
2
106
7
2
28
143
145
4
—
—
4
26
—
—
16
42
46
Close-out netting agreements provide for the termination, valuation and net settlement of some or all
outstanding transactions between two counterparties on the occurrence of one or more pre-defined
trigger events.
Although the Company is party to close-out netting agreements with most derivative counterparties,
the fair values in the tables above and in the Consolidated Balance Sheets at December 31, 2021 and
2020, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements allow net settlements under certain
conditions. At December 31, 2021 and 2020, information related to these offsetting arrangements was
as follows:
December 31, 2021 ($ in millions)
Type of agreement or
similar arrangement
Derivatives
Total
Gross amount of
recognized assets
Derivative liabilities
eligible for set-off in
case of default
Cash
collateral
received
Non-cash
collateral
received
Net asset
exposure
200
200
(104)
(104)
—
—
—
—
96
96
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
201
Gross amount of
recognized
liabilities
Derivative liabilities
eligible for set-off in
case of default
Cash
collateral
pledged
Non-cash
collateral
pledged
Net liability
exposure
238
238
(104)
(104)
—
—
—
—
134
134
Gross amount of
recognized assets
Derivative liabilities
eligible for set-off in
case of default
Cash
collateral
received
Non-cash
collateral
received
Net asset
exposure
410
410
(106)
(106)
—
—
—
—
304
304
Gross amount of
recognized
liabilities
Derivative liabilities
eligible for set-off in
case of default
Cash
collateral
pledged
Non-cash
collateral
pledged
Net liability
exposure
147
147
(106)
(106)
—
—
—
—
41
41
December 31, 2021 ($ in millions)
Type of agreement or
similar arrangement
Derivatives
Total
December 31, 2020 ($ in millions)
Type of agreement or
similar arrangement
Derivatives
Total
December 31, 2020 ($ in millions)
Type of agreement or
similar arrangement
Derivatives
Total
—
Note 7
Fair values
Recurring fair value measures
The fair values of financial assets and liabilities measured at fair value on a recurring basis were
as follows:
December 31, 2021 ($ in millions)
Level 1
Level 2
Level 3
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
Debt securities—U.S. government obligations
Debt securities—Corporate
Derivative assets—current in “Other current assets”
Derivative assets—non-current in “Other non-current assets”
Total
Liabilities
Derivative liabilities—current in “Other current liabilities”
Derivative liabilities—non-current in “Other non-current liabilities”
Total
209
209
—
587
74
176
41
878
133
131
264
Total fair
value
587
209
74
176
41
—
1,087
133
131
264
—
202
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
December 31, 2020 ($ in millions)
Level 1
Level 2
Level 3
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
Debt securities—U.S. government obligations
Debt securities—Other government obligations
Debt securities—Corporate
Derivative assets—current in “Other current assets”
Derivative assets—non-current in “Other non-current assets”
Total
Liabilities
Total fair
value
1,716
293
24
75
308
114
293
24
1,716
75
308
114
317
2,213
—
2,530
Derivative liabilities—current in “Other current liabilities”
Derivative liabilities—non-current in “Other non-current liabilities”
Total
145
46
191
—
145
46
191
—
During 2021, 2020 and 2019 there have been no reclassifications for any financial assets or liabilities
between Level 1 and Level 2.
The Company uses the following methods and assumptions in estimating fair values of financial assets
and liabilities measured at fair value on a recurring basis:
• Securities in “Marketable securities and short-term investments”: If quoted market prices in active
markets for identical assets are available, these are considered Level 1 inputs; however, when markets
are not active, these inputs are considered Level 2. If such quoted market prices are not available, fair
value is determined using market prices for similar assets or present value techniques, applying an
appropriate risk-free interest rate adjusted for non-performance risk. The inputs used in present value
techniques are observable and fall into the Level 2 category.
• Derivatives: The fair values of derivative instruments are determined using quoted prices of identical
instruments from an active market, if available (Level 1 inputs). If quoted prices are not available, price
quotes for similar instruments, appropriately adjusted, or present value techniques, based on
available market data, or option pricing models are used. Cash-settled call options hedging the
Company’s WAR liability are valued based on bid prices of the equivalent listed warrant. The fair values
obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input
unless significant unobservable inputs are used.
Non-recurring fair value measures
The Company elects to record private equity investments without readily determinable fair values at
cost, less impairment, adjusted for observable price changes. The Company reassesses at each
reporting period whether these investments continue to qualify for this treatment. In 2021 and 2020,
the Company recognized, in “Other income (expense), net”, net fair value gains of $108 million and
$73 million, respectively, related to certain of its private equity investments based on observable
market price changes for an identical or similar investment of the same issuer. The fair values were
determined using Level 2 inputs. The carrying values of these investments at December 31, 2021 and
2020 totaled $169 million and $105 million.
Based on valuations at July 1, 2020, the Company recorded goodwill impairment charges of $311 million
in the third quarter of 2020. The fair value measurements used in the analyses were calculated using the
income approach (discounted cash flow method). The discounted cash flow models were calculated
using unobservable inputs, which classified the fair value measurement as Level 3 (see Note 11 for
additional information including further detailed information related to these charges and significant
unobservable inputs).
In June 2019, upon meeting the criteria as held for sale, the Company adjusted the carrying value of the
solar inverters business which was sold in February 2020 (See Note 4 for details). Apart from the
transactions above, there were no additional significant non-recurring fair value measurements during
2021 and 2020.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
203
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
December 31, 2021 ($ in millions)
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
Time deposits
Restricted cash
Marketable securities and short-term investments
(excluding securities):
Time deposits
Restricted cash, non-current
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
Long-term debt (excluding finance lease obligations)
1,357
4,043
1,288
4,234
Carrying
value
Level 1
Level 2
Level 3
Total fair
value
2,422
1,737
30
300
300
2,422
30
300
1,737
300
69
58
2,422
1,737
30
300
300
1,357
4,292
Carrying
value
Level 1
Level 2
Level 3
Total fair
value
December 31, 2020 ($ in millions)
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
Time deposits
Restricted cash
Restricted cash, non-current
Liabilities
1,765
1,513
323
300
1,765
323
300
1,513
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
Long-term debt (excluding finance lease obligations)
1,266
4,668
497
4,909
769
89
1,765
1,513
323
300
1,266
4,998
The Company uses the following methods and assumptions in estimating fair values of financial
instruments carried on a cost basis:
• Cash and equivalents (excluding securities with original maturities up to 3 months), Restricted cash,
current and non-current, and Marketable securities and short-term investments (excluding securities):
The carrying amounts approximate the fair values as the items are short-term in nature or, for cash
held in banks, are equal to the deposit amount.
• Short-term debt and current maturities of long-term debt (excluding finance lease obligations):
Short-term debt includes commercial paper, bank borrowings and overdrafts. The carrying amounts
of short-term debt and current maturities of long-term debt, excluding finance lease obligations,
approximate their fair values.
• Long-term debt (excluding finance lease obligations): Fair values of bonds are determined using
quoted market prices (Level 1 inputs), if available. For bonds without available quoted market prices
and other long-term debt, the fair values are determined using a discounted cash flow methodology
based upon borrowing rates of similar debt instruments and reflecting appropriate adjustments for
non-performance risk (Level 2 inputs).
204
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 8
Receivables, net and Contract assets and liabilities
“Receivables, net” consisted of the following:
December 31, ($ in millions)
Trade receivables
Other receivables
Allowance
Total
2021
6,206
684
(339)
6,551
2020
6,417
760
(357)
6,820
“Trade receivables” in the table above includes contractual retention amounts billed to customers of
$119 million and $146 million at December 31, 2021 and 2020, respectively. Management expects that
the substantial majority of related contracts will be completed and the substantial majority of the billed
amounts retained by the customer will be collected. Of the retention amounts outstanding at
December 31, 2021, 60 percent and 29 percent are expected to be collected in 2022 and 2023,
respectively.
“Other receivables” in the table above consists of value added tax, claims, rental deposits and other
non-trade receivables.
The reconciliation of changes in the allowance for doubtful accounts is as follows:
($ in millions)
Balance at January 1,
Transition adjustment
Current-period provision for expected credit losses
Write-offs charged against the allowance
Exchange rate differences
Balance at December 31,
2021
357
—
33
(37)
(14)
339
2020
228
56
115
(42)
—
357
2019
219
—
31
(19)
(3)
228
The following table provides information about Contract assets and Contract liabilities:
($ in millions)
Contract assets
Contract liabilities
2021
990
1,894
2020
985
1,903
2019
1,025
1,719
Contract assets primarily relate to the Company’s right to receive consideration for work completed but
for which no invoice has been issued at the reporting date. Contract assets are transferred to
receivables when rights to receive payment become unconditional. Management expects that the
majority of the amounts will be collected within one year of the respective balance sheet date.
Contract liabilities primarily relate to up-front advances received on orders from customers as well as
amounts invoiced to customers in excess of revenues recognized predominantly on long-term projects.
Contract liabilities are reduced as work is performed and as revenues are recognized.
The significant changes in the Contract assets and Contract liabilities balances were as follows:
($ in millions)
Revenue recognized, which was included in the Contract liabilities
balance at January 1, 2021/2020
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
Receivables recognized that were included in the Contract assets
balance at January 1, 2021/2020
2021
2020
Contract
assets
Contract
liabilities
Contract
assets
Contract
liabilities
(1,086)
1,136
(1,011)
1,129
(566)
(680)
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
205
The Company considers its order backlog to represent its unsatisfied performance obligations. At
December 31, 2021, the Company had unsatisfied performance obligations totaling $16,607 million and,
of this amount, the Company expects to fulfill approximately 75 percent of the obligations in 2022,
approximately 14 percent of the obligations in 2023 and the balance thereafter.
—
Note 9
Inventories, net
“Inventories, net” consisted of the following:
December 31, ($ in millions)
Raw materials
Work in process
Finished goods
Advances to suppliers
Total
—
Note 10
Property, plant and equipment, net
“Property, plant and equipment, net” consisted of the following:
December 31, ($ in millions)
Land and buildings
Machinery and equipment
Construction in progress
Accumulated depreciation
Total
2021
2,136
995
1,594
155
4,880
2020
1,785
1,020
1,499
165
4,469
2021
3,925
5,785
522
10,232
(6,187)
4,045
2020
3,889
6,144
505
10,538
(6,364)
4,174
Assets under finance leases included in “Property, plant and equipment, net” were as follows:
December 31, ($ in millions)
Land and buildings
Machinery and equipment
Accumulated depreciation
Total
2021
2020
164
92
256
(123)
133
169
79
248
(111)
137
In 2021, 2020 and 2019 depreciation, including depreciation of assets under finance leases, was
$575 million, $586 million and $616 million, respectively. In 2021, 2020 and 2019 there were no significant
impairments of property, plant or equipment.
206
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 11
Goodwill and intangible assets
The changes in “Goodwill” were as follows:
($ in millions)
Electrification
Motion
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
Balance at January 1, 2020
4,372
2,436
1,615
Goodwill acquired during the year
Impairment of Goodwill
Exchange rate differences and other
71
—
84
—
—
20
—
—
24
Balance at December 31, 2020(1)
4,527
2,456
1,639
Goodwill acquired during the year
Goodwill allocated to disposals
Exchange rate differences and other
Balance at December 31, 2021(1)
11
—
(66)
4,472
—
(338)
(1)
2,117
—
(7)
(19)
2,381
21
(290)
116
2,228
150
—
(98)
1,613
2,280
Total
10,825
92
(311)
244
10,850
161
(345)
(184)
10,482
21
—
(21)
—
—
—
—
—
—
(1) At December 31, 2021 and 2020, the gross goodwill amounted to $10,760 million and $11,152 million, respectively. The accumulated impair-
ment charges amounted to $278 million and $302 million, respectively, and related to the Robotics & Discrete Automation segment.
The Company adopted a new operating model on July 1, 2020, which resulted in a change to the
identification of the goodwill reporting units. Previously, the reporting units were the same as the
operating segments for Electrification, Motion and Robotics & Discrete Automation, while for the
Process Automation operating segment the reporting units were determined to be at the Division level,
which is one level below the operating segment. The new operating model provides the Divisions with
full ownership and accountability for their respective strategies, performance and resources and based
on these changes, the Company concluded that the reporting units would change and be the respective
Divisions within each operating segment. This change resulted only in an allocation of goodwill within
the operating segments and thus there is no change to segment level goodwill in the table above.
As a result of the new allocation of goodwill, an interim quantitative impairment test was conducted
both before and after the changes which were effective July 1, 2020. In the “before” test, it was
concluded that the fair value of the Company’s reporting units exceeded the carrying value under the
historical reporting unit structure.
The impairment test was performed for the new reporting units and the fair value of each was
determined using a discounted cash flow fair value estimate based on objective information available at
the measurement date. The significant assumptions used to develop the estimates of fair value for each
reporting unit included management’s best estimates of the expected future results and discount rates
specific to the reporting unit. The fair value estimates were based on assumptions that the Company
believed to be reasonable, but which are inherently uncertain and thus, actual results may differ from
those estimates. The fair values for each of the individual reporting units and their associated goodwill
were determined using Level 3 measurements.
The interim quantitative impairment test indicated that the estimated fair values of the reporting units
were substantially in excess of their carrying value for all reporting units except for the Machine
Automation reporting unit within the Robotics & Discrete Automation operating segment. The
contraction of the global economy in 2020, particularly in end-customer industries related to this
reporting unit and considerable uncertainty around the continued pace of macroeconomic recovery
generally led to a reduction in the fair values of the reporting units, thus affecting this reporting unit.
Also, at the Division level, this reporting unit does not benefit from shared cash flows generated within
an entire operating segment. In addition, the book value of the Machine Automation Division
includes a significant amount of intangible assets recognized in past acquisitions, resulting
in a proportionately higher book value than the other reporting unit within the Robotics & Discrete
Automation Business Area. With the fair value of the reporting unit lower due to the economic
conditions, the existing book value of the intangible assets combined with the newly allocated
reporting unit goodwill led to the carrying value of the Machine Automation reporting unit exceeding its
fair value. During 2020, a goodwill impairment charge of $290 million was recorded to reduce the
carrying value of this reporting unit to its implied fair value. The remaining goodwill for the Machine
Automation reporting unit was $554 million as of December 31, 2020.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
207
During 2021, certain reporting units were split into separate reporting units. For each change, an
interim quantitative impairment test was conducted before and after the change and in all cases, it was
concluded that the fair value of the relevant reporting units exceeded the carrying value
by a significant amount.
At October 1, 2021 and 2020, respectively, the Company performed qualitative assessments and
determined that it was not more likely than not that the fair value for each of these reporting units was
below the carrying value. As a result, the Company concluded that it was not necessary to perform the
quantitative impairment test.
“Intangible assets, net” consisted of the following:
December 31, ($ in millions)
Capitalized software for internal use
Capitalized software for sale
Intangibles other than software:
Customer-related
Technology-related
Marketing-related
Other
Total
2021
2020
Gross
carrying
amount
Accumu-
lated amort-
ization
Net
carrying
amount
Gross
carrying
amount
Accumu-
lated amor-
tization
Net
carrying
amount
835
31
1,716
1,122
493
56
(732)
(29)
(707)
(868)
(327)
(29)
103
2
1,009
254
166
27
828
33
2,557
1,170
492
63
(694)
(32)
134
1
(1,104)
1,453
(898)
(304)
(33)
272
188
30
4,253
(2,692)
1,561
5,143
(3,065)
2,078
In 2021 and 2020, additions to intangible assets were $95 million and $78 million, respectively.
There were no significant intangible assets acquired in business combinations during 2021 and 2020.
Amortization expense of intangible assets consisted of the following:
($ in millions)
Capitalized software for internal use
Intangibles other than software
Total
2021
2020
2019
66
252
318
61
268
329
74
271
345
In 2021, 2020 and 2019, impairment charges on intangible assets were not significant.
At December 31, 2021, future amortization expense of intangible assets is estimated to be:
($ in millions)
2022
2023
2024
2025
2026
Thereafter
Total
276
249
199
155
142
540
1,561
208
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 12
Debt
The Company’s total debt at December 31, 2021 and 2020, amounted to $5,561 million and
$6,121 million, respectively.
Short-term debt and current maturities of long-term debt
“Short-term debt and current maturities of long-term debt” consisted of the following:
December 31, ($ in millions)
Short-term debt
(weighted-average interest rate of 3.2% and 2.8%, respectively)
Current maturities of long-term debt
(weighted-average nominal interest rate of 2.8% and 3.2%, respectively)
Total
2021
2020
78
153
1,306
1,384
1,140
1,293
Short-term debt primarily represents short-term loans from various banks and issued
commercial paper.
At December 31, 2021, the Company had in place two commercial paper programs: a $2 billion
Euro-commercial paper program for the issuance of commercial paper in a variety of currencies,
and a $2 billion commercial paper program for the private placement of U.S. dollar denominated
commercial paper in the United States. At December 31, 2021 and 2020, no amount was outstanding
under the $2 billion Euro-commercial paper program. At December 31, 2021, no amount was
outstanding under the $2 billion program in the United States, while $32 million was outstanding at
December 31, 2020.
In December 2019, the Company replaced its previous multicurrency revolving credit facility with a new
$2 billion multicurrency revolving credit facility maturing in 2024. In 2021, the Company exercised its
option to further extend the maturity of this facility to 2026. The facility is for general corporate
purposes. Interest costs on drawings under the facility are LIBOR (for drawings in currencies for which
LIBOR is still published) and EURIBOR for EURO drawings, plus a margin of 0.175 percent, while
commitment fees (payable on the unused portion of the facility) amount to 35 percent of the margin,
which represents commitment fees of 0.06125 percent per annum. Utilization fees, payable on
drawings, amount to 0.075 percent per annum on drawings up to one-third of the facility, 0.15 percent
per annum on drawings in excess of one-third but less than or equal to two-thirds of the facility, or
0.30 percent per annum on drawings over two-thirds of the facility. The facility contains cross-default
clauses whereby an event of default would occur if the Company were to default on indebtedness as
defined in the facility, at or above a specified threshold. No amount was drawn at December 31, 2021
and 2020, under this facility.
Long-term debt
The Company raises long-term debt in various currencies, maturities and on various interest rate terms.
For certain of its debt obligations, the Company utilizes derivative instruments to modify its interest
rate exposure. In particular, the Company uses interest rate swaps to effectively convert certain
fixed-rate long-term debt into floating rate obligations. For certain non-U.S. dollar denominated debt,
the Company utilizes cross-currency interest rate swaps to effectively convert the debt into a U.S. dollar
obligation. The carrying value of debt, designated as being hedged by fair value hedges, is adjusted for
changes in the fair value of the risk component of the debt being hedged.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
209
The following table summarizes the Company’s long-term debt considering the effect of interest rate
and cross-currency interest rate swaps. Consequently, a fixed-rate debt subject to a fixed-to-floating
interest rate swap is included as a floating rate debt in the table below:
December 31,
($ in millions, except % data)
Floating rate
Fixed rate
Current portion of long-term debt
Total
2021
Nominal
rate
Effective
rate
1.2%
3.0%
0.3%
3.1%
2020
Nominal
rate
Effective
rate
1.6%
3.2%
0.2%
3.3%
Balance
3,330
2,638
5,968
2.8%
1.0%
(1,140)
3.2%
2.6%
4,828
Balance
3,598
1,885
5,483
(1,306)
4,177
At December 31, 2021, the principal amounts of long-term debt repayable (excluding finance lease
obligations) at maturity were as follows:
($ in millions)
2022
2023
2024
2025
2026
Thereafter
Total
1,271
794
1,156
56
—
2,085
5,362
Details of outstanding bonds were as follows:
December 31, (in millions)
Bonds:
4.0% USD Notes, due 2021
2.25% CHF Bonds, due 2021
2.875% USD Notes, due 2022
0.625% EUR Instruments, due 2023
0.75% EUR Instruments, due 2024
0.3% CHF Bonds, due 2024
3.8% USD Notes, due 2028(2)
1.0% CHF Bonds, due 2029
0% EUR Notes, due 2030
4.375% USD Notes, due 2042(2)
Total
2021
2020
Nominal
outstanding
Carrying
value(1)
Nominal
outstanding
Carrying
value(1)
USD
EUR
EUR
CHF
USD
CHF
EUR
USD
1,250
700
750
280
383
170
800
609
—
—
1,258
800
860
306
381
186
862
589
5,242
$
$
$
$
$
$
$
$
$
USD
CHF
USD
EUR
EUR
CHF
USD
CHF
650
350
1,250
700
750
280
383
170
USD
609
$
$
$
$
$
$
$
$
$
$
649
403
1,280
875
946
317
381
192
—
589
5,632
(1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge
accounting, where appropriate.
(2) Prior to completing a cash tender offer in 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and
the 4.375% USD Notes, due 2042, was $750 million.
During 2021, the Company repaid at maturity its 4.0% USD Notes and its 2.25% CHF Bonds. The
4.0% USD Notes paid interest semi-annually in arrears, while the 2.25% CHF Bonds paid interest
annually in arrears. The Company had entered into interest rate swaps to hedge its interest obligations
on the 2.25% CHF Bonds. After considering the impact of such swaps, these bonds effectively became
floating rate Swiss franc obligations and consequently have been shown as floating rate debt at
December 31, 2020, in the table of long-term debt above.
During 2020, in connection with exercising certain early redemption options on the $250 million 5.625%
USD Notes due 2021 and $450 million 3.375% USD Notes due 2023, and the partial redemption
through a cash tender offer of the 3.8% USD Notes due 2028 and 4.375% USD Notes due 2042, the
Company recognized losses on extinguishment of debt of $162 million, representing the premium
associated with the early redemption, as well as the recognition of the relevant remaining unamortized
issuance premium or discounts and issuance costs.
210
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The 2.875% USD Notes, due 2022, pay interest semi-annually in arrears at a fixed annual rate of
2.875 percent. The 4.375% USD Notes, due 2042, pay interest semi-annually in arrears at a fixed annual
rate of 4.375 percent. The Company may redeem both of these notes (which were issued together in May
2012) prior to maturity, in whole or in part, at the greater of (i) 100 percent of the principal amount of
the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of
principal and interest (excluding interest accrued to the redemption date) discounted to the
redemption date at a rate defined in the note terms, plus interest accrued at the redemption date.
These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance
(USA) Inc., a 100 percent owned finance subsidiary, and were fully and unconditionally guaranteed by
ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from
its subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S-X, the separate financial
statements of ABB Finance (USA) Inc. are not provided. The Company has entered into interest rate
swaps for an aggregate nominal amount of $1,050 million to partially hedge its interest obligations on
the 2.875% USD Notes, due 2022. After considering the impact of such swaps, $1,050 million of the
outstanding principal is shown as floating rate debt in the table of long-term debt above. During 2020,
by way of a cash tender offer, the Company redeemed $141 million of the original $750 million 4.375%
USD Notes due 2042 issued.
The 0.625% EUR Instruments, due 2023 pay interest annually in arrears at a fixed rate of 0.625 percent
per annum. The Company may redeem these notes three months prior to maturity (Par call date), in
whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed
and (ii) the sum of the present values of remaining scheduled payments of principal and interest
(excluding interest accrued to the redemption date) discounted to the redemption date at a rate
defined in the note terms, plus interest accrued at the redemption date. The Company may redeem
these instruments in whole or in part, after the Par call date at 100 percent of the principal amount of
the notes to be redeemed. The Company entered into interest rate swaps to hedge its interest on these
bonds. After considering the impact of such swaps, these notes effectively became floating rate euro
obligations and consequently have been shown as floating rate debt, in the table of long-term
debt above.
The 0.75% EUR Instruments, due 2024 pay interest annually in arrears at a fixed rate of 0.75 percent per
annum and have the same early redemption terms as the 0.625% EUR Instruments above. The Company
entered into interest rate swaps to hedge its interest on these bonds. After considering the impact of
such swaps, these bonds effectively became floating rate euro obligations and consequently have been
shown as floating rate debt in the table of long-term debt above.
In April 2018, the Company issued the following notes (i) $300 million of 2.8% USD Notes, due 2020,
(ii) $450 million of 3.375% USD Notes, due 2023, and (iii) $750 million of 3.8% USD Notes, due 2028. Each
of the respective notes pays interest semi-annually in arrears. The 2020 Notes were repaid at maturity in
October 2020 and the 2023 Notes were redeemed in full in December 2020. The Company may redeem
the remaining principal outstanding on the 2028 Notes up to three months prior to their maturity date,
in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed
and (ii) the sum of the present values of remaining scheduled payments of principal and interest
(excluding interest accrued to the redemption date) discounted to the redemption date at a rate
defined in the Notes terms, plus interest accrued at the redemption date. On or after January 3, 2028
(three months prior to their maturity date), the Company may also redeem the 2028 Notes, in whole or
in part, at any time at a redemption price equal to 100 percent of the principal amount of the notes to
be redeemed plus unpaid accrued interest to, but excluding, the redemption date. During 2020 by way
of a cash tender offer, the Company redeemed $367 million of the original $750 million 3.8% USD Notes
due 2028 issued. These notes, registered with the U.S. Securities and Exchange Commission, were
issued by ABB Finance (USA) Inc., a 100 percent owned finance subsidiary, and were fully and
unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of the parent
company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13-01 of
Regulation S-X, the separate financial statements of ABB Finance (USA) Inc. are not provided.
In February 2019, the Company issued the following notes: (i) CHF 280 million of 0.3% CHF Bonds, due
2024 and (ii) CHF 170 million of 1.0% CHF Bonds, due 2029. Each of the respective notes pays interests
annually in arrears. The Company recorded aggregate net proceeds, after underwriting discount and
other fees, of CHF 449 million (equivalent to approximately $449 million on date of issuance).
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
211
In January 2021, the Company issued zero interest Notes having a principal amount of EUR 800 million
and due in 2030. The Company recorded net proceeds (after underwriting fees) of EUR 791 million
(equivalent to $960 million on the date of issuance). These instruments do not pay interest and have the
same early redemption terms as the 0.625% EUR Instruments above. In line with the Company’s policy
of reducing its currency and interest rate exposures, cross-currency interest rate swaps have been used
to modify the characteristics of these instruments. After considering the impact of these
cross-currency interest rate swaps, the Company effectively has a floating rate U.S. dollar obligation.
The Company’s various debt instruments contain cross-default clauses which would allow the
bondholders to demand repayment if the Company were to default on any borrowing at or
above a specified threshold. Furthermore, all such bonds constitute unsecured obligations of the
Company and rank pari passu with other debt obligations.
In addition to the bonds described above, included in long-term debt at December 31, 2021 and 2020,
are finance lease obligations, bank borrowings of subsidiaries and other long-term debt, none of which
is individually significant.
Subsequent events
At February 23, 2022, the amount outstanding under the $2 billion Euro-commercial paper program was
$475 million.
—
Note 13
Other provisions, other current liabilities and other
non-current liabilities
“Other provisions” consisted of the following:
December 31, ($ in millions)
Contract-related provisions
Restructuring and restructuring-related provisions
Provision for insurance-related reserves
Provisions for contractual penalties and compliance and litigation matters
Other
Total
“Other current liabilities” consisted of the following:
December 31, ($ in millions)
Employee-related liabilities
Accrued expenses
Non-trade payables
Income taxes payable
Accrued customer rebates
Other tax liabilities
Derivative liabilities (see Note 6)
Deferred income
Pension and other employee benefits
Accrued interest
Other
Total
2021
2020
762
188
174
63
199
754
292
176
113
184
1,386
1,519
2021
1,547
2020
1,467
768
644
378
322
298
133
95
41
28
113
4,367
650
622
395
317
286
145
130
42
29
98
4,181
212
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
“Other non-current liabilities” consisted of the following:
December 31, ($ in millions)
Income tax related liabilities
Derivative liabilities (see Note 6)
Provisions for contractual penalties and compliance and litigation matters
Deferred income
Employee-related liabilities
Environmental provisions
Other
Total
—
Note 14
Leases
2021
1,458
130
129
74
59
39
227
2,116
2020
1,423
46
120
138
70
38
190
2,025
The Company’s lease obligations primarily relate to real estate, machinery and equipment. The
components of lease expense were as follows:
($ in millions)
Operating lease cost
Finance lease cost
Short-term lease cost
Sub-lease income
Total lease expense
Land and buildings
Machinery and
equipment
Total
2021
2020
2019
2021
2020
2019
2021
2020
2019
240
287
268
101
313
376
369
17
26
(24)
259
13
17
(20)
297
14
19
(2)
73
20
14
(1)
89
16
31
(1)
299
106
135
152
22
29
—
37
40
(25)
365
29
48
(21)
432
36
48
(2)
451
The following table presents supplemental cash flow information related to leases:
($ in millions)
Operating leases:
Land and buildings
Machinery and
equipment
Total
2021
2020
2019
2021
2020
2019
2021
2020
2019
Cash paid under operating cash flows
223
263
252
Right-of-use assets obtained
in exchange for new liabilities:
267
266
153
68
86
83
57
96
52
291
346
348
353
323
205
In 2021, 2020 and 2019 the cash flow amounts under finance leases were not significant.
At December 31, 2021, the future net minimum lease payments for operating and finance leases and the
related present value of the net minimum lease payments consisted of the following:
($ in millions)
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Difference between undiscounted cash flows and discounted cash flows
Present value of minimum lease payments
Operating Leases
Finance Leases
Land and
buildings
Machinery
and
equipment
Land and
buildings
Machinery
and
equipment
197
164
134
109
81
154
839
(59)
780
71
39
21
9
1
1
142
(3)
139
21
21
19
18
16
54
149
(28)
121
15
12
8
5
1
—
41
(1)
40
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
213
The following table presents certain information related to lease terms and discount rates:
Operating Leases:
Weighted-average remaining term (months)
Weighted-average discount rate
73
2.6%
84
3.0%
78
3.0%
30
1.9%
29
2.0%
29
2.2%
Land and buildings
Machinery and equipment
2021
2020
2019
2021
2020
2019
Finance Leases:
Weighted-average remaining term (months)
Weighted-average discount rate
100
7.7%
107
7.7%
110
8.2%
40
1.8%
40
2.3%
33
2.8%
The present value of minimum finance lease payments included in “Short-term debt and current
maturities of long-term debt” and “Long-term debt” in the Consolidated Balance Sheets at
December 31, 2021, amounts to $27 million and $134 million, respectively, and at December 31, 2020,
amounts to $27 million and $160 million, respectively.
—
Note 15
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
As a result of an internal investigation, the Company self-reported to the Securities and Exchange
Commission (SEC) and the Department of Justice (DoJ) in the United States as well as to the Serious
Fraud Office (SFO) in the United Kingdom concerning certain of its past dealings with Unaoil and its
subsidiaries, including alleged improper payments made by these entities to third parties. In May 2020,
the SFO closed its investigation, which it originally announced in February 2017, as the case did not
meet the relevant test for prosecution. The Company continues to cooperate with the U.S. authorities
as requested. At this time, it is not possible for the Company to make an informed judgment about the
outcome of this matter.
Based on findings during an internal investigation, the Company self-reported to the SEC and the DoJ,
in the United States, to the Special Investigating Unit (SIU) and the National Prosecuting Authority
(NPA) in South Africa as well as to various authorities in other countries potential suspect payments
and other compliance concerns in connection with some of the Company’s dealings with Eskom and
related persons. Many of those parties have expressed an interest in, or commenced an investigation
into, these matters and the Company is cooperating fully with them. The Company paid $104 million to
Eskom in December 2020 as part of a full and final settlement with Eskom and the Special Investigating
Unit relating to improper payments and other compliance issues associated with the Controls and
Instrumentation Contract, and its Variation Orders for Units 1 and 2 at Kusile. The Company continues
to cooperate fully with the authorities in their review of the Kusile project and is in discussions with
them regarding a coordinated resolution. Although the Company believes that there could be an
unfavorable outcome in one or more of these ongoing reviews, at this time it is not possible for the
Company to make an informed judgment about the possible financial impact.
General
The Company is aware of proceedings, or the threat of proceedings, against it and others in respect of
private claims by customers and other third parties with regard to certain actual or alleged
anticompetitive practices. Also, the Company is subject to other claims and legal proceedings, as well
as investigations carried out by various law enforcement authorities. With respect to the
above-mentioned claims, regulatory matters, and any related proceedings, the Company will bear the
related costs, including costs necessary to resolve them.
214
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Liabilities recognized
At December 31, 2021 and 2020, the Company had aggregate liabilities of $104 million and $100 million,
respectively, included in “Other provisions” and “Other non-current liabilities”, for the above regulatory,
compliance and legal contingencies, and none of the individual liabilities recognized was significant. As
it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain
matters and as it is not possible, based on information currently available to management, to estimate
the maximum potential liability on other matters, there could be adverse outcomes beyond the
amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s third-party guarantees. The
maximum potential payments represent a “worst-case scenario”, and do not reflect management’s
expected outcomes.
December 31, ($ in millions)
Performance guarantees
Financial guarantees
Indemnification guarantees(2)
Total
Maximum potential payments(1)
2021
4,540
52
136
4,728
2020
6,726
339
177
7,242
(1) Maximum potential payments include amounts in both continuing and discontinued operations.
(2) Certain indemnifications provided to Hitachi in connection with the divestment of Power Grids are without limit.
The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company’s
best estimate of future payments, which it may incur as part of fulfilling its guarantee obligations. In
respect of the above guarantees, the carrying amounts of liabilities at December 31, 2021 and 2020,
amounted to $156 million and $135 million, respectively, the majority of which is included in
discontinued operations.
The Company is party to various guarantees providing financial or performance assurances to certain
third parties. These guarantees, which have various maturities up to 2035, mainly consist of
performance guarantees whereby (i) the Company guarantees the performance of a third party’s
product or service according to the terms of a contract and (ii) as member of a consortium/joint
venture that includes third parties, the Company guarantees not only its own performance but also the
work of third parties. Such guarantees may include guarantees that a project will be completed
within a specified time. If the third party does not fulfill the obligation, the Company will compensate
the guaranteed party in cash or in kind. The original maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable and cables accessories businesses, the
Company has entered into various performance guarantees with other parties with respect to certain
liabilities of the divested business. At December 31, 2021 and 2020, the maximum potential payable
under these guarantees amounts to $911 million and $994 million, respectively, and these guarantees
have various maturities ranging from five to ten years.
The Company retained obligations for financial, performance and indemnification guarantees related to
the Power Grids business sold on July 1, 2020 (see Note 3 for details). The performance and financial
guarantees have been indemnified by Hitachi at the same proportion of its ownership in Hitachi Energy
Ltd, formerly Hitachi ABB Power Grids (80.1 percent). These guarantees, which have various maturities
up to 2035, primarily consist of bank guarantees, standby letters of credit, business performance
guarantees and other trade-related guarantees, the majority of which have original maturity dates
ranging from one to ten years. The maximum amount payable under these guarantees at December 31,
2021 and 2020, is approximately $3.2 billion and $5.5 billion, respectively, and the carrying amounts of
liabilities (recorded in discontinued operations) at December 31, 2021 and 2020, amounted to
$136 million and $135 million, respectively.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
215
Commercial commitments
In addition, in the normal course of bidding for and executing certain projects, the Company has
entered into standby letters of credit, bid/performance bonds and surety bonds (collectively
“performance bonds”) with various financial institutions. Customers can draw on such performance
bonds in the event that the Company does not fulfill its contractual obligations. The Company would
then have an obligation to reimburse the financial institution for amounts paid under the performance
bonds. At December 31, 2021 and 2020, the total outstanding performance bonds aggregated to
$3.6 billion and $4.3 billion, respectively, of which $0.1 billion and $0.3 billion, respectively, relate to
discontinued operations. There have been no significant amounts reimbursed to financial institutions
under these types of arrangements in 2021 and 2020.
Product and order-related contingencies
The Company calculates its provision for product warranties based on historical claims experience and
specific review of certain contracts.
The reconciliation of the “Provisions for warranties”, including guarantees of product performance, was
as follows:
($ in millions)
Balance at January 1,
Net change in warranties due to acquisitions,
divestments and liabilities held for sale(1)
Claims paid in cash or in kind
Net increase in provision for changes in estimates,
warranties issued and warranties expired
Exchange rate differences
Balance at December 31,
2021
1,035
1
(222)
226
(35)
2020
816
8
(209)
369
51
1,005
1,035
2019
948
(88)
(310)
276
(10)
816
(1) Includes adjustments to the initial purchase price allocation recorded during the measurement period.
In 2020, the Company determined that the provision for a product warranty related to a divested
business was no longer sufficient to cover expected warranty costs in the remaining warranty period.
Due to an unexpected level of product failure, the previously estimated product warranty provision was
increased by $143 million during 2020. The corresponding increase was included in “Cost of sales of
products”. As these costs relate to a divested business, in accordance with the definition of the
Company’s primary measure of segment performance, Operational EBITA (see Note 23), the costs have
been excluded from this measure.
The warranty liability has been recorded based on the information currently available and is subject to
change in the future.
Related party transactions
The Company conducts business with certain companies where members of the Company’s Board of
Directors or Executive Committee act, or in recent years have acted, as directors or senior executives.
The Company’s Board of Directors has determined that the Company’s business relationships with
those companies do not constitute material business relationships. This determination was made in
accordance with the Company’s related party transaction policy which was prepared based on the
Swiss Code of Best Practice and the independence criteria set forth in the corporate governance rules
of the New York Stock Exchange.
216
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 16
Income taxes
“Income tax expense” consisted of the following:
($ in millions)
Current taxes
Deferred taxes
Income tax expense allocated to continuing operations
Income tax expense allocated to discontinued operations
2021
1,346
(289)
1,057
1
2020
776
(280)
496
322
2019
855
(83)
772
167
Income tax expense from continuing operations is reconciled below from the Company’s
weighted-average global tax rate (rather than from the Swiss domestic statutory tax rate) as the parent
company of the ABB Group, ABB Ltd, is domiciled in Switzerland and income generated in jurisdictions
outside of Switzerland (hereafter “foreign jurisdictions”) which has already been subject to corporate
income tax in those foreign jurisdictions is, to a large extent, tax exempt in Switzerland. There is no
requirement in Switzerland for any parent company of a group to file a tax return of the consolidated
group determining domestic and foreign pre-tax income. As the Company’s consolidated income from
continuing operations is predominantly earned outside of Switzerland, the weighted-average global tax
rate of the Company results from enacted corporate income tax rates in foreign jurisdictions.
The reconciliation of “Income tax expense from continuing operations” at the weighted-average tax
rate to the effective tax rate is as follows:
($ in millions, except % data)
Income from continuing operations before income taxes
Weighted-average global tax rate
Income taxes at weighted-average tax rate
Items taxed at rates other than the weighted-average tax rate
Unrecognized tax benefits
Changes in valuation allowance, net
Effects of changes in tax laws and enacted tax rates
Non-deductible / non-taxable items
Other, net
Income tax expense from continuing operations
Effective tax rate for the year
2021
5,787
23.7%
1,371
176
151
(95)
1
(542)
(5)
1,057
18.3%
2020
841
2019
1,862
22.9%
18.3%
193
3
(38)
29
23
232
54
496
341
(7)
133
198
63
44
—
772
59.0%
41.5%
The allocation of consolidated income from continuing operations, which is predominantly earned
outside of Switzerland, impacts the “weighted-average global tax rate”. In 2021, gains on sales of
businesses increased the weighted-average global tax rate by approximately 1 percent. In 2019, based
on the enacted tax rates in the applicable jurisdictions, the loss recorded for the planned sale of the
solar inverters business reduced the weighted-average global tax rate by approximately 2 percent.
In 2021, “Items taxed at rates other than the weighted-average tax rate” included $107 million, for
certain amounts related to the divestment of the Dodge business. In 2020 and 2019, the amount was
not significant.
In 2021, “Changes in valuation allowance, net” included positive impacts from changes in certain
outlooks in Europe of $82 million.
In 2020, “Changes in valuation allowance, net” predominantly reflects increases in the valuation
allowance resulting from changes in the expectations at that time of future economic conditions due to
impacts at that time on the Company’s business from the COVID-19 pandemic.
In 2019, “Changes in valuation allowance, net” included adjustments to the valuation allowance in
certain jurisdictions where the Company updated its assessment that it was more likely than not that
such deferred tax assets would be realized. In 2019, the Company recorded an increase of $158 million
to the valuation allowance in certain operations in North America, including an amount to provide for
certain deferred tax assets arising in 2019.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
217
There were no significant impacts from “Effects of changes in tax laws and enacted tax rates” in 2021.
In 2020, the amount primarily reflects the impact of changes to tax rates in certain countries in Asia for
$16 million. In 2019, the amount primarily reflects a change in tax law applicable to a country in Europe.
The benefit in 2019 was mostly offset by a related change in the valuation allowance, resulting in a net
benefit of $17 million.
In 2021, “Non-deductible / non-taxable items” includes $567 million in benefits primarily due to impacts
of divestments and internal reorganizations where the reported net gain from sale of businesses
exceeded the related taxable gain as well as the impact of a recognition of previously unrecognized
outside basis differences. In 2020, the negative impact was $232 million, and included $82 million for
the impairment of non-deductible goodwill. In addition, the amount in 2020 includes $62 million
relating to non-operational pension costs resulting from the settlement of certain defined benefit plans
which were principally not deductible. “Non-deductible / non-taxable items” also includes other items
that were deducted for financial accounting purposes but are typically not tax deductible, such as
certain interest expense costs, local taxes on productive activities, disallowed amounts for meals and
entertainment expenses and other similar items. The amounts in 2019 related primarily to these
typically non-deductible items.
In 2021 and 2019, “Unrecognized tax benefits” in the table above included a net cost of $150 million and
$91 million, respectively, related to the interpretation for tax law and double tax treaty agreements by
competent tax authorities. In 2020, “Unrecognized tax benefits” included a benefit of $20 million.
In 2020, “Other, net” includes an expense of $54 million, related to finalization of tax audits in Europe.
Deferred tax assets and liabilities (excluding amounts held for sale and in discontinued operations)
consisted of the following:
December 31, ($ in millions)
Deferred tax assets:
Unused tax losses and credits
Provisions and other accrued liabilities
Other current assets including receivables
Pension
Inventories
Intangible assets
Other
Total gross deferred tax asset
Valuation allowance
Total gross deferred tax asset, net of valuation allowance
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
Other assets
Pension
Other liabilities
Inventories
Unremitted earnings of subsidiaries
Total gross deferred tax liability
Net deferred tax asset (liability)
Included in:
“Deferred taxes”—non-current assets
“Deferred taxes”—non-current liabilities
Net deferred tax asset (liability)
2021
2020
551
757
104
338
266
1,135
57
3,208
(1,263)
1,945
(245)
(281)
(107)
(302)
(175)
(35)
(308)
758
750
114
413
370
901
48
3,354
(1,518)
1,836
(275)
(419)
(107)
(223)
(268)
(29)
(333)
(1,453)
(1,654)
492
182
1,177
(685)
492
843
(661)
182
Certain entities have deferred tax assets related to net operating loss carry-forwards and other items.
As recognition of these assets in certain entities did not meet the more likely than not criterion,
valuation allowances have been recorded. “Unused tax losses and credits” at December 31, 2021 and
2020, in the table above, included $93 million and $170 million, respectively, for which the Company has
established a valuation allowance as, due to limitations imposed by the relevant tax law, the Company
determined that, more likely than not, such deferred tax assets would not be realized.
218
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The valuation allowance at December 31, 2021, 2020 and 2019, was $1,263 million, $1,518 million and
$1,632 million, respectively.
At December 31, 2021 and 2020, deferred tax liabilities totaling $308 million and $333 million,
respectively, have been provided for withholding taxes, dividend distribution taxes or additional
corporate income taxes (hereafter “withholding taxes”) on unremitted earnings which will be payable in
foreign jurisdictions in the event of repatriation of the foreign earnings to Switzerland. Income which
has been generated outside of Switzerland and has already been subject to corporate income tax in
such foreign jurisdictions is, to a large extent, tax exempt in Switzerland and therefore, generally no or
only limited Swiss income tax has to be provided for on the repatriated earnings of foreign subsidiaries.
Certain countries levy withholding taxes on dividend distributions and these taxes cannot always be
fully reclaimed by the Company’s relevant subsidiary receiving the dividend although the taxes have to
be withheld and paid by the relevant subsidiary distributing such dividend. In 2021 and 2020, certain
taxes arose in certain foreign jurisdictions for which the technical merits do not allow utilization of
benefits. At December 31, 2021 and 2020, foreign subsidiary retained earnings subject to withholding
taxes upon distribution of approximately $100 million and $100 million, respectively, were considered
as indefinitely reinvested, as these funds are used for financing current operations as well as business
growth through working capital and capital expenditure in those countries and, consequently, no
deferred tax liability was recorded.
At December 31, 2021, net operating loss carry-forwards of $2,170 million and tax credits of $69 million
were available to reduce future income taxes of certain subsidiaries. Of these amounts, $1,258 million of
operating loss carry-forwards and $48 million of tax credits will expire in varying amounts through
2045, while the remainder are available for carryforward indefinitely. The largest amount of these
carry-forwards related to the Company’s Europe operations.
Unrecognized tax benefits consisted of the following:
($ in millions)
Classification as unrecognized tax items on January 1, 2019
Net change due to acquisitions and divestments
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
Decrease as a result of the applicable statute of limitations
Exchange rate differences
Balance at December 31, 2019,
which would, if recognized, affect the effective tax rate
Net change due to acquisitions and divestments
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
Decrease as a result of the applicable statute of limitations
Exchange rate differences
Balance at December 31, 2020,
which would, if recognized, affect the effective tax rate
Net change due to acquisitions and divestments
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
Decrease as a result of the applicable statute of limitations
Exchange rate differences
Balance at December 31, 2021,
which would, if recognized, affect the effective tax rate
Unrecognized
tax benefits
Penalties and
interest related
to unrecognized
tax benefits
961
11
202
(82)
163
(57)
(83)
(9)
1,106
1
298
(161)
390
(340)
(59)
63
1,298
16
240
(42)
98
(175)
(72)
(41)
1,322
239
7
85
(63)
6
(8)
(28)
(5)
233
—
96
(57)
5
(75)
(16)
6
192
(6)
58
(3)
7
(20)
(22)
(7)
199
Total
1,200
18
287
(145)
169
(65)
(111)
(14)
1,339
1
394
(218)
395
(415)
(75)
69
1,490
10
298
(45)
105
(195)
(94)
(48)
1,521
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
219
In 2021, “Increase relating to current year tax positions” included a total of $72 million in taxes related to
the interpretation of tax law and double tax treaty agreements by competent tax authorities.
In 2020 and 2019, “Increase relating to current year tax positions” included a total of $381 million and
$163 million, respectively, in taxes related to the interpretation of tax law and double tax treaty
agreements by competent tax authorities. In 2020, $301 million of the $381 million is reported as
Income tax expense in discontinued operations.
In 2021, “Increase relating to prior year tax positions” included a total of $240 million related to the
interpretation of tax law and double tax treaty agreements by competent tax authorities in Europe.
In 2020, “Increase relating to prior year tax positions” is predominantly related to the interpretation of
tax law and double tax treaty agreements by competent tax authorities in Europe, of which $73 million
is reported as Income tax expense in discontinued operations.
In 2021, “Decrease relating to prior year tax positions” included a total of $42 million related to tax risk
assessments in Europe of $33 million.
In 2020, “Decrease relating to prior year tax positions” included a total of $85 million related to a change
of interpretation of tax law in Asia and changed tax risk assessments in Europe of $59 million.
In 2021, “Decrease due to settlements with tax authorities” is predominantly related to tax assessments
received in Europe.
In 2020, “Decrease due to settlements with tax authorities” is predominantly related to closed tax
audits in Europe.
At December 31, 2021, the Company expected the resolution, within the next twelve months, of
unrecognized tax benefits related to pending court cases amounting to $63 million for income taxes,
penalties and interest. Otherwise, the Company had not identified any other significant changes which
were considered reasonably possible to occur within the next twelve months.
At December 31, 2021, the earliest significant open tax years that remained subject to examination were
the following:
Region
Europe
United States
Rest of Americas
China
Rest of Asia, Middle East and Africa
Year
2015
2018
2017
2012
2011
220
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 17
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and
termination indemnity plans, in accordance with local regulations and practices. At December 31, 2021,
the Company’s most significant defined benefit pension plans are in Switzerland as well as in Germany,
the United Kingdom, and the United States. These plans cover a large portion of the Company’s
employees and provide benefits to employees in the event of death, disability, retirement, or
termination of employment. Certain of these plans are multi-employer plans. The Company also
operates other postretirement benefit plans including postretirement health care benefits and other
employee-related benefits for active employees including long-service award plans. The measurement
date used for the Company’s employee benefit plans is December 31. The funding policies of the
Company’s plans are consistent with local government and tax requirements.
During 2020, the Company took steps to transfer the defined benefit pension risks in three
International countries to external financial institutions. Two of these plans were settled entirely for
accounting purposes while the third plan involved the settlement of specific obligations for certain
former employees. In connection with these transactions, the Company made net payments of
$309 million and recorded non-operational pension charges of $520 million which were included in net
periodic benefit cost as curtailments, settlements and special termination benefits. The Company also
made cash payments of $143 million and recorded non-operational pension charges of $101 million in
2020 for the settlement of pension obligations in discontinued operations.
The Company recognizes in its Consolidated Balance Sheets the funded status of its defined benefit
pension plans, postretirement plans and other employee-related benefits measured as the difference
between the fair value of the plan assets and the benefit obligation.
Unless otherwise indicated, the following tables include amounts relating to both continuing and
discontinued operations.
Obligations and funded status of the plans
The change in benefit obligation, change in fair value of plan assets, and funded status recognized in
the Consolidated Balance Sheets were as follows:
($ in millions)
Benefit obligation at January 1,
Service cost
Interest cost
Contributions by plan participants
Benefit payments
Settlements
Benefit obligations of
businesses acquired (divested)
Actuarial (gain) loss
Plan amendments and other
Exchange rate differences
Benefit obligation at December 31,
Fair value of plan assets at January 1,
Actual return on plan assets
Contributions by employer
Contributions by plan participants
Benefit payments
Settlements
Plan assets of businesses acquired (divested)
Plan amendments and other
Exchange rate differences
Fair value of plan assets at December 31,
Funded status — overfunded (underfunded)
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
2021
3,870
61
(5)
36
(130)
(124)
—
(140)
—
(134)
3,434
4,133
279
63
36
(130)
(124)
—
—
(144)
4,113
679
2020
4,308
74
6
72
(160)
(101)
(765)
71
—
365
3,870
4,189
191
228
72
(160)
(101)
(664)
—
378
4,133
263
2021
5,527
47
72
8
(207)
(84)
(46)
(15)
13
(200)
5,115
4,608
197
124
8
(207)
(84)
(50)
14
(147)
4,463
(652)
2020
7,878
92
111
12
(295)
(2,542)
(165)
214
(64)
286
5,527
6,246
375
611
12
(295)
(2,542)
(82)
62
221
4,608
(919)
2021
98
1
2
—
(9)
—
(11)
(8)
(2)
—
71
—
—
9
—
(9)
—
—
—
—
—
2020
110
1
3
—
(12)
—
(5)
4
(3)
—
98
—
—
12
—
(12)
—
—
—
—
—
(71)
(98)
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
221
The amounts recognized in “Accumulated other comprehensive loss” and “Noncontrolling interests”
were:
Defined pension
benefits
Other postretirement
benefits
December 31, ($ in millions)
2021
2020
2019
2021
2020
2019
Net actuarial (loss) gain
Prior service credit
(1,540)
(2,038)
(2,782)
72
75
59
Amount recognized in OCI(1) and NCI(2)
(1,468)
(1,963)
(2,723)
Taxes associated with
amount recognized in OCI and NCI
Amount recognized in
OCI and NCI, net of tax(3)
352
374
536
(1,116)
(1,589)
(2,187)
21
7
28
—
28
21
11
32
—
32
28
13
41
—
41
(1) OCI represents “Accumulated other comprehensive loss”.
(2) NCI represents “Noncontrolling interests”.
(3) NCI, net of tax, amounted to $0 million, $(1) million and $(1) million at December 31, 2021, 2020 and 2019.
In addition, the following amounts were recognized in the Company’s Consolidated Balance Sheets:
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
December 31, ($ in millions)
Overfunded plans
Underfunded plans — current
Underfunded plans — non-current
Funded status - overfunded (underfunded)
2021
683
—
(4)
679
2020
267
—
(4)
263
2021
208
(23)
(837)
(652)
2020
92
(22)
(989)
(919)
December 31, ($ in millions)
Non-current assets
Overfunded pension plans
Other employee-related benefits
Pension and other employee benefits
December 31, ($ in millions)
Current liabilities
Underfunded pension plans
Underfunded other postretirement benefit plans
Other employee-related benefits
Pension and other employee benefits
December 31, ($ in millions)
Non-current liabilities
Underfunded pension plans
Underfunded other postretirement benefit plans
Other employee-related benefits
Pension and other employee benefits
2021
2020
—
(7)
(64)
(71)
—
(9)
(89)
(98)
2021
2020
891
1
892
359
1
360
2021
2020
(23)
(10)
(8)
(41)
(22)
(9)
(11)
(42)
2021
2020
(841)
(62)
(122)
(993)
(89)
(149)
(1,025)
(1,231)
222
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The accumulated benefit obligation (ABO) for all defined benefit pension plans was $8,452 million and
$9,310 million at December 31, 2021 and 2020, respectively. The projected benefit obligation (PBO), ABO
and fair value of plan assets, for pension plans with a PBO in excess of fair value of plan assets or ABO in
excess of fair value of plan assets, was:
December 31,
($ in millions)
PBO
ABO
Fair value of plan assets
PBO exceeds fair value of plan assets
ABO exceeds fair value of plan assets
Switzerland
International
Switzerland
International
2021
2020
2021
12
12
8
13
13
9
2,994
2,917
2,133
2020
5,131
5,056
4,120
2021
2020
2021
12
12
8
13
13
9
2,979
2,905
2,119
2020
5,008
4,942
4,004
All of the Company’s other postretirement benefit plans are unfunded.
Components of net periodic benefit cost
Net periodic benefit cost consisted of the following:
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
($ in millions)
2021
2020
2019
2021
2020
2019
2021
2020
2019
Operational pension cost:
Service cost
Operational pension cost
Non-operational pension cost (credit):
61
61
74
74
76
76
47
47
92
92
113
113
Interest cost
(5)
6
15
72
111
174
Expected return on plan assets
(116)
(123)
(112)
(178)
(253)
(276)
Amortization of prior service cost (credit)
Amortization of net actuarial loss
Curtailments, settlements
and special termination benefits
(9)
—
1
(11)
(14)
7
6
—
11
(2)
67
7
Non-operational pension cost (credit)
(129)
(115)
(100)
(34)
Net periodic benefit cost
(68)
(41)
(24)
13
2
2
109
108
644
613
705
27
35
148
1
1
2
—
(3)
(2)
—
(3)
(2)
1
1
3
—
(2)
(3)
—
(2)
(1)
1
1
4
—
(5)
(3)
(10)
(14)
(13)
The components of net periodic benefit cost other than the service cost component are included in the
line Non-operational pension (cost) credit in the Consolidated Income Statements. Net periodic benefit
cost includes $121 million and $47 million in 2020 and 2019, respectively, related to discontinued
operations.
Assumptions
The following weighted-average assumptions were used to determine benefit obligations:
December 31, (in %)
Discount rate
Rate of compensation increase
Rate of pension increase
Cash balance interest credit rate
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
2021
2020
2021
2020
2021
2020
0.2
—
—
1.0
—
—
—
1.0
2.1
1.5
1.7
2.1
1.6
1.0
1.4
2.1
2.6
0.3
—
—
2.1
0.2
—
—
For the Company’s significant benefit plans, the discount rate used at each measurement date is set
based on a high-quality corporate bond yield curve (derived based on bond universe information
sourced from reputable third-party index and data providers and rating agencies) reflecting the timing,
amount and currency of the future expected benefit payments for the respective plan. Consistent
discount rates are used across all plans in each currency zone, based on the duration of the applicable
plan(s) in that zone. For plans in the other countries, the discount rate is based on high quality corporate
or government bond yields applicable in the respective currency, as appropriate at each measurement
date with a duration broadly consistent with the respective plan’s obligations.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
223
The following weighted-average assumptions were used to determine the “Net periodic benefit cost”:
(in %)
Discount rate
Expected long-term rate
of return on plan assets
Rate of compensation increase
Cash balance interest credit rate
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
2021
2020
2019
2021
2020
2019
2021
2020
2019
—
0.3
0.8
1.6
1.9
2.8
2.1
2.8
3.9
3.0
—
1.0
3.0
—
1.0
3.0
—
1.0
4.0
1.0
2.1
4.3
2.2
1.6
4.9
2.4
1.6
—
0.2
—
—
0.2
—
—
0.2
—
The “Expected long-term rate of return on plan assets” is derived for each benefit plan by considering
the expected future long-term return assumption for each individual asset class. A single long-term
return assumption is then derived for each plan based upon the plan’s target asset allocation.
The Company maintains other postretirement benefit plans, which are generally contributory with
participants’ contributions adjusted annually. The assumptions used were:
December 31,
Health care cost trend rate assumed for next year
Rate to which the trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2021
5.1%
4.5%
2026
2020
5.9%
4.9%
2028
Plan assets
The Company has pension plans in various countries with the majority of the Company’s pension
liabilities deriving from a limited number of these countries.
The pension plans are typically funded by regular contributions from employees and the Company.
These plans are typically administered by boards of trustees (which include Company representatives)
whose primary responsibilities include ensuring that the plans meet their liabilities through
contributions and investment returns. The boards of trustees have the responsibility for making key
investment strategy decisions within a risk-controlled framework.
The pension plan assets are invested in diversified portfolios that are managed by third-party asset
managers, in accordance with local statutory regulations, pension plan rules and the respective plans’
investment guidelines, as approved by the boards of trustees.
Plan assets are generally segregated from those of the Company and invested with the aim of meeting
the respective plans’ projected future pension liabilities. Plan assets are measured at fair value at the
balance sheet date.
The boards of trustees manage the assets of the pension plans in a risk-controlled manner and assess
the risks embedded in the pension plans through asset/liability management studies. Asset/liability
management studies typically take place every three years. However, the risks of the plans are
monitored on an ongoing basis.
The boards of trustees’ investment goal is to maximize the long-term returns of plan assets within
specified risk parameters, while considering the future liabilities and liquidity needs of the individual
plans. Risk measures taken into account include the funding ratio of the plan, the likelihood of
extraordinary cash contributions being required, the risk embedded in each individual asset class, and
the plan asset portfolio as a whole.
224
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The Company’s global pension asset allocation is the result of the asset allocations of the individual
plans, which are set by the respective boards of trustees. The target asset allocation of the Company’s
plans on a weighted-average basis is as follows:
(in %)
Asset class
Equity
Fixed income
Real estate
Other
Total
Target
Switzerland
International
15
54
26
5
100
15
72
4
9
100
The actual asset allocations of the plans are in line with the target asset allocations.
Equity securities primarily include investments in large-cap and mid-cap publicly traded companies.
Fixed income assets primarily include corporate bonds of companies from diverse industries and
government bonds. Both fixed income and equity assets are invested either via funds or directly in
segregated investment mandates, and include an allocation to emerging markets. Real estate consists
primarily of investments in real estate in Switzerland held in the Swiss plans. The “Other” asset class
includes investments in private equity, hedge funds, commodities, and cash, and reflects a variety of
investment strategies.
Based on the above global asset allocation and the fair values of the plan assets, the expected
long-term return on assets at December 31, 2021, is 3.4 percent. The Company and the local boards of
trustees regularly review the investment performance of the asset classes and individual asset
managers. Due to the diversified nature of the investments, the Company is of the opinion that no
significant concentration of risks exists in its pension fund assets.
At December 31, 2021 and 2020, plan assets include ABB Ltd’s shares (as well as an insignificant amount
of the Company’s debt instruments) with a total value of $8 million and $8 million, respectively.
The fair values of the Company’s pension plan assets by asset class are presented below. For further
information on the fair value hierarchy and an overview of the Company’s valuation techniques applied,
see the “Fair value measures” section of Note 2.
December 31, 2021 ($ in millions)
Asset class
Equity
Equity securities
Mutual funds/commingled funds
Emerging market mutual funds/commingled funds
Fixed income
Government and corporate securities
Government and corporate—mutual funds/commingled funds
Emerging market bonds—mutual funds/commingled funds
Real estate
Insurance contracts
Cash and short-term investments
Private equity
Total
Level 1
Level 2
Not subject
to leveling(1)
Total
fair value
124
314
75
1
1,049
218
1,366
3,121
428
74
158
65
513
6,480
125
1,049
218
1,680
3,121
428
1,326
74
233
322
8,576
1,326
257
1,583
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
225
December 31, 2020 ($ in millions)
Asset class
Equity
Equity securities
Mutual funds/commingled funds
Emerging market mutual funds/commingled funds
Fixed income
Government and corporate securities
Government and corporate—mutual funds/commingled funds
Emerging market bonds—mutual funds/commingled funds
Real estate
Insurance contracts
Cash and short-term investments
Private equity
Hedge funds
Total
Level 1
Level 2
Not subject
to leveling(1)
Total
fair value
180
389
103
5
1,298
243
1,415
2,876
547
50
190
185
1,298
243
1,804
2,876
547
1,289
50
293
156
1
1,289
156
1
672
6,624
1,446
8,742
(1) Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling.
The Company applies accounting guidance related to the presentation of certain investments using the
net asset value (NAV) practical expedient. This accounting guidance exempts investments using this
practical expedient from categorization within the fair value hierarchy. Investments measured at NAV
are primarily non exchange-traded commingled or collective funds in private equity and real estate
where the fair value of the underlying assets is determined by the investment manager. Investments in
private equity can never be redeemed, but instead the funds will make distributions through liquidation
of the underlying assets. Total unfunded commitments for the private equity funds were approximately
$125 million and $115 million at December 31, 2021 and 2020, respectively. The real estate funds are
typically subject to a lock-in period of up to three years after subscribing. After this period, the real
estate funds typically offer a redemption notice of three to twelve months.
Contributions
Employer contributions were as follows:
Defined pension
benefits
Other postretirement
benefits
Switzerland
International
International
($ in millions)
2021
2020
2021
2020
2021
2020
Total contributions to defined benefit pension
and other postretirement benefit plans
Of which, discretionary contributions
to defined benefit pension plans
63
—
228
152
124
61
611
520
9
—
12
—
The total contributions included non-cash contributions totaling $53 million and $224 million,
respectively, for 2021 and 2020, of available-for-sale debt securities to certain of the Company’s
pension plans.
The Company expects to contribute approximately $108 million to its defined benefit pension plans in
2022. Of these discretionary contributions, $5 million are expected to be non-cash contributions. The
Company expects to contribute approximately $7 million to its other postretirement benefit plans
in 2022.
The Company also contributes to a number of defined contribution plans. The aggregate expense for
these plans in continuing operations was $278 million, $205 million and $190 million in 2021, 2020 and
2019, respectively. Contributions to multi-employer plans were not significant in 2021, 2020 and 2019.
226
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Estimated future benefit payments
The expected future cash flows to be paid by the Company’s plans in respect of pension and other
postretirement benefit plans at December 31, 2021, are as follows:
($ in millions)
Switzerland
International
International
Defined pension
benefits
Other postretirement
benefits
2022
2023
2024
2025
2026
Years 2027 - 2031
256
241
226
220
213
977
265
257
255
256
259
1,299
7
7
6
6
5
22
—
Note 18
Share -based payment arrangements
The Company has granted share-based instruments to its employees under three principal share-based
payment plans, as more fully described in the respective sections below. Compensation cost for
equity-settled awards is recorded in Total cost of sales and in Selling, general and administrative
expenses and totaled $59 million, $44 million and $46 million in 2021, 2020 and 2019, respectively, while
compensation cost for cash-settled awards, recorded in Selling, general and administrative expenses,
was not significant, as mentioned in the WARs, LTIP and Other share-based payments sections of this
note. The total tax benefit recognized in 2021, 2020 and 2019 was not significant.
At December 31, 2021, the Company had the ability to issue up to 94 million new shares out of
contingent capital in connection with share-based payment arrangements. In addition, 23 million of the
95 million shares held by the Company as treasury stock at December 31, 2021, could be used to settle
share-based payment arrangements.
As the primary trading market for the shares of ABB Ltd is the SIX Swiss Exchange (on which the shares
are traded in Swiss francs) and substantially all the share-based payment arrangements with employees
are based on the Swiss franc share or have strike prices set in Swiss francs, certain data disclosed below
related to the instruments granted under share-based payment arrangements are presented in
Swiss francs.
Management Incentive Plan
Up to 2019, the Company offered, under the MIP, options and cash-settled WARs to key employees for
no consideration. Starting in 2020, the employee group previously eligible to receive grants under the
MIP were granted shares under the LTIP (see LTIP section below) and consequently no grants were made
in 2021 and 2020 under the MIP.
The options granted under the MIP allow participants to purchase shares of ABB Ltd at predetermined
prices. Participants may sell the options rather than exercise the right to purchase shares. Equivalent
warrants are listed by a third-party bank on the SIX Swiss Exchange, which facilitates pricing and
transferability of options granted under this plan. The options entitle the holder to request that the
third-party bank purchase such options at the market price of equivalent listed warrants related to that
MIP launch. If the participant elects to sell the options, the options will thereafter be held by a third
party and, consequently, the Company’s obligation to deliver shares will be toward this third party.
Each WAR gives the participant the right to receive, in cash, the market price of an equivalent listed
warrant on the date of exercise of the WAR. Participants may exercise or sell options and exercise WARs
after the vesting period, which is three years from the date of grant. All options and WARs expire six
years from the date of grant.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
227
Options
The fair value of each option was estimated on the date of grant using a lattice model that used the
assumptions noted in the table below. Expected volatilities were based on implied volatilities from
equivalent listed warrants on ABB Ltd shares. The expected term of the options granted is the
contractual six-year life of each option, based on the fact that after the vesting period, a participant can
elect to sell the option rather than exercise the right to purchase shares, thereby also realizing the time
value of the options. The risk-free rate was based on a six-year Swiss franc interest rate, reflecting the
six-year contractual life of the options. In estimating forfeitures, the Company used data from previous
comparable MIP launches.
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
2019
19%
4.7%
6 years
-0.9%
Presented below is a summary of the activity related to options under the MIP:
Number of
options
(in millions)
Number of
shares
(in millions)(1)
336.1
(160.0)
(1.7)
174.4
174.4
158.5
67.2
(32.0)
(0.3)
34.9
34.9
31.7
Weighted-
average
exercise
price
(in Swiss
francs)(2)
Weighted-
average
remaining
contractual
term (in years)
Aggregate
intrinsic value
(in millions of
Swiss francs)(3)
21.16
20.25
20.31
22.00
22.00
22.30
2.4
2.4
2.3
450
450
400
Outstanding at January 1, 2021
Exercised(4)
Forfeited
Outstanding at December 31, 2021
Vested and expected to vest
at December 31, 2021
Exercisable at December 31, 2021
(1) Information presented reflects the number of ABB Ltd shares that can be received upon exercise, as options have a conversion ratio of 5:1.
(2) Information presented reflects the exercise price per ABB Ltd share..
(3) Computed using the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange and the exercise price of each option in
Swiss francs.
(4) The cash received upon exercise amounted to approximately $693 million. The shares were delivered out of treasury stock.
At December 31, 2021, the total unrecognized compensation cost related to non-vested options granted
under the MIP was not significant. The weighted-average grant-date fair value (per option) of options
granted during 2019 was 0.34 Swiss francs. As mentioned previously, no options were granted in 2021
and 2020. In 2021 and 2020, the aggregate intrinsic value (on the date of exercise) of options exercised
was approximately $313 million and $38 million, respectively, while the amount in 2019 was
not significant.
Presented below is a summary, by launch, related to options outstanding at December 31, 2021:
Exercise price (in Swiss francs)(1)
Number of options
(in millions)
Number of shares
(in millions)(2)
Weighted-average
remaining contractual
term (in years)
21.50
22.50
23.50
19.00
Total number of options and shares
9.3
63.4
61.6
40.1
174.4
1.9
12.7
12.3
8.0
34.9
0.7
1.6
2.7
3.7
2.4
(1) Information presented reflects the exercise price per share of ABB Ltd.
(2) Information presented reflects the number of shares of ABB Ltd that can be received upon exercise.
228
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
WARs
As each WAR gives the holder the right to receive cash equal to the market price of the equivalent listed
warrant on date of exercise, the Company records a liability based upon the fair value of outstanding
WARs at each period end, accreted on a straight-line basis over the three-year vesting period. In Selling,
general and administrative expenses, the Company records the changes in both the fair value and
vested portion of the outstanding WARs. To hedge its exposure to fluctuations in the fair value of
outstanding WARs, the Company purchased cash-settled call options, which entitle the Company to
receive amounts equivalent to its obligations under the outstanding WARs. The cash-settled call
options are recorded as derivatives measured at fair value (see Note 6), with subsequent changes in fair
value recorded in Selling, general and administrative expenses to the extent that they offset the change
in fair value of the liability for the WARs. The total impact in Selling, general and administrative expenses
in 2021, 2020 and 2019 was not significant.
The aggregate fair value of outstanding WARs was $29 million and $21 million at December 31, 2021 and
2020, respectively. The fair value of WARs was determined based upon the trading price of equivalent
warrants listed on the SIX Swiss Exchange.
Presented below is a summary of the activity related to WARs:
(in millions)
Outstanding at January 1, 2021
Exercised
Forfeited
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Number of WARs
22.1
(12.6)
(0.1)
9.4
3.8
The aggregate fair value at date of grant of WARs granted in 2019 was not significant. As mentioned
previously, no grants were made in 2021 and 2020 under the MIP. In 2021 and 2020, share-based
liabilities of $25 million and $13 million, respectively, were paid upon exercise of WARs by participants.
The amounts in 2019 were not significant.
Employee Share Acquisition Plan
The employee share acquisition plan (ESAP) is an employee stock-option plan with a savings feature.
Employees save over a twelve-month period, by way of regular payroll deductions. At the end of the
savings period, employees choose whether to exercise their stock options using their savings plus
interest, if any, to buy ABB Ltd shares (American Depositary Shares (ADS) in the case of employees in
the United States and Canada—each ADS representing one registered share of the Company) at the
exercise price set at the grant date, or have their savings returned with any interest. The savings are
accumulated in bank accounts held by a third-party trustee on behalf of the participants and earn
interest, where applicable. Employees can withdraw from the ESAP at any time during the savings
period and will be entitled to a refund of their accumulated savings.
The fair value of each option is estimated on the date of grant using the same option valuation model as
described under the MIP, using the assumptions noted in the table below. The expected term of the
option granted has been determined to be the contractual one-year life of each option, at the end of
which the options vest and the participants are required to decide whether to exercise their options or
have their savings returned with interest. The risk-free rate is based on one-year Swiss franc interest
rates, reflecting the one-year contractual life of the options. In estimating forfeitures, the Company has
used the data from previous ESAP launches.
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
2021
20%
2.9%
1 year
-0.6%
2020
24%
3.8%
1 year
-0.7%
2019
18%
4.1%
1 year
-0.7%
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
229
Presented below is a summary of activity under the ESAP:
Weighted-
average exercise
price (in Swiss
francs)(2)
Weighted-
average
remaining
contractual
term (in years)
Aggregate
intrinsic value
(in millions of
Swiss francs)(2)(3)
Number of shares
(in millions)(1)
Outstanding at January 1, 2021
Granted
Forfeited
Exercised(4)
Not exercised (savings returned plus interest)
Outstanding at December 31, 2021
Vested and expected to vest at
December 31, 2021
Exercisable at December 31, 2021
2.1
1.8
(0.1)
(1.7)
(0.3)
1.8
1.7
—
22.87
30.32
22.87
22.87
22.87
30.32
30.32
—
0.8
0.8
—
8.3
7.9
—
(1) Includes shares represented by ADS.
(2) Information presented for ADS is based on equivalent Swiss franc denominated awards.
(3) Computed using the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange and the exercise price of each option in
Swiss francs.
(4) The cash received in 2021 from exercises was approximately $42 million. The shares were delivered out of treasury stock.
The exercise prices per ABB Ltd share and per ADS of 30.32 Swiss francs and $33.35, respectively, for the
2021 grant, 22.87 Swiss francs and $24.93, respectively, for the 2020 grant, and 20.78 Swiss francs and
$20.17, respectively, for the 2019 grant were determined using the closing price of the ABB Ltd share on
the SIX Swiss Exchange and ADS on the New York Stock Exchange on the respective grant dates.
At December 31, 2021, the total unrecognized compensation cost related to non-vested options granted
under the ESAP was not significant. The weighted-average grant-date fair value (per option) of options
granted during 2021, 2020 and 2019 was 1.96 Swiss francs, 1.67 Swiss francs and 1.05 Swiss francs,
respectively. The total intrinsic value (on the date of exercise) of options exercised in 2021 was
approximately $14 million, while in 2020 and 2019 it was not significant.
Long-Term Incentive Plan
The long-term incentive plan (LTIP) involves annual grants of the Company’s stock subject to certain
conditions (Performance Shares) to members of the Company’s Executive Committee and selected
other senior executives, as defined in the terms of the LTIP. Starting with 2020, certain of the employee
group previously eligible to receive grants under the MIP have been included in the LTIP. The ultimate
amount delivered under the LTIP’s Performance Shares grant is based on achieving certain results
against targets, as set out below, over a three-year period from grant and the final amount is delivered
to the participants at the end of this period. In addition, for certain awards to vest, the participant has
to fulfill a three-year service condition as defined in the terms and conditions of the LTIP.
The Performance Shares under the 2021, 2020 and 2019 LTIP launches include a performance
component, based on the Company’s earnings per share performance, and a market component, based
on the Company’s relative total shareholder return.
For the relative total shareholder return component of the Performance Shares, the actual number of
shares that will be delivered at a future date is based on the Company’s total shareholder return
performance relative to a peer group of companies over a three-year period starting with the year of
grant. The actual number of shares that will ultimately be delivered will vary depending on the relative
total shareholder return outcome achieved between a lower threshold (no shares delivered) and an
upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant).
For the earnings per share performance component of the Performance Shares, the actual number of
shares that will be delivered at a future date is based on the Company’s average earnings per share over
three financial years, beginning with the year of launch. The actual number of shares that will ultimately
be delivered will vary depending on the earnings per share outcome as computed under each LTIP
launch, interpolated between a lower threshold (no shares delivered) and an upper threshold (the
number of shares delivered is capped at 200 percent of the conditional grant).
230
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Under the 2019 LTIP launches, participants receive 65 percent of the shares that have vested in the form
of shares and 35 percent of the value of the shares that have vested in cash, with the possibility to elect
to also receive the 35 percent portion in shares rather than in cash. Under the 2021 and 2020 LTIP
launches, participants generally do not have the ability to receive any of the award in cash, subject to
legal restrictions in certain jurisdictions.
Presented below is a summary of activity under the Performance Shares of the LTIP:
Nonvested at January 1, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Number of
Performance Shares
(in millions)
Weighted-average
grant-date fair value per
share (Swiss francs)
1.3
0.9
(0.4)
(0.3)
1.5
12.76
38.92
25.78
19.82
23.23
The aggregate fair value, at the dates of grant, of Performance Shares granted in 2021 and 2019 was
$37 million and $18 million, respectively, while in 2020 it was not significant. The total grant-date fair
value of shares that vested during 2019 was $21 million. The amounts in 2021 and 2020 were not
significant. The weighted-average grant-date fair value (per share) of shares granted during 2021, 2020
and 2019 was 38.92 Swiss francs, 10.50 Swiss francs and 15.94 Swiss francs, respectively.
Starting in 2020, key employees which were previously eligible to participate in the MIP and which were
not included in the employee group granted the Performance Shares described above, were granted
Restricted Shares of the Company under the LTIP. The Restricted Shares do not have performance
conditions and vest over a three-year period from the grant date.
Presented below is a summary of activity under the Restricted Shares of the LTIP:
Nonvested at January 1, 2021
Granted
Forfeited
Nonvested at December 31, 2021
Number of Restricted
Shares (in millions)
Weighted-average
grant-date fair value per
share (Swiss francs)
1.2
0.9
(0.1)
2.0
15.80
26.39
18.09
20.61
The aggregate fair value, at the dates of grant, of Restricted Shares granted in 2021 and 2020 was
$26 million and $22 million, respectively. The weighted-average grant-date fair value (per share) of
shares granted during 2021 and 2020 was 26.39 Swiss francs and 15.76 Swiss francs, respectively.
Equity-settled awards are recorded in the Additional paid-in capital component of Stockholders’ equity,
with compensation cost recorded in Selling, general and administrative expenses over the vesting
period (which is from grant date to the end of the vesting period) based on the grant-date fair value of
the shares. Cash-settled awards are recorded as a liability, remeasured at fair value at each reporting
date for the percentage vested, with changes in the liability recorded in Selling, general and
administrative expenses.
At December 31, 2021, total unrecognized compensation cost related to equity-settled awards under the
LTIP was $59 million and is expected to be recognized over a weighted-average period of 2 years. The
compensation cost recorded in 2021, 2020 and 2019 for cash-settled awards was not significant.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
231
For the relative total shareholder return component of the LTIP launches, the fair value of granted
shares at grant date, for equity-settled awards, and at each reporting date, for cash-settled awards, is
determined using a Monte Carlo simulation model. The main inputs to this model are the Company’s
share price and dividend yield, the volatility of the Company’s and the peer group’s share price as well
as the correlation between the peer companies. For the earnings per share component of the LTIP
launches, the fair value of granted shares is based on the market price of the ABB Ltd share at grant
date for equity-settled awards and at each reporting date for cash-settled awards, as well as the
probable outcome of the earnings per share achievement, as computed using a Monte Carlo simulation
model. The main inputs to this model are the Company’s and external financial analysts’ revenue growth
rates and Operational EBITA margin expectations.
Other share-based payments
The Company has other minor share-based payment arrangements with certain employees. The
compensation cost related to these arrangements in 2021, 2020 and 2019 was not significant.
—
Note 19
Stockholders’ equity
At December 31, 2021, the Company had 2,557 million authorized shares, of which 2,053 million were
registered and issued. At December 31, 2020, the Company had 2,672 million authorized shares, of which
2,168 million were registered and issued.
At the Annual General Meeting of Shareholders (AGM) in March 2021, the shareholders approved the
proposal of the Board of Directors to distribute a total of 0.80 Swiss francs per share. The approved
dividend distribution amounted to $1,730 million with the Company disbursing a portion in March 2021
and the remaining amounts in April 2021. At the AGM in March 2020, the shareholders approved the
proposal of the Board of Directors to distribute a total of 0.80 Swiss francs per share. The approved
dividend distribution amounted to $1,758 million and was paid in April 2020. At the AGM in March 2019,
the shareholders approved the proposal of the Board of Directors to distribute a total of 0.80 Swiss
francs per share. The approved dividend distribution amounted to $1,675 million and was paid in
May 2019.
In July 2020, the Company announced it initially intends to buy 10 percent of its share capital (which at
the time represented a maximum of 180 million shares, in addition to those already held in treasury)
through the share buyback program that started in July 2020. The initial share buyback program was
executed on a second trading line on the SIX Swiss Exchange and was completed in March 2021.
Through this buyback program, the Company purchased a total of approximately 129 million shares for
approximately $3.5 billion, of which approximately 20 million shares (resulting in an increase in Treasury
stock of $628 million) were purchased in 2021 and approximately 109 million shares (resulting in an
increase in Treasury Stock of $2,835 million) were purchased in 2020. At the AGM on March 25, 2021,
shareholders approved the cancellation of 115 million of the shares purchased under this buyback
program and the cancellation was completed in the second quarter of 2021, resulting in a decrease in
Treasury stock of $3,157 million and a corresponding total decrease in Capital stock, Additional paid-in
capital and Retained earnings.
In March 2021, the Company announced a follow-up share buyback program of up to $4.3 billion. This
buyback program, which was launched in April 2021, is being executed on a second trading line on the
SIX Swiss Exchange and is planned to run until the Company’s AGM in March 2022. Through this
follow-up buyback program, the Company purchased, in 2021, approximately 59 million shares, resulting
in an increase in Treasury stock of $2,022 million. At the March 2022 AGM, the Company intends to
request shareholder approval to cancel the shares purchased through this follow-up share buyback
program as well as those shares purchased under the initial share buyback program that were not
proposed for cancellation at the Company’s AGM in March 2021.
232
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
In addition to the ongoing share buyback program, in 2021 and 2020, the Company purchased 33 million
and 13 million, respectively, of its own shares on the open market, mainly for use in connection with its
employee share plans, resulting in an increase in Treasury stock of $1,032 million and $346 million,
respectively.
Upon and in connection with each launch of the Company’s MIP, the Company sold call options to a bank
at fair value, giving the bank the right to acquire shares equivalent to the number of shares represented
by the MIP WAR awards to participants. Under the terms of the agreement with the bank, the call
options can only be exercised by the bank to the extent that MIP participants have exercised their WARs.
At December 31, 2021, such call options representing 5.4 million shares and with strike prices ranging
from 19.00 to 23.50 Swiss francs (weighted-average strike price of 21.93 Swiss francs) were held by the
bank. The call options expire in periods ranging from August 2022 to August 2025. However, only
3.5 million of these instruments, with strike prices ranging from 19.00 to 23.50 Swiss francs
(weighted-average strike price of 22.64 Swiss francs), could be exercised at December 31, 2021, under
the terms of the agreement with the bank.
In addition to the above, at December 31, 2021, the Company had further outstanding obligations
to deliver:
• up to 2 million shares relating to the options granted under the 2016 launch of the MIP, with a strike
price of 21.50 Swiss francs, vested in August 2019 and expiring in August 2022,
• up to 13 million shares relating to the options granted under the 2017 launch of the MIP, with a strike
price of 22.50 Swiss francs, vested in August 2020 and expiring in August 2023,
• up to 12 million shares relating to the options granted under the 2018 launch of the MIP, with a strike
price of 23.50 Swiss francs, vested in August 2021 and expiring in August 2024,
• up to 8 million shares relating to the options granted under the 2019 launch of the MIP, with a strike
price of 19.00 Swiss francs, vesting in August 2022 and expiring in August 2025,
• up to 2 million shares relating to the ESAP, vesting and expiring in October 2022,
• up to 8 million shares to Eligible Participants under the 2021, 2020 and 2019 launches of the LTIP,
vesting and expiring in April 2024, April 2023 and May 2022, respectively, and
• approximately 1 million shares in connection with certain other share-based payment arrangements
with employees.
See Note 18 for a description of the above share-based payment arrangements.
In 2021 and 2020, the Company delivered approximately 36 million and 17 million shares, respectively,
out of treasury stock, for options exercised in relation to the MIP, while in 2019 the amount was not
significant. In addition, in 2021, 2020 and 2019, the Company delivered 1.7 million, 1.4 million and
0.5 million shares, respectively, out of treasury stock under the ESAP.
Amounts available to be distributed as dividends to the stockholders of ABB Ltd are based on the
requirements of Swiss law and ABB Ltd’s Articles of Incorporation, and are determined based on
amounts presented in the unconsolidated financial statements of ABB Ltd, prepared in accordance with
Swiss law. At December 31, 2021, the total unconsolidated stockholders’ equity of ABB Ltd was
6,837 million Swiss francs ($7,490 million), including 246 million Swiss francs ($270 million) representing
share capital, 9,443 million Swiss francs ($10,345 million) representing reserves and 2,853 million Swiss
francs ($3,125 million) representing a reduction of equity for own shares (treasury stock). Of the
reserves, 2,853 million Swiss francs ($3,125 million) relating to own shares and 49 million Swiss francs
($54 million) representing 20 percent of share capital, are restricted and not available for distribution.
In February 2022, the Company announced that a proposal will be put to the 2022 AGM for approval by
the shareholders to distribute 0.82 Swiss francs per share to shareholders.
Subsequent events
Subsequent to December 31, 2021, and up to February 23, 2022, the Company purchased, under the
follow-up share buyback program, an additional 21 million shares, for approximately $735 million, and,
on the open market, an additional 9 million shares, for approximately $326 million.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
233
—
Note 20
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares
outstanding during the year. Diluted earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during the year, assuming that all potentially dilutive
securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call
options and outstanding options and shares granted subject to certain conditions under the
Company’s share-based payment arrangements. In 2020 and 2019, outstanding securities
representing a maximum of 79 million and 93 million shares, respectively, were excluded from the
calculation of diluted earnings per share as their inclusion would have been antidilutive. None were
excluded in 2021.
Basic earnings per share:
($ in millions, except per share data in $)
2021
2020
2019
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
4,625
(79)
4,546
294
4,852
5,146
1,043
396
1,439
Weighted-average number of shares outstanding (in millions)
2,001
2,111
2,133
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Diluted earnings per share:
2.31
(0.04)
2.27
0.14
2.30
2.44
0.49
0.19
0.67
($ in millions, except per share data in $)
2021
2020
2019
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
4,625
(79)
4,546
294
4,852
5,146
1,043
396
1,439
Weighted-average number of shares outstanding (in millions)
2,001
2,111
2,133
Effect of dilutive securities:
Call options and shares
Adjusted weighted-average number of shares outstanding (in millions)
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
18
2,019
2.29
(0.04)
2.25
8
2
2,119
2,135
0.14
2.29
2.43
0.49
0.19
0.67
234
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
—
Note 21
Other comprehensive income
The following table includes amounts recorded within “Total other comprehensive income (loss)”
including the related income tax effects:
($ in millions)
Foreign currency translation adjustments:
Foreign currency translation adjustments
Changes attributable to divestments
Net change during the year
Available-for-sale securities:
Net unrealized gains (losses) arising
during the year
Reclassification adjustments for net
(gains) losses included in net income
Changes attributable to divestments
Net change during the year
Pension and other postretirement plans:
Prior service (costs) credits
arising during the year
Net actuarial gains (losses)
arising during the year
Amortization of prior service cost (credit)
included in net income
Amortization of net actuarial loss
included in net income
Net losses from settlements and curtailments
included in net income
Changes attributable to divestments
2021
2020
2019
Before
tax
Tax
effect
Net of
tax
Before
tax
Tax
effect
Net of
tax
Before
tax
Tax
effect
Net of
tax
(521)
(9)
(530)
— (521)
—
(9)
500
519
— (530)
1,019
(13)
3
(10)
31
(6)
—
(19)
1
—
4
(5)
—
(15)
(18)
(3)
10
(2)
—
(2)
(7)
4
—
(3)
498
519
(130)
(2)
— (130)
—
(2)
1,017
(132)
— (132)
24
(14)
(3)
7
16
1
—
17
(2)
(1)
—
(3)
14
—
—
14
2
(2)
—
55
(12)
43
3
3
6
437
(26)
411
(243)
43
(200)
(293)
73
(220)
(14)
— (14)
(11)
—
(11)
(25)
(3)
(28)
113
(25)
88
99
(31)
65
7
(8)
4
—
2
69
7
(6)
650
186
750
(132)
(35)
(161)
518
151
589
38
—
(178)
2
(2)
—
—
2
2
2
—
2
20
(9)
11
68
32
—
(142)
20
(9)
11
(249)
(6)
—
36
—
—
—
33
(17)
(83)
1,779
(164)
1,615
(282)
Net change during the year
489
(22)
467
Derivative instruments and hedges:
Net gains (losses) arising during the year
7
1
8
Reclassification adjustments for net (gains)
losses included in net income
Net change during the year
Total other comprehensive income (loss)
(13)
(6)
(66)
— (13)
1
(5)
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
235
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to
ABB, by component, net of tax:
($ in millions)
Balance at January 1, 2019
Cumulative effect of changes in
accounting principles(1)
Other comprehensive (loss) income
before reclassifications
Amounts reclassified from OCI
Total other comprehensive (loss) income
Less:
Amounts attributable
to noncontrolling interests
Balance at December 31, 2019
Other comprehensive (loss) income
before reclassifications
Amounts reclassified from OCI
Total other comprehensive (loss) income
Less:
Amounts attributable
to noncontrolling interests
Balance at December 31, 2020
Other comprehensive (loss) income
before reclassifications
Amounts reclassified from OCI
Total other comprehensive (loss) income
Less:
Amounts attributable
to noncontrolling interests
Balance at December 31, 2021(2)
Foreign
currency
translation
adjustments
Unrealized
gains (losses)
on available-
for-sale
securities
Pension and
other post-
retirement
plan
adjustments
Derivative
instruments
and hedges
Accumulated
other compre-
hensive loss
(1,967)
(16)
(5,311)
(4)
—
14
—
14
—
10
24
(17)
7
—
17
(10)
(5)
(15)
(36)
(214)
72
(142)
—
(2,145)
(157)
746
589
—
(1,556)
411
56
467
(3,324)
—
(130)
(2)
(132)
(6)
(3,450)
498
519
1,017
27
(2,460)
(521)
(9)
(530)
4
(2,993)
—
20
(9)
11
—
(5)
2
—
2
—
(3)
8
(13)
(5)
—
(8)
(36)
(310)
61
(249)
(6)
(5,590)
367
1,248
1,615
27
(4,002)
(112)
29
(83)
4
(4,088)
(1) Amounts relate to the adoption of an accounting standard update in 2019 regarding the Tax Cuts and Jobs Act of 2017.
(2) Due to rounding, numbers presented may not add to the totals provided.
—
2
—
(1,089)
236
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation
adjustments and Pension and other postretirement plan adjustments:
($ in millions)
Details about OCI components
Location of (gains) losses
reclassified from OCI
2021
2020
2019
Foreign currency translation adjustments:
Changes attributable to divestments:
- Losses (gains) on other divestments, net Other income (expense), net
- Loss on solar inverters business
(see Note 4)
- Loss on Power Grids business
(see Note 3)
Amounts reclassified from OCI
Other income (expense), net
Income (loss) from discontinued
operations, net of tax
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit(1)
Amortization of net actuarial loss
Non-operational pension (cost) credit(1)
Net losses from settlements and
curtailments
Changes attributable to divestments:
Non-operational pension (cost) credit(1)
- Losses (gains) on other divestments, net Other income (expense), net
- Loss on Power Grids business
(see Note 3)
Income (loss) from discontinued
operations, net of tax(2)
Total before tax
Tax
Changes in tax attributable to divestments:
Income tax expense
- Losses (gains) on other divestments, net Other income (expense), net
- Loss on Power Grids business
(see Note 3)
Income (loss) from discontinued
operations, net of tax(2)
Amounts reclassified from OCI
(9)
—
—
(9)
(14)
65
7
(8)
—
50
4
2
—
56
—
99
420
519
(11)
113
650
—
186
938
(157)
—
(35)
746
(2)
—
—
(2)
(25)
99
38
—
—
112
(40)
—
—
72
(1) Amounts in 2020 and 2019, include a total of $94 million and $6 million, respectively, reclassified from OCI to Income (loss) from discontin-
ued operations (see Note 3).
(2) Amounts represent the reclassification of OCI relating to pensions, including tax, on divestment of the Power Grids business.
The amounts reclassified out of OCI in respect of Unrealized gains (losses) on available-for-sale
securities and Derivative instruments and hedges were not significant in 2021, 2020 and 2019.
—
Note 22
Restructuring and related expenses
OS program
From December 2018 to December 2020, the Company executed a two-year restructuring program with
the objective of simplifying its business model and structure through the implementation of a new
organizational structure driven by its businesses. The program resulted in the elimination of the country
and regional structures within the previous matrix organization, including the elimination of the three
regional Executive Committee roles. The operating businesses are now responsible for both their
customer-facing activities and business support functions, while the remaining Group-level corporate
activities primarily focus on Group strategy, portfolio and performance management and
capital allocation.
As of December 31, 2020, the Company has incurred substantially all costs related to the OS program.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
237
Liabilities associated with the OS program are included primarily in Other provisions. The following
table shows the activity from the beginning of the program to December 31, 2021:
($ in millions)
Liability at January 1, 2018
Expenses
Liability at December 31, 2018
Expenses
Cash payments
Change in estimates
Exchange rate differences
Liability at December 31, 2019
Expenses
Cash payments
Change in estimates
Exchange rate differences
Liability at December 31, 2020
Expenses, net of change in estimates
Cash payments
Exchange rate differences
Liability at December 31, 2021
Employee
severance costs
Contract settlement,
loss order and
other costs
—
65
65
111
(44)
(30)
(3)
99
119
(91)
(10)
4
121
2
(65)
(6)
52
—
—
—
1
(1)
—
—
—
17
(15)
—
—
2
2
(3)
—
1
Total
—
65
65
112
(45)
(30)
(3)
99
136
(106)
(10)
4
123
4
(68)
(6)
53
The following table outlines the costs incurred in 2020 and 2019, and the cumulative costs incurred
under the program per operating segment as well as Corporate and Other:
($ in millions)
Electrification
Motion
Process Automation(1)
Robotics & Discrete Automation
Corporate and Other
Total
(1) Formerly named the Industrial Automation operating segment.
Costs incurred in
2020
35
18
37
10
49
149
2019
18
6
3
8
54
89
Cumulative costs
incurred up to
December 31, 2020
85
25
61
18
114
303
The Company recorded the following expenses, net of change in estimates, under this program:
($ in millions)
Employee severance costs
Estimated contract settlement, loss order and other costs
Inventory and long-lived asset impairments
Total
Costs incurred in
2020
109
17
23
149
2019
81
1
7
89
Cumulative costs
incurred up to
December 31, 2020
255
18
30
303
Restructuring expenses recorded for this program are included in the following line items in the
Consolidated Income Statements:
($ in millions)
Total cost of sales
Selling, general and administrative expenses
Non-order related research and development expenses
Other income (expense), net
Total
2020
2019
38
37
4
70
149
8
46
1
34
89
238
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
Other restructuring-related activities
In addition, during 2021, 2020 and 2019, the Company executed various other restructuring-related
activities and incurred the following charges, net of changes in estimates:
($ in millions)
Employee severance costs
Estimated contract settlement, loss order and other costs
Inventory and long-lived asset impairments
Total
2021
101
31
24
156
2020
2019
164
18
12
194
55
37
22
114
Expenses associated with these activities are recorded in the following line items in the Consolidated
Income Statements:
($ in millions)
Total cost of sales
Selling, general and administrative expenses
Non-order related research and development expenses
Other income (expense), net
Total
2021
2020
2019
71
21
2
62
95
50
10
39
46
4
—
64
156
194
114
In 2021, the Company initiated a plan to fully exit a product group within one of its non-core businesses.
The exit activities are expected to be completed by the end of 2022 and incur restructuring-related
expenses of between $150 million and $200 million, primarily relating to contract settlements. The
majority of these costs will be recorded in 2022 as certain required contractual elements will only be
effective in 2022.
At December 31, 2021 and 2020, $212 million and $233 million, respectively, was recorded for other
restructuring-related liabilities and is primarily included in “Other provisions”.
—
Note 23
Operating segment and geographic data
The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates
resources to and assesses the performance of each operating segment using the information outlined
below. The Company is organized into the following segments, based on products and services:
Electrification, Motion, Process Automation and Robotics & Discrete Automation. The remaining
operations of the Company are included in Corporate and Other.
Effective January 1, 2021, the Industrial Automation segment was renamed the Process Automation
segment. In addition, the Company changed its method of allocating real estate assets to its operating
segments whereby these assets are now accounted for directly in the individual operating segment
which utilizes the asset rather than as a cost recharged to the operating segment from Corporate and
Other. As a result, while this change had no impact on segment revenues or profits (Operational EBITA),
certain real estate assets (including corresponding depreciation and capital expenditure), previously
reported within Corporate and Other have been allocated to the total segment assets of each individual
operating segment. Certain segment information for 2020 and 2019, as well as Total assets at
December 31, 2020 and 2019, have been recast to reflect this allocation change.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
239
A description of the types of products and services provided by each reportable segment is as follows:
• Electrification: manufactures and sells electrical products and solutions which are designed to
provide safe, smart and sustainable electrical flow from the substation to the socket. The portfolio of
increasingly digital and connected solutions includes electric vehicle charging infrastructure,
renewable power solutions, modular substation packages, distribution automation products,
switchboard and panelboards, switchgear, UPS solutions, circuit breakers, measuring and sensing
devices, control products, wiring accessories, enclosures and cabling systems and intelligent home
and building solutions, designed to integrate and automate lighting, heating, ventilation, security and
data communication networks. The products and services are delivered through six operating
Divisions: Distribution Solutions, Smart Power, Smart Buildings, E-mobility, Installation Products and
Power Conversion.
• Motion: manufactures and sells drives, motors, generators, traction converters and mechanical power
transmission products that are driving the low-carbon future for industries, cities, infrastructure and
transportation. These products, digital technology and related services enable industrial customers
to increase energy efficiency, improve safety and reliability, and achieve precise control of their
processes. Building on over 130 years of cumulative experience in electric powertrains, the
Business Area combines domain expertise and technology to deliver the optimum solution for a wide
range of applications in all industrial segments. In addition, the Business Area, along with partners,
has leading global service presence. These products and services are delivered through eight
operating Divisions: Large Motors & Generators, IEC LV Motors, NEMA Motors, Drive Products, System
Drives, Service, Traction and, until October 2021, Mechanical Power Transmission.
• Process Automation: develops and sells a broad range of industry-specific, integrated automation and
electrification and digital systems and solutions, as well as digital solutions, lifecycle services,
advanced industrial analytics and artificial intelligence applications and suites for the process, marine
and hybrid industries. Products and solutions include process and discrete control technologies,
advanced process control software and manufacturing execution systems, sensing, measurement and
analytical instrumentation, marine propulsion systems and large turbochargers. In addition, the
Business Area offers a comprehensive range of services ranging from repair to advanced services
such as remote monitoring, preventive maintenance, asset performance management, emission
monitoring and cybersecurity services. The products, systems and services are delivered through five
operating Divisions: Energy Industries, Process Industries, Marine & Ports, Turbocharging, and
Measurement & Analytics.
• Robotics & Discrete Automation: delivers its products, solutions and services through two operating
Divisions: Robotics and Machine Automation. Robotics includes: industrial robots, software, robotic
solutions and systems, field services, spare parts, and digital services. Machine Automation
specializes in solutions based on its programmable logic controllers (PLC), industrial PCs (IPC), servo
motion, transport systems and machine vision. Both Divisions offer engineering and simulation
software as well as a comprehensive range of digital solutions.
Corporate and Other: includes headquarter costs, the Company’s corporate real estate activities,
Corporate Treasury Operations, historical operating activities of certain divested businesses and other
non-core operating activities.
The primary measure of profitability on which the operating segments are evaluated is Operational
EBITA, which represents income from operations excluding:
• amortization expense on intangibles arising upon acquisition (acquisition-related amortization),
• restructuring, related and implementation costs,
• changes in the amount recorded for obligations related to divested businesses occurring after the
divestment date (changes in obligations related to divested businesses),
• changes in estimates relating to opening balance sheets of acquired businesses (changes in
pre-acquisition estimates),
• gains and losses from sale of businesses (including fair value adjustment on assets and liabilities held
for sale),
• acquisition- and divestment-related expenses and integration costs,
• other income/expense relating to the Power Grids joint venture,
• certain other non-operational items, as well as
240
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
• foreign exchange/commodity timing differences in income from operations consisting of:
(a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded
derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has
not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities).
Certain other non-operational items generally includes certain regulatory, compliance and legal costs,
certain asset write downs/impairments (including impairment of goodwill) and certain other fair value
changes, as well as other items which are determined by management on a case-by-case basis.
The CODM primarily reviews the results of each segment on a basis that is before the elimination of
profits made on inventory sales between segments. Segment results below are presented before these
eliminations, with a total deduction for intersegment profits to arrive at the Company’s consolidated
Operational EBITA. Intersegment sales and transfers are accounted for as if the sales and transfers were
to third parties, at current market prices.
The following tables present disaggregated segment revenues from contracts with customers for 2021,
2020 and 2019:
($ in millions)
Electrification
Motion
2021
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
Geographical markets
Europe
The Americas
of which: United States
Asia, Middle East and Africa
of which: China
Product type
Products
Systems
Services and software
Third-party revenues
Intersegment revenues
Total revenues
4,517
4,465
3,304
3,975
2,087
12,957
10,706
1,367
884
12,957
12,957
230
13,187
2,015
2,346
1,952
2,111
1,156
6,472
5,555
—
917
6,472
6,472
453
6,925
2,416
1,431
833
2,367
740
6,214
1,496
1,802
2,916
6,214
6,214
45
6,259
1,578
439
308
1,270
949
3,287
2,159
645
483
3,287
3,287
10
3,297
3
5
—
7
—
15
4
11
—
15
15
(738)
(723)
($ in millions)
Electrification
Motion
2020
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
Geographical markets
Europe
The Americas
of which: United States
Asia, Middle East and Africa
of which: China
Product type
Products
Systems
Services and software
Third-party revenues
Intersegment revenues(1)
Total revenues
4,008
4,050
3,093
3,506
1,820
11,564
9,951
743
870
11,564
11,564
360
11,924
1,934
2,173
1,846
1,807
926
5,914
5,040
—
874
5,914
5,914
495
6,409
2,322
1,321
805
2,038
628
5,681
1,263
1,665
2,753
5,681
5,681
111
5,792
1,429
385
270
1,024
714
2,838
1,635
780
423
2,838
2,838
69
2,907
15
7
5
7
3
29
26,026
53
(24)
—
29
29
(927)
(898)
17,942
3,164
4,920
26,026
26,026
108
26,134
Total
10,529
8,686
6,397
9,730
4,932
28,945
19,920
3,825
5,200
28,945
28,945
—
28,945
Total
9,708
7,936
6,019
8,382
4,091
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
241
($ in millions)
Electrification
Motion
2019
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
Geographical markets
Europe
The Americas
of which: United States
Asia, Middle East and Africa
of which: China
Product type
Products
Systems
Services and software
Third-party revenues
Intersegment revenues(1)
Total revenues
4,039
4,568
3,522
3,665
1,729
12,272
10,315
958
999
12,272
12,272
456
12,728
1,879
2,315
1,972
1,827
876
6,021
5,152
—
869
6,021
6,021
512
6,533
2,416
1,582
948
2,153
608
6,151
1,439
1,648
3,064
6,151
6,151
122
6,273
1,634
453
290
1,157
825
3,244
1,785
968
491
3,244
3,244
70
3,314
36
1
3
40
1
77
65
12
—
77
77
(947)
(870)
Total
10,004
8,919
6,735
8,842
4,039
27,765
18,756
3,586
5,423
27,765
27,765
213
27,978
(1) Intersegment revenues until June 30, 2020, include sales to the Power Grids business, which is presented as discontinued operations, and
are not eliminated from Total revenues (see Note 3).
Revenues by geography reflect the location of the customer. In 2021, 2020 and 2019 the United States
and China are the only countries where revenue exceeded 10 percent of Total revenues. In each of 2021,
2020 and 2019 more than 98 percent of the Company’s total revenues were generated from customers
outside Switzerland.
242
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
The following tables present Operational EBITA, the reconciliations of consolidated Operational EBITA
to Income from continuing operations before taxes, as well as Depreciation and amortization, and
Capital expenditure for 2021, 2020 and 2019, as well as Total assets at December 31, 2021, 2020
and 2019:
($ in millions)
Operational EBITA:
Electrification
Motion
Process Automation
Robotics & Discrete Automation
Corporate and Other:
— Non-core and divested businesses
— Stranded corporate costs
— Corporate costs and Other intersegment elimination
Total
Acquisition-related amortization
Restructuring, related and implementation costs(1)
Changes in obligations related to divested businesses
Changes in pre-acquisition estimates
Gains and losses from sale of businesses
Fair value adjustment on assets and liabilities held for sale
Acquisition- and divestment-related expenses and integration costs
Other income/expenses relating to the Power Grids joint venture
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
Realized gains and losses on derivatives where the underlying hedged transaction
has not yet been realized
Unrealized foreign exchange movements on receivables/payables (and related
assets/liabilities)
Certain other non-operational items:
Costs for planned divestment of Power Grids
Regulatory, compliance and legal costs
Business transformation costs(2)
Executive Committee transition costs
Favorable resolution of an uncertain purchase price adjustment
Gain on sale of investments
Certain other fair value changes, including asset impairments(3)
Other non-operational items
Income from operations
Interest and dividend income
Interest and other finance expense
Losses from extinguishment of debt
Non-operational pension (cost) credit
Income from continuing operations before taxes
2021
2020
2019
2,121
1,183
801
355
(39)
—
(299)
4,122
(250)
(160)
(9)
6
2,193
—
(132)
(34)
(54)
(2)
20
—
—
(92)
(3)
6
—
119
(12)
5,718
51
(148)
—
166
5,787
1,681
1,075
451
237
(133)
(40)
(372)
2,899
(263)
(410)
(218)
(11)
(2)
(33)
(74)
(20)
67
26
(33)
(86)
(7)
(37)
(1)
36
—
(239)
(1)
1,593
51
(240)
(162)
(401)
841
1,688
1,082
732
393
(145)
(225)
(418)
3,107
(265)
(300)
(36)
(22)
55
(421)
(121)
—
20
8
(7)
(141)
(7)
(19)
(14)
92
15
(4)
(2)
1,938
67
(215)
—
72
1,862
(1) Amounts in 2020 and 2019 include $67 million and $97 million, respectively, of implementation costs in relation to the OS program.
(2) Amounts in 2021 includes ABB Way process transformation costs of $80 million.
(3) Amount in 2020 includes goodwill impairment charges of $311 million.
A B B A N N U A L R E P O R T 2 0 2 1
0 4 F I N A N C I A L R E V I E W O F A B B G R O u P
243
($ in millions)
Electrification
Motion
Process Automation
Robotics & Discrete
Automation
Corporate and Other
Consolidated
Depreciation and
amortization(1)
Capital expenditures(1), (2)
Total assets(1), (2), (3)
at December 31,
2021
2020
2019
2021
2020
2019
2021
2020
2019
425
172
83
144
69
893
411
182
80
131
111
915
444
183
72
129
133
961
345
230
85
96
64
820
316
118
75
65
120
694
298
12,831
12,800
12,318
79
126
62
197
762
5,936
5,009
6,495
5,008
6,378
4,914
4,860
4,794
4,784
11,624
11,991
17,714
40,260
41,088
46,108
(1) Amounts in 2020 and 2019 have been restated to reflect the reallocation of certain real estate assets, previously reported in Corporate and
Other, to the individual operating segments utilizing these assets.
(2) Capital expenditures and Total assets are after intersegment eliminations and therefore reflect third-party activities only.
(3) At December 31, 2021, 2020 and 2019, Corporate and Other includes $136 million, $282 million and $9,840 million, respectively, of assets in
the Power Grids business which is reported as discontinued operations (see Note 3). In addition, at December 31, 2021 and 2020, Corporate
and Other includes $1,609 million and $1,710 million related to the equity investment in Hitachi Energy Ltd (see Note 4).
Other geographic information
Geographic information for long-lived assets was as follows:
($ in millions)
Europe
The Americas
Asia, Middle East and Africa
Total
Long-lived assets at
December 31,
2021
2,670
1,260
1,009
4,939
2020
2,822
1,382
940
5,144
Long-lived assets represent “Property, plant and equipment, net” and “Operating lease right-of-use
assets” and are shown by location of the assets. At December 31, 2021, approximately 19 percent,
12 percent and 11 percent of the Company’s long-lived assets were located in the United States, China
and Switzerland, respectively. At December 31, 2020, approximately 21 percent, 10 percent and
11 percent of the Company’s long-lived assets were located in the United States, China and Switzerland,
respectively.
05
ABB Ltd
Statutory
Financial
Statements
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
245
246 ABB Ltd Management Report 2021
247 Financial Statements 2021
248 Notes to Financial Statements
260 Proposed appropriation of available
earnings
261 Report of the Statutory Auditor
on the Financial Statements
246
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
—
ABB Ltd Management Report 2021
ABB Ltd is the holding company of the ABB Group,
owning directly or indirectly all
subsidiaries globally.
In 2022, the Company will continue to operate as
the holding company of the ABB Group. No
change of business is expected.
February 24, 2022
The major business activities
during 2021 can be summarized
as follows:
Management services
The Company provided management services
to a Group company for CHF 17 million.
Share transactions
• share deliveries in relation to employee share
programs of CHF 963 million
• share cancellations of CHF 2,778 million: those
shares were repurchased under a share buyback
program in 2020-2021
• further share repurchases of CHF 2,425 million
for cancellation purposes
• share repurchases for employee share programs
of CHF 939 million
Dividend payment to external shareholders
• from retained earnings of CHF 1,436 million
Divestment of the Power Grids business
Further to its sale of 80.1% of the shares of
Hitachi Energy Ltd on July 1, 2020, the Company
transferred in 2021 ABB Power Technology
Services Private Limited, India, ABB Power
Products And Systems India Limited, India, and
ABB Power Grids South Africa (Pty) Ltd to Hitachi
Energy Ltd.
Other information
In 2021, the Company employed on average
19 employees.
Once a year, the Company’s Board of Directors
performs a risk assessment in accordance with
the Group’s risk management process and
discusses appropriate actions if necessary.
The Company does not carry out any research and
development activities.
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
247
—
Financial Statements 2021
Income Statement
Year ended December 31 (CHF in thousands)
Dividend income
Finance income
Other operating income
Finance expense
Personnel expenses
Other operating expenses
Write down of participation
Gain and Loss on sale of participation
Net income before taxes
Income taxes
Net income
Balance Sheet
December 31 (CHF in thousands)
Cash
Cash deposit with ABB Capital Ltd
Non-trade receivables
Non-trade receivables – Group
Short-term loans – Group
Accrued income and prepaid expenses
Accrued income and prepaid expenses – Group
Other short-term assets
Total current assets
Long-term loans – Group
Participations
Other long-term assets
Total non-current assets
Total assets
Interest-bearing liabilities
Interest-bearing liabilities – Group
Non-trade payables
Non-trade payables – Group
Deferred income and accrued expenses
Deferred income and accrued expenses – Group
Short-term provisions
Total current liabilities
Interest-bearing liabilities
Interest-bearing liabilities – Group
Long-term provisions
Total non-current liabilities
Total liabilities
Share capital
Legal reserves
Legal other reserves
Legal reserves from retained earnings
Free reserves
Retained earnings
Net income
Own shares
Total stockholders' equity
Total liabilities and stockholders’ equity
Note
2021
2020
7
8
1,768,705
8,045,320
177,551
107,326
68,357
83,603
(299,024)
(100,778)
(45,441)
(42,142)
(22,850)
(65,101)
2
(110,836) (3,263,742)
74,336
(308,073)
1,610,798 4,456,413
—
(906)
1,610,798
4,455,507
Note
2021
570
2020
781
292,883
3,573,027
926
17,985
22,819
699
46
2,306
7,878
22,026
631
4,155
2
10,644
266,281
346,572
3,877,085
319,462
330,394
2
7,088,533
7,086,247
289,897
266,143
7,697,892
7,682,784
8,044,464 11,559,869
4
4
2
2
4
4
6
6
6
6
—
350,000
22,819
22,026
107,419
145,435
5,360
36,713
26,079
908
533,787
50,367
221,120
349,453
419,510
1,451,976
450,210
450,251
319,462
330,394
18,712
264,315
788,384
1,044,960
1,207,894
2,496,936
246,378
260,178
—
30,430
1,000,000
1,000,000
6,832,045
6,545,827
1,610,798
4,455,507
6 (2,852,651) (3,229,009)
6,836,570
9,062,933
8,044,464 11,559,869
248
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
—
Notes to Financial Statements
—
Note 1
General
ABB Ltd, Zurich, Switzerland (the Company) is the parent company of the ABB Group. Its stand-alone
financial statements are prepared in accordance with Swiss law.
The financial statements have been prepared in accordance with Article 957 et seqq. of Title 32 of the
Swiss Code of Obligations.
Group companies are all companies which are directly or indirectly controlled by the Company and
variable interest entities if it is determined that the Company is the primary beneficiary.
—
Note 2
Participations
Company name
Purpose
Domicile
2021
2021
2020
ABB Asea Brown Boveri Ltd.
Holding CH-Zurich CHF 2,767,880,000
100.00% CHF 2,767,880,000
Hitachi Energy Ltd.
Holding CH-Zurich
CHF 1,250,000
19.90%
CHF 1,250,000
2020
100.00%
19.90%
Share capital
Ownership and
voting rights
Share capital
Ownership and
voting rights
Development of participations
Opening balance January 1
Additions(1)
Disposals
Write offs
Closing balance December 31
CHF in thousands
2021
2020
7,086,247
8,973,229
681,827
6,917,922
(568,705) (5,541,042)
(110,836) (3,263,862)
7,088,533
7,086,247
(1) thereof dividend in kind from ABB Asea Brown Boveri Ltd CHF 568,705 in 2021 and CHF 6,745,619 in 2020
The participation is valued at the lower of cost or fair value, using generally accepted valuation
principles.
On July 1, 2020, the Company completed the sale of 80.1 percent of Hitachi Energy Ltd (formerly Hitachi
ABB Power Grids Ltd). The transaction was executed through the sale of 80.1 percent of the shares of
Hitachi Energy Ltd. Cash consideration received directly by the Company at the closing date was USD
5,674 million (CHF 5,376 million) and USD 1,176 million (CHF 1,114 million) restricted cash. The Company
also obtained a put option allowing the Company to require Hitachi to purchase the remaining interest
for fair value, subject to a minimum floor price equivalent to a 10 percent discount compared to the
total price paid for the initial 80.1 percent. The put option can be exercised commencing April 2023. It is
not recognized in the accounts of the Company. The book value of the retained 19.9 percent investment
for Hitachi Energy Ltd was CHF 1,379 million and CHF 1,377 million, as of December 31, 2021 and 2020,
respectively.
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
249
Liabilities for estimated payments
Deferred income (1)
Short-term provisions (2)
Accrued expenses - Group (3)
Closing balance December 31
(1) Delayed closing countries
(2) Retention Bonus, Transitional Service Agreement, Working Capital (only in 2020)
(3) Internal cost reimbursement
CHF in thousands
2021
2,541
221,120
8,611
232,272
2020
449,925
349,453
45,569
844,947
For certain entities of the Power Grids business, the legal process or other regulatory delays resulted in the
Company not having transferred legal title to Hitachi as at the date of this report. The proceeds for these
entities are included in Other short-term assets of CHF 11 million and CHF 266 million at December 31, 2021
and 2020, respectively.
In 2021, the Company transferred ABB Power Technology Services Private Limited, India, and ABB Power
Products And Systems India Limited, India, and ABB Power Grids South Africa (Pty) Ltd to Hitachi Energy Ltd.
The remaining Power Grids entity ABB Engg. Technologies Co. (KSCC) in Kuwait is expected to be transferred
by the first half of 2022.
—
Note 3
Indirect Participations
The following table sets forth the name, country of incorporation, ownership and voting rights, as well as
share capital, of the significant indirect subsidiaries of the Company, as of December 31, 2021 and 2020.
Company
ownership
and voting
rights %
2021
Share
capital in
thousands
2021
Company
ownership
and voting
rights %
2020
Share
capital in
thousands
2020 Currency
Company name/location
ABB S.A., Buenos Aires
ABB Australia Pty Limited, Moorebank
ABB Group Holdings Pty. Ltd., Moorebank
ABB Group Investment Management Pty. Ltd.,
Moorebank
ABB AG, Wiener Neudorf
B&R Holding GmbH, Eggelsberg
B&R Industrial Automation GmbH, Eggelsberg
ABB N.V., Zaventem
ABB Automacao Ltda, Sorocaba
ABB Eletrificacao Ltda, Sorocaba
ABB Bulgaria EOOD, Sofia
ABB Electrification Canada ULC, Edmonton
ABB Inc., Saint-Laurent
ABB S.A., Santiago
ABB (China) Investment Limited, Beijing
ABB (China) Ltd., Beijing
ABB Beijing Drive Systems Co. Ltd., Beijing
ABB Beijing Switchgear Limited, Beijing
ABB Electrical Machines Ltd., Shanghai
ABB Engineering (Shanghai) Ltd., Shanghai
ABB LV Installation Materials Co. Ltd. Beijing, Beijing
ABB Shanghai Free Trade Zone Industrial Co., Ltd.,
Shanghai
ABB Shanghai Motors Co. Ltd., Shanghai
ABB Xiamen Low Voltage Equipment Co. Ltd.,
Xiamen
ABB Xiamen Switchgear Co. Ltd., Xiamen
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui
Country
Argentina
Australia
Australia
Australia
Austria
Austria
Austria
Belgium
Brazil
Brazil
Bulgaria
Canada
Canada
Chile
China
China
China
China
China
China
China
China
China
China
China
China
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
278,860
131,218
552,982
505,312
15,000
35
1,240
34,308
196,554
268,759
65,110
—(1)
—(1)
100.00
100.00
—(3)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
278,860
131,218
—(3)
505,312
15,000
35
1,240
34,308
196,554
268,759
65,110
—(1)
—(1)
100.00 5,484,348
100.00 5,484,348
100.00
95,000
100.00
95,000
100.00
140,000
100.00
140,000
90.00
60.00
100.00
100.00
85.70
100.00
75.00
100.00
66.52
90.00
5,000
16,500
14,400
40,000
17,100
6,500
11,217
15,800
29,500
6,200
90.00
60.00
100.00
100.00
—(3)
100.00
75.00
100.00
66.52
90.00
5,000
16,500
14,400
40,000
—(3)
6,500
11,217
15,800
29,500
6,200
ABB s.r.o., Prague
Czech Republic
100.00
400,000
100.00
400,000
ARS
AUD
AUD
AUD
EUR
EUR
EUR
EUR
BRL
BRL
BGN
CAD
CAD
CLP
USD
USD
USD
USD
USD
USD
USD
CNY
USD
USD
USD
USD
CZK
250
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
Company name/location
ABB A/S, Skovlunde
ABB for Electrical Industries (ABB ARAB) S.A.E.,
Cairo
Asea Brown Boveri S.A.E., Cairo
ABB AS, Jüri
ABB Oy, Helsinki
ABB France, Cergy Pontoise
ABB SAS, Cergy Pontoise
ABB AG, Mannheim
ABB Automation GmbH, Mannheim
ABB Automation Products GmbH, Ladenburg
ABB Beteiligungs- und Verwaltungsges. mbH,
Mannheim
ABB Stotz-Kontakt GmbH, Heidelberg
B + R Industrie-Elektronik GmbH, Bad Homburg
Busch-Jaeger Elektro GmbH, Lüdenscheid
ABB Engineering Trading and Service Ltd., Budapest
Industrial C&S Hungary Kft., Budapest
ABB Global Business Services and Contracting India
Private Limited, Bangalore
ABB Global Industries and Services Private Limited,
Bangalore(5)
ABB India Limited, Bangalore
ABB S.p.A., Milan
ABB K.K., Tokyo
ABB Ltd., Seoul
ABB Electrical Control Systems S. de R.L. de C.V.,
Monterrey
ABB Mexico S.A. de C.V., San Luis Potosi
Asea Brown Boveri S.A. de C.V., San Luis Potosi
ABB B.V., Rotterdam
ABB Finance B.V., Rotterdam
ABB Holdings B.V., Rotterdam
ABB AS, Fornebu
ABB Electrification Norway AS, Skien
ABB Holding AS, Fornebu
ABB Business Services Sp. z o.o., Warsaw
ABB Industrial Solutions (Bielsko-Biala) Sp. z o.o.,
Bielsko-Biala
ABB Industrial Solutions (Klodzko) Sp. z o.o.,
Klodzko
ABB Sp. z o.o., Warsaw
Company
ownership
and voting
rights %
2021
Share
capital in
thousands
2021
Company
ownership
and voting
rights %
2020
Share
capital in
thousands
2020 Currency
Country
Denmark
100.00
100,000
100.00
100,000
DKK
Egypt
Egypt
Estonia
Finland
France
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Hungary
Hungary
100.00
100.00
100.00
100.00
99.83
100.00
100.00
—(4)
—(4)
100.00
100.00
100.00
100.00
100.00
100.00
353,479
166,000
1,663
10,003
25,778
45,921
167,500
—(4)
—(4)
61,355
7,500
358
1,535
100.00
100.00
100.00
100.00
99.83
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
353,479
166,000
1,663
10,003
25,778
45,921
167,500
15,000
10,620
61,355
7,500
358
1,535
436,281
100.00 26,436,281
3,000
100.00
3,000
EGP
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
HUF
HUF
India
100.00 5,200,100
—(3)
—(3)
INR
India
India
Italy
100.00
366,923
100.00
366,923
75.00
423,817
75.00
423,817
100.00
110,000
100.00
110,000
Japan
100.00 1,000,000
100.00 1,000,000
Korea, Republic of
100.00 23,670,000
100.00 23,670,000
Mexico
Mexico
Mexico
Netherlands
Netherlands
Netherlands
Norway
Norway
Norway
Poland
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
315,134
683,418
667,686
9,200
20
363
134,550
60,450
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
315,134
683,418
667,686
9,200
20
119
134,550
60,450
100.00
240,000
100.00
240,000
99.94
24
99.93
24
INR
INR
EUR
JPY
KRW
MXN
MXN
MXN
EUR
EUR
EUR
NOK
NOK
NOK
PLN
Poland
99.94
328,125
99.93
328,125
PLN
Poland
Poland
99.94
99.94
50
245,461
99.93
99.93
50
245,461
Industrial C&S of P.R. LLC, San Juan
Puerto Rico
100.00
—(1)
100.00
—(1)
ABB Ltd., Moscow
Russian
Federation
100.00
23,000
100.00
5,686
ABB Electrical Industries Co. Ltd., Riyadh
Saudi Arabia
65.00
181,000
65.00
181,000
ABB Pte. Ltd., Singapore
ABB Holdings (Pty) Ltd., Modderfontein
ABB Investments (Pty) Ltd, Modderfontein
ABB South Africa (Pty) Ltd., Modderfontein
Asea Brown Boveri S.A., Madrid
ABB AB, Västerås
ABB Electrification Sweden AB, Västerås
ABB Norden Holding AB, Västerås
ABB Canada EL Holding GmbH, Zurich
ABB Capital AG, Zurich
ABB Information Systems Ltd., Zurich
ABB Investment Holding 2 GmbH, Zurich
ABB Management Services Ltd., Zurich
ABB Schweiz AG, Baden
ABB Ltd., Taipei
Singapore
South Africa
South Africa
South Africa
100.00
100.00
51.00
74.91
32,797
217,758
56,000
200,001
Spain
100.00
33,318
100.00
200,000
100.00
10,000
100.00
100.00
—(3)
74.91
100.00
100.00
—(3)
32,797
4,050
—(3)
1
33,318
200,000
—(3)
Sweden
Sweden
Sweden
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Taiwan (Chinese
Taipei)
100.00 2,344,783
100.00
2,344,783
100.00
100.00
100.00
100.00
100.00
100.00
1,000
100
500
20
571
55,000
100.00
100.00
100.00
100.00
100.00
100.00
1,000
100
500
20
571
55,000
100.00
195,000
100.00
195,000
TWD
PLN
PLN
USD
RUB
SAR
SGD
ZAR
ZAR
ZAR
EUR
SEK
SEK
SEK
CHF
CHF
CHF
CHF
CHF
CHF
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
251
Company name/location
ABB Elektrik Sanayi A.S., Istanbul
ABB Industries (L.L.C.), Dubai
ABB Holdings Limited, Warrington
ABB Limited, Warrington
ABB Finance (USA) Inc., Wilmington, DE
ABB Holdings Inc., Cary, NC
ABB Inc., Cary, NC
ABB Installation Products Inc, Memphis, TN
ABB Installation Products International LLC.,
Wilmington, DE
ABB Motors and Mechanical Inc, Fort Smith, AR
ABB Treasury Center (USA), Inc., Wilmington, DE
Edison Holding Corporation, Wilmington, DE
Company
ownership
and voting
rights %
2021
Share
capital in
thousands
2021
Company
ownership
and voting
rights %
2020
Share
capital in
thousands
2020 Currency
Country
Turkey
99.99
13,410
99.99
13,410
TRY
United Arab
Emirates
United Kingdom
United Kingdom
United States
United States
United States
United States
United States
United States
United States
United States
49.00(2)
5,000
49.00(2)
5,000
100.00
100.00
100.00
100.00
100.00
100.00
—(3)
100.00
100.00
100.00
100.00
226,014
120,000
1
2
1
1
—(3)
—(1)
1
—(1)
—(1)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
226,014
120,000
1
2
1
1
—
—(1)
1
—(1)
—(1)
AED
GBP
GBP
USD
USD
USD
USD
USD
USD
USD
USD
USD
Industrial Connections & Solutions LLC, Cary, NC
United States
(1) Shares without par value.
(2) Company consolidated as ABB exercises full management control.
(3) Based on the internally defined thresholds, these indirect participations are considered not significant, and therefore no details to these participa-
tions are disclosed in the respective year.
(4) Participation was either sold, liquidated or merged in 2021.
(5) Participation was renamed from ABB Substations Contracting India Private Limited, Bangalore in 2021.
—
Note 4
Interest-bearing liabilities
December 31 (CHF in thousands)
Bonds 2011–2021 2.25% coupon
Bonds 2019–2024 0.3% coupon
Bonds 2019–2029 1.0% coupon
Loan 2016-2024 USD 375 million (in 2020 USD 400 million)
Total
2021
2020
nominal value
—
350,000
nominal value
280,000
280,000
premium on issuance
54
75
nominal value
170,000
170,000
premium on issuance
156
176
342,281
352,420
792,491
1,152,671
During 2021, the Company repaid its 2.25% bonds at maturity. The bonds paid interest annually in
arrears. The Company had, through ABB Capital Ltd, entered into an interest rate swap with a bank to
effectively convert those bonds into floating rate obligations. The interest swap was treated as an
off-balance sheet item and was therefore not recorded. The swap agreement ended upon repayment of
the bonds.
In February 2019, the Company issued the following bonds: (i) CHF 280 million 0.3% bonds due 2024 and
(ii) CHF 170 million 1.0% bonds due 2029. Each of the respective bonds pays interest annually in arrears
in August and May respectively. The Company has the option, one month before their maturity date in
case of the 2024 bonds and three months before their maturity date in the case of the 2029 bonds, to
redeem the bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the
option to redeem the above bonds prior to maturity, in whole but not in part, at par plus accrued
interest, if 85% or more of the aggregate principal amount of the relevant bond issue has been
redeemed or purchased and cancelled at the time of the option exercise notice.
In 2016, the Company entered into a borrowing agreement of USD 500 million with ABB Capital Ltd that
expires in 2024 (with an amortization schedule of USD 25 million per annum) to hedge the
USD 500 million loan granted to a Group company. In each of 2021 and 2020, the Company repaid
USD 25 million. The average interest in 2021 and 2020 was 1.08% and 1.89%, respectively.
252
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
—
Note 5
Contingent liabilities
The Company has issued a support letter to a surety institution for the issuance of surety bonds on
behalf of Group companies. No amount was issued under this letter at December 31, 2021, compared
with CHF 889.9 million as of December 31, 2020.
With certain Group companies, the Company has keep-well agreements. A keep-well agreement
is a shareholder agreement between the Company and a Group company. These agreements provide for
maintenance of a minimum net worth in the Group company and the maintenance of 100% direct or
indirect ownership by the Company.
The keep-well agreements additionally provide that if at any time the Group company has insufficient
liquid assets to meet any payment obligation on its debt (as defined in the agreements) and has
insufficient unused commitments under its credit facilities with its lenders, the Company will make
available to the Group company sufficient funds to enable it to fulfill such payment obligation as it falls
due. A keep-well agreement is not a guarantee by the Company for payment of the indebtedness, or any
other obligation, of a Group company. No party external to the ABB Group is a party to any
keep-well agreement.
The Company has also provided certain guarantees securing the performance of Group companies in
connection with commercial paper programs, indentures or other debt instruments to enable them to
fulfill the payment obligations under such instruments as they fall due. The amount guaranteed under
these instruments was CHF 4,371.2 million as of December 31, 2021 and CHF 4,144.0 million as of
December 31, 2020.
Additionally, the Company has provided certain guarantees securing the performance of contracts and
undertakings of Group companies with third parties entered into in the normal course of business of an
aggregate value of CHF 72.8 million as per December 31, 2021 and CHF 70.3 million as per
December 31, 2020.
Furthermore, the Company is the guarantor in the Group’s USD 2 billion multicurrency revolving credit
facility (“Group Facility”). In December 2019, the Group Facility maturing in 2021 was replaced
with a new Group Facility maturing in 2024, with the option in 2020 and 2021 to extend the maturity to
2025 and 2026, respectively. The Company exercised its option in 2021 to extend the maturity of the
facility to 2026. No amounts were drawn under this Group Facility at December 31, 2021 and 2020.
The Company through certain of its direct and indirect subsidiaries is involved in various regulatory and
legal matters. The Company’s direct and indirect subsidiaries have made certain related provisions as
further described in “Note 15 Commitments and contingencies” to the Consolidated Financial
Statements of ABB Ltd. As described in the note, there is a risk of adverse outcomes beyond the
provisioned amounts.
The Company is part of a value added tax Group and therefore is jointly liable to the Swiss Federal Tax
Department for the value added tax liabilities of the other members.
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
253
—
Note 6
Stockholders’ equity
(CHF in thousands)
Opening balance
as of January 1, 2021
Legal reserves
Free reserves
Share
capital
Other
reserves
from
retained
earnings
from
retained
earnings
Net
income
Own
shares
Total
260,178
30,430 1,000,000
6,545,827
4,455,507 (3,229,009)
9,062,933
Allocation to retained earnings
4,455,507 (4,455,507)
Cancellation of shares
(13,800)
(30,430)
(2,733,599)
2,777,829
—
—
Dividend payment CHF 0.80 per
share
Purchases of own shares
Delivery of own shares
Net income for the year
Closing balance
as of December 31, 2021
(1,435,690)
(1,435,690)
(3,364,344)
(3,364,344)
962,873
962,873
1,610,798
1,610,798
246,378
— 1,000,000
6,832,045
1,610,798 (2,852,651)
6,836,570
Share capital as of December 31, 2021
Issued shares
Contingent shares
Authorized shares
Share capital as of December 31, 2020
Issued shares
Contingent shares
Authorized shares
Number of
registered shares
2,053,148,264
304,038,800
200,000,000
Number of
registered shares
2,168,148,264
304,038,800
200,000,000
Par value (CHF)
Total
(CHF in thousands)
0.12
0.12
0.12
246,378
36,485
24,000
Par value (CHF)
Total
(CHF in thousands)
0.12
0.12
0.12
260,178
36,485
24,000
The own shares are valued at acquisition cost. During 2021 and 2020, a loss from the delivery of own
shares of CHF 155 million and CHF 14 million, respectively, was recorded in the Income Statement under
Finance expense.
During 2021, a bank holding call options related to ABB Group’s management incentive plan (MIP)
exercised a portion of these options. Such options had been issued in 2015, 2016 and 2019 by the Group
company that facilitates the MIP at fair value and had a strike price of CHF 19.50, CHF 21.50 and
CHF 19.00, respectively. At issuance, the Group company had entered into an intercompany option
agreement with the Company, having the same terms and conditions to enable it to meet its future
obligations. As a result of the exercise by the bank, the Company delivered 17,507,403 shares at
CHF 19.50, 14,194,305 shares at CHF 21.50 and 4,217,913 shares at CHF 19.00, out of own shares. During
2020, a bank holding call options related to ABB Group’s MIP exercised a portion of these options. Such
options had been issued in 2014 by the Group company that facilitates the MIP at fair value and
had a strike price of CHF 21.00. At issuance, the Group company had entered into an intercompany
option agreement with the Company, having the same terms and conditions to enable it to meet its
future obligations. As a result of the exercise by the bank, the Company delivered 16,431,565 shares at
CHF 21.00, out of own shares.
The ABB Group has an annual employee share acquisition plan (ESAP) which provides share options to
employees globally. To enable the Group company that facilitates the ESAP to deliver shares to
employees who have exercised their stock options, the Group company entered into an agreement with
the Company to acquire the required number of shares at their then market value from the Company.
Consequently, in 2021, the Company delivered, out of own shares, to the Group company
1,458,128 shares at CHF 32.24 and 270,504 shares at USD 34.88. In 2020, the Company delivered, out of
own shares, to the Group company 1,149,891 shares at CHF 24.91 and 237,259 shares at USD 27.27.
In 2021 and 2020, the Company transferred 949,795 and 1,389,715 own shares at an average acquisition
price per share of CHF 25.50 and CHF 21.97, respectively, to fulfill its obligations under other
share-based arrangements.
254
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
In 2021, the Company purchased 33 million shares, for CHF 939 million, to support its employee share
programs globally and 78 million shares, for CHF 2,425 million, as part of its share buyback program for
capital reduction purposes as publicly disclosed on April 8, 2021, and July 22, 2020. In 2020, the
Company purchased 13 million shares, for CHF 312 million, to support its employee share programs
globally and 109 million shares, for CHF 2,578 million, as part of its share buyback program for capital
reduction purposes as publicly disclosed on July 22, 2020.
At the AGM in March 2021, shareholders approved the proposal of the Board of Directors to reduce the
share capital of the Company by cancelling 115,000,000 treasury shares which were acquired under the
share buyback program. This cancellation was completed in June 2021, resulting in a decrease in
Treasury stock (own shares) of CHF 2,778 million and a corresponding combined decrease in share
capital and retained earnings.
The movement in the number of own shares during the year was as follows:
2021
2020
Average
acquisition price
Number of shares
per share (in CHF) Number of shares
Average
acquisition price
per share (in CHF)
Opening balance as of January 1
Purchases for employee share programs
Purchases for intended cancellation
Cancellation
Delivery for employee share programs
Closing balance as of December 31
Thereof pledged for MIP
137,314,095
32,668,987
78,418,830
(115,000,000)
(38,598,048)
94,803,864
5,604,519
23.52
28.74
30.93
24.16
24.95
30.09
34,647,153
13,046,013
108,829,359
(19,208,430)
137,314,095
9,866,402
21.94
23.95
23.69
21.97
23.52
—
Note 7
Dividend income
The Company received in 2021, dividend payments from ABB Asea Brown Boveri Ltd of CHF 1.2 billion in
cash and CHF 569 million in kind (see note 2). The Company received in 2020, a dividend payment from
ABB Asea Brown Boveri Ltd of CHF 1.3 billion in cash and CHF 6.7 billion in kind (see note 2).
—
Note 8
Other operating income
Other operating income includes mainly outgoing charges for Business Area and Division management
services, income from share deliveries and guarantee compensation fees to Group companies.
—
Note 9
Shareholders
Shareholder structure
As of December 31, 2021, the total number of shareholders directly registered with ABB Ltd was
approximately 96,000 and another 513,000 shareholders held shares indirectly through nominees. In
total as of that date, ABB had approximately 609,000 shareholders.
Significant shareholders
Investor AB, Sweden, held 265,385,142 ABB shares as of December 31, 2021 (refer to Investor’s year-end
2021 report available at https://www.investorab.com/investors-media/reports-presentations). This
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
255
holding represented 12.9 percent of ABB’s total share capital and voting rights as registered in the
Commercial Register on December 31, 2021. The number of shares held by Investor AB does not include
shares held by Mr. Jacob Wallenberg, the chairman of Investor AB and a director of ABB, in his
individual capacity.
The Capital Group Companies Inc., USA, disclosed that as of July 1, 2021, it, together with its direct and
indirect affiliates, held 115,841,336 ABB shares (refer to https://www.ser-ag.com/en/resources/
notifications-market-participants/significant-shareholders.html#/shareholder-details/TAL7600020).
This holding represented 5.64 percent of ABB’s total share capital and voting rights as registered in the
Commercial Register at that time.
Cevian Capital II GP Limited, Jersey, disclosed that as of August 3, 2020, it held 105,988,662 ABB shares
(refer to https://www.sec.gov/Archives/edgar/data/1091587/000090266420002862/p20-1467sc13da.
htm). This holding represented 4.89 percent of ABB’s total share capital and voting rights as registered
in the Commercial Register at that time.
BlackRock Inc., U.S., disclosed that as of August 31, 2017, it, together with its direct and indirect
subsidiaries, held 72,900,737 ABB shares (refer to https://www.ser-ag.com/en/resources/
notifications-market-participants/significant-shareholders.html#/shareholder-details/TAH91000F4).
This holding represented 3.36 percent of ABB’s total share capital and voting rights as registered in the
Commercial Register at that time.
At December 31, 2021, to the best of ABB’s knowledge, no other shareholder held 3 percent or more of
ABB’s total share capital and voting rights as registered in the Commercial Register on that date.
ABB Ltd has no cross shareholdings in excess of 5 percent of capital, or voting rights with any
other company.
Announcements related to disclosure notifications made by shareholders during 2021 can be found via
the search facility on the platform of the Disclosure Office of the SIX Swiss Exchange: https://www.
ser-ag.com/en/resources/notifications-market-participants/significant-shareholders.html#/.
Under ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance),
each registered share represents one vote. Significant shareholders do not have different voting rights.
To our knowledge, we are not directly or indirectly owned or controlled by any government or by any
other corporation or person.
Shareholders’ rights
Shareholders have the right to receive dividends, to vote and to execute such other rights as granted
under Swiss law and the Articles of Incorporation (available at https://new.abb.com/about/
corporate-governance).
Right to vote
ABB has one class of shares and each registered share carries one vote at the general meeting. Voting
rights may be exercised only after a shareholder has been registered in the share register of ABB
as a shareholder with the right to vote, or with Euroclear Sweden AB (Euroclear), which
maintains a subregister of the share register of ABB.
A shareholder may be represented at the Annual General Meeting by its legal representative, by another
shareholder with the right to vote or by the independent proxy elected by the shareholders
(unabhängiger Stimmrechtsvertreter). If the Company does not have an independent proxy, the Board
of Directors shall appoint the independent proxy for the next General Meeting of Shareholders. All
shares held by one shareholder may be represented by one representative only.
For practical reasons shareholders must be registered in the share register no later than 6 business
days before the general meeting in order to be entitled to vote. Except for the cases described under
“Limitations on transferability of shares and nominee registration” below, there are no voting rights
restrictions limiting ABB’s shareholders’ rights.
256
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
Annual General Meeting/COVID-19
ABB’s top priority is protecting the health of its shareholders and employees. Therefore, due to the
extraordinary circumstances and in accordance with applicable Swiss COVID-19 legislation,
shareholders were not able to attend ABB’s Annual General Meeting 2021 in person, but could exercise
their shareholder rights via the independent proxy only. The Board of Directors has resolved that for
ABB’s Annual General Meeting 2022, in accordance with applicable Swiss COVID-19 legislation, the same
procedures shall apply. In addition, ABB will offer shareholders the opportunity to address questions on
agenda items to the Board of Directors in writing ahead of the meeting.
—
Note 10
Shareholdings of Board and Executive Committee
At December 31, 2021 and 2020, the members of the Board of Directors as of that date, held the
following numbers of shares (or American Depository Shares (ADSs) representing such shares):
Board ownership of ABB shares (audited)
Name
Peter Voser(1)
Jacob Wallenberg
Matti Alahuhta(2)
Gunnar Brock
David Constable
Frederico Curado
Lars Förberg
Jennifer Xin-Zhe Li
Geraldine Matchett
David Meline(3)
Satish Pai
Total
(1) Includes 2,000 shares held by spouse.
(2) Matti Alahuhta did not stand for re-election at ABB’s Annual General Meeting in March 2021.
(3) Includes 3,150 shares held by spouse.
Total number of shares held
December
31, 2021
191,946
239,878
December
31, 2020
314,648
234,246
n.a.
33,399
38,185
40,301
59,916
37,580
25,196
37,780
28,432
93,408
26,951
33,978
32,382
49,992
33,721
19,800
33,774
24,618
732,613
897,518
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
257
At December 31, 2021, the members of the Executive Committee, as of that date, held the following
number of shares (or ADSs representing such shares), the conditional rights to receive ABB shares under
the Long-term Incentive Plan (LTIP) and options (either vested or unvested as indicated) under the MIP
and unvested shares in respect of other compensation arrangements.
Vested at
December
31, 2021
Unvested at December 31, 2021
d
l
e
h
s
e
r
a
h
s
f
o
r
e
b
m
u
n
l
a
t
o
T
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
10,000
150,440
1,200
26,006
1,360
51,472
118,056
100,440
51,912
s
n
o
i
t
p
o
d
e
t
s
e
v
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
—
—
—
—
—
—
—
—
—
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
s
n
o
i
t
p
o
d
e
t
s
e
v
n
u
f
o
r
e
b
m
u
N
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
9
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
0
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
1
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
)
2
(
l
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
)
2
(
l
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
(vesting
2022)
(vesting
2022)
(vesting
2023)
(vesting
2024)
(vesting
2022)
(vesting
2023)
—
—
—
—
148,750
—
—
—
—
—
131,715
95,901
130,150
18,904
49,071
49,071
36,480
—
—
—
—
—
6,209
49,587
41,323
26,326
—
15,044
30,087
44,422
46,488
34,976
41,323
41,323
30,087
36,158
38,740
30,087
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
510,886
—
148,750
220,561
354,869
298,988
130,150
18,904
Name
Björn Rosengren
Timo Ihamuotila
Carolina Granat
(EC member as of
January 1, 2021)(3)
Maria Varsellona(4)
Theodor
Swedjemark(3)(5)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee members
at December 31, 2021
(1) The final LTIP 2019 award will be settled 65 percent in shares and 35 percent in cash. This applies to both performance factors (EPS and
TSR). However, the participants have the possibility to elect to receive 100 percent of the vested award in shares. The final LTIP 2020
award and LTIP 2021 award will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to
withholding taxes.
(2) It is expected that the replacement share grants will be settled 65 in shares and 35 percent in cash. However, the participants have the
possibility to elect to receive 100 percent of the vested award in shares.
(3) This includes shares held by the spouse.
(4) Unvested share grants were forfeited as a result of the resignation provided and removed from the shareholding overview.
(5) In addition, his spouse holds unvested shares and options granted in connection with her role in the company.
258
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
At December 31, 2020, the members of the Executive Committee, as of that date, held the following
number of shares (or ADSs representing such shares), the conditional rights to receive ABB shares under
the LTIP and options (either vested or unvested as indicated) under the MIP and unvested shares in
respect of other compensation arrangements.
Vested at
December
31, 2020
d
l
e
h
s
e
r
a
h
s
f
o
r
e
b
m
u
n
l
a
t
o
T
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
s
n
o
i
t
p
o
d
e
t
s
e
v
f
o
r
e
b
m
u
N
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
Unvested at December 31, 2020
I
P
M
e
h
t
r
e
d
n
u
d
l
e
h
s
n
o
i
t
p
o
d
e
t
s
e
v
n
u
f
o
r
e
b
m
u
N
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
8
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
9
1
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
s
e
r
a
h
s
f
o
r
e
b
m
u
n
e
c
n
e
r
e
f
e
R
0
2
0
2
e
h
t
r
e
d
n
u
e
b
a
r
e
v
i
l
l
e
d
S
P
E
(
s
r
o
t
c
a
f
e
c
n
a
m
r
o
f
r
e
p
)
1
(
P
I
T
L
e
h
t
f
o
)
R
S
T
d
n
a
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
)
2
(
l
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
)
2
(
l
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
t
n
a
r
g
e
r
a
h
s
t
n
e
m
e
c
a
p
e
R
l
)
2
(
l
r
e
y
o
p
m
e
r
e
m
r
o
f
m
o
r
f
s
t
i
f
e
n
e
b
e
n
o
g
e
r
o
f
r
o
f
(vesting
2021/
2022)
(vesting
2021)
(vesting
2022)
(vesting
2023)
(vesting
2021)
(vesting
2022)
(vesting
2023)
Name
Björn Rosengren
(EC member as of
January 27, 2020, CEO
as of March 1, 2020)
Timo Ihamuotila
Theodor Swedjemark
(EC member as of
August 1, 2020)(3)
Sami Atiya
Tarak Mehta
Peter Terwiesch
Morten Wierod
Total Executive
Committee members
at December 31, 2020
5,000
171,610
—
—
—
—
Sylvia Hill
2,265
796,875
318,750
Maria Varsellona
—
—
—
—
—
37,217
49,071
49,071
36,158
37,707
—
—
—
—
41,323
41,323
40,010
40,009
—
—
131,715
—
130,150
18,904
480
102,000
250,750
—
—
6,209
42,778
179,636
142,338
1,544
—
—
—
—
—
—
—
—
23,301
49,587
41,323
34,790
44,422
46,488
37,379
41,323
41,323
15,292
36,158
38,740
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
545,651
898,875
569,500
147,979
298,042
433,899
40,010
170,159
18,904
(1) The final LTIP 2018 award and LTIP 2019 award will be settled 65 percent in shares and 35 percent in cash. This applies to both
performance factors (EPS and TSR). However, the participants have the possibility to elect to receive 100 percent of the vested
award in shares. The final LTIP 2020 award will be settled 100 percent in shares, with an automatic sell-to-cover in place for
employees who are subject to withholding taxes.
(2) It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However, the
participants have the possibility to elect to receive 100 percent of the vested award in shares.
(3) In addition, his spouse holds unvested shares and options granted in connection with her role in the company.
—
Note 11
Full time employees
During each of 2021 and 2020, the Company employed on average 19 employees.
At ABB, we believe that a culture of diversity, inclusion and equal opportunity is critical to our business
success and makes us stronger. ABB has non-discriminatory pay policies which play an important part
in minimizing any pay disparities based on gender. As part of its Diversity and Inclusion Strategy 2030
and in line with national legislation, ABB carried out an equal pay analysis for its Swiss entities with at
least 100 employees. It showed that three of the in scope entities meet the equal pay requirements and
are within the applicable thresholds and the fourth entity, the smallest, meets the equal pay
requirements for salary and slightly underachieves the parity level for overall compensation (salary plus
actual bonus).
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
259
—
Note 12
Subsequent events
Subsequent to December 31, 2021, and up to February 23, 2022, the Company purchased,
under the follow-up share buyback program, an additional 21 million shares, for approximately
CHF 677 million, and, on the open market, an additional 9 million shares, for approximately
CHF 300 million. The purchases were partially financed via borrowings from ABB Capital Ltd.
260
A B B A N N U A L R E P O R T 2 0 2 1
0 5 A B B LT D S TAT u TO R Y F I N A N C I A L S TAT E M E N T S
—
Proposed appropriation of
available earnings
Proposed appropriation of retained earnings (CHF in thousands)
Net income for the year
Carried forward from previous year
Cancellation of shares
Retained earnings available to the Annual General Meeting
Gross dividend of CHF 0.80 per share paid
directly by the Company(1)
Gross dividend of CHF 0.82 per share on
total number of registered shares(1)
Balance to be carried forward
2021
1,610,798
9,565,644
(2,733,599)
8,442,843
2020
4,455,507
6,545,827
—
11,001,334
—
(1,435,690)
(1,683,582)
6,759,261
—
9,565,644
(1) No dividend will be paid on own shares held by ABB Ltd. Shareholders who are resident in Sweden participating in the established dividend
access facility will receive an amount in Swedish kronor from ABB Participation AB which corresponds to the dividend resolved on a regis-
tered share of ABB Ltd without deduction of the Swiss withholding tax. This amount however is subject to taxation according to Swedish
law.
On February 3, 2022, the Company announced that the Board of Directors will recommend for approval
at the March 24, 2022, Annual General Meeting that a dividend of CHF 0.82 per share be distributed out
of the retained earnings available, to be paid in March 2022 and in April 2022 for residents in Sweden
participating in the dividend access facility.
261
Report of the Statutory Auditor To the General Meeting of ABB Ltd, Zurich Report of the Statutory Auditor on the Financial Statements As statutory auditor, we have audited the accompanying financial statements of ABB Ltd, which comprise the balance sheet, income statement and notes to financial statements (pages 247 to 259) for the year ended December 31, 2021. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended December 31, 2021 comply with Swiss law and the company’s articles of incorporation. 262
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. We have determined that there are no key audit matters to communicate in our report. Report on Other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. KPMG AG Hans-Dieter Krauss Mohammad Nafeie Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 24, 2022 KPMG AG, Badenerstrasse 172, CH-8036 Zurich © 2022 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 263
—
E M P T Y PAG E A D D E D I N T E N T I O N A L LY
06
Supplemental
information
266 Supplemental information
266
A B B A N N U A L R E P O R T 2 0 2 1
0 6 S u P P L E M E N TA L I N F O R M AT I O N
—
Supplemental information
The following are definitions of key financial
measures used to evaluate ABB’s operating
performance. These financial measures are re-
ferred to in this Annual Report and are not defined
under United States generally accepted account-
ing principles (U.S. GAAP).
While ABB’s management believes that the
non-GAAP financial measures herein are useful in
evaluating ABB’s operating results, this informa-
tion should be considered as supplemental in
nature and not as a substitute for the related
financial information prepared in accordance with
U.S. GAAP.
For a full reconciliation of ABB’s non-GAAP mea-
sures, please refer to Supplemental
Reconciliations and Definitions, ABB Q4 2021
Financial Information on global.abb/group/en/
investors/results-and-reports/2021.
business was divested in the period when the
decision to cease business activities was taken.
We do not adjust for portfolio changes where the
relevant business has annualized revenues of less
than $50 million.
Operational EBITA margin
Operational EBITA margin
Operational EBITA margin is Operational EBITA
as a percentage of Operational revenues.
Operational EBITA
Operational earnings before interest, taxes and
acquisition-related amortization (Operational
EBITA) represents Income from operations
excluding:
• acquisition-related amortization (as defined
Comparable growth rates
below),
• restructuring, related and implementation costs
(as defined below),
• changes in the amount recorded for obligations
related to divested businesses occurring after
the divestment date (changes in obligations
related to divested businesses),
• changes in estimates relating to opening
balance sheets of acquired businesses (changes
in pre-acquisition estimates),
• gains and losses from sale of businesses
(including fair value adjustment on assets and
liabilities held for sale),
• acquisition- and divestment-related expenses
and integration costs,
• other income/expense relating to the Power
Grids joint venture,
• certain other non-operational items, as well as
• foreign exchange/commodity timing
differences in income from operations
consisting of: (a) unrealized gains and losses on
derivatives (foreign exchange, commodities,
embedded derivatives), (b) realized gains and
losses on derivatives where the underlying
hedged transaction has not yet been realized,
and (c) unrealized foreign exchange movements
on receivables/payables (and related assets/
liabilities).
Growth rates for certain key figures may be
presented and discussed on a “comparable” basis.
The comparable growth rate measures growth
on a constant currency basis. Since we are a global
company, the comparability of our operating
results reported in U.S. dollars is affected by
foreign currency exchange rate fluctuations. We
calculate the impacts from foreign currency
fluctuations by translating the current-year
periods’ reported key figures into U.S. dollar
amounts using the exchange rates in effect for
the comparable periods in the previous year.
Comparable growth rates are also adjusted for
changes in our business portfolio. Adjustments to
our business portfolio occur due to acquisitions,
divestments, or by exiting specific business
activities or customer markets. The adjustment
for portfolio changes is calculated as follows:
where the results of any business acquired or
divested have not been consolidated and reported
for the entire duration of both the current and
comparable periods, the reported key figures of
such business are adjusted to exclude the relevant
key figures of any corresponding quarters which
are not comparable when computing the compa-
rable growth rate. Certain portfolio changes
which do not qualify as divestments under U.S.
GAAP have been treated in a similar manner to
divestments. Changes in our portfolio where we
have exited certain business activities or cus-
tomer markets are adjusted as if the relevant
A B B A N N U A L R E P O R T 2 0 2 1
0 6 S u P P L E M E N TA L I N F O R M AT I O N
267
Free cash flow conversion to net
income
Free cash flow conversion to net income
Free cash flow conversion to net income is calcu-
lated as free cash flow divided by Adjusted net
income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calcu-
lated as net income attributable to ABB adjusted
for: (i) impairment of goodwill, (ii) losses from
extinguishment of debt, and (iii) the gains arising
on the sale of both the Mechanical Power Trans-
mission Division (Dodge) and Power Grids
business, the latter being included in discontin-
ued operations.
Free cash flow
Free cash flow is calculated as net cash provided
by operating activities adjusted for: (i) purchases
of property, plant and equipment and intangible
assets, and (ii) proceeds from sales of property,
plant and equipment.
Certain other non-operational items generally
includes: certain regulatory, compliance and legal
costs, certain asset impairments (including
impairment of goodwill) and certain other fair
value changes, as well as other items which are
determined by management
on a case-by-case basis.
Operational EBITA is our measure of segment
profit but is also used by management to evaluate
the profitability of the Company as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon
acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs
consists of restructuring and other related ex-
penses, as well as internal and external costs
relating to the implementation of group-wide
restructuring programs.
Other income/expense relating to the Power
Grids joint venture
Other income/expense relating to the Power
Grids joint venture consists of amounts recorded
in Income from continuing operations before
taxes relating to the divested Power Grids busi-
ness including the income/loss under the equity
method for the investment in Hitachi Energy Ltd.
(Hitachi Energy), amortization of deferred brand
income as well as changes in value of other obli-
gations relating to the divestment.
Operational revenues
We present Operational revenues solely for the
purpose of allowing the computation of Opera-
tional EBITA margin. Operational revenues are
Total revenues adjusted for foreign exchange/
commodity timing differences in Total revenues
of: (i) unrealized gains and losses on derivatives,
(ii) realized gains and losses on derivatives where
the underlying hedged transaction has not yet
been realized, and (iii) unrealized foreign ex-
change movements on receivables (and related
assets). Operational revenues are not intended to
be an alternative measure to Total revenues,
which represent our revenues measured in accor-
dance with U.S. GAAP.
268
A B B A N N U A L R E P O R T 2 0 2 1
0 6 S u P P L E M E N TA L I N F O R M AT I O N
Adjusted Group effective tax rate
The Adjusted Group effective tax rate is com-
puted by dividing an adjusted income tax expense
by an adjusted pre-tax income. Certain amounts
recorded in income before taxes and the related
income tax expense (primarily due to gains and
losses from sale of businesses) are removed from
the reported amounts when computing these
adjusted amounts. Certain other amounts re-
corded in income tax expense are also excluded
from the computation to determine the Adjusted
Group effective tax rate
Book-to-bill ratio
Book-to-bill ratio is calculated as Orders received
divided by Total revenues.
Return on Capital employed
(ROCE)
Return on Capital employed (ROCE)
Return on Capital employed is calculated as
Operational EBITA after tax, divided by the aver-
age of the period’s opening and closing Capital
employed, adjusted to reflect impacts from the
timing of significant acquisitions/divestments
occurring during the period.
Capital employed
Capital employed is calculated as the sum of
Adjusted total fixed assets and Net working
capital (as defined below).
Adjusted total fixed assets
Adjusted total fixed assets is the sum of (i) prop-
erty, plant and equipment, net, (ii) goodwill,
(iii) other intangible assets, net, (iv) investments
in equity-accounted companies, and (v) operating
lease right-of-use assets, less (vi) deferred tax
liabilities recognized in certain acquisitions.
Net working capital
Net working capital is the sum of (i) receivables,
net, (ii) contract assets, (iii) inventories, net, and
(iv) prepaid expenses; less (v) accounts payable,
trade, (vi) contract liabilities, and (vii) other
current liabilities (excluding primarily: (a) income
taxes payable, (b) current derivative liabilities,
(c) pension and other employee benefits), (d) pay-
ables under the share buyback program and
(e) liabilities related to the divestment of the
Power Grids business); and including the amounts
related to these accounts which have been pre-
sented as either assets or liabilities held for sale
but excluding any amounts included in discontin-
ued operations.
Notional tax on Operational EBITA
The Notional tax on Operational EBITA is com-
puted using the adjusted group effective tax rate
multiplied by Operational EBITA.
Parts of the ABB annual report 2021 have been
translated into German. Please note that the
English-language version of the ABB annual report
is the binding version.
Caution concerning forward-looking statements
The ABB annual report 2021 includes “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We have based these forward-looking
statements largely on current expectations, estimates and
projections about the factors that may affect our future
performance, including global economic conditions as well
as the economic conditions of the regions and the industries
that are major markets for ABB. The words “believe,” “may,”
“will,” “estimate,” “continue,” “target,” “anticipate,” “intend,”
“expect”, “plan” and similar words and the express or implied
discussion of strategy, plans or intentions are intended
to identify forward-looking statements. These forward-
looking statements are subject to risks, uncertainties and
assumptions, including among other things, the following:
(i) business risks related to the global volatile economic
environment; (ii) costs associated with compliance activities;
(iii) difficulties encountered in operating in emerging markets;
(iv) risks inherent in large, long term projects served by parts
of our business; (v) the timely development of new products,
technologies, and services that are useful for our customers;
(vi) our ability to anticipate and react to technological change
and evolving industry standards in the markets in which we
operate; (vii) changes in interest rates and fluctuations in
currency exchange rates; (viii) changes in raw materials prices
or limitations of supplies of raw materials; (ix) the weakening
or unavailability of our intellectual property rights; (x) industry
consolidation resulting in more powerful competitors and
fewer customers; (xi) effects of competition and changes
in economic and market conditions in the product markets
and geographic areas in which we operate; (xii) effects of,
and changes in, laws, regulations, governmental policies,
taxation, or accounting standards and practices and (xiii)
other factors described in documents that we may furnish
from time to time with the US Securities and Exchange
Commission, including our Annual Reports on Form 20-F.
Although we believe that the expectations reflected in any
such forward-looking statements are based on reasonable
assumptions, we can give no assurance that they will be
achieved. We undertake no obligation to update publicly
or revise any forward-looking statements because of new
information, future events or otherwise. In light of these
risks and uncertainties, the forward-looking information,
events and circumstances might not occur. Our actual
results and performance could differ substantially from
those anticipated in our forward-looking statements.
White
—
The Space for Invention
White
—
The Space for Invention
—
ABB Ltd
Corporate Communications
Affolternstrasse 44
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71 11
Fax: +41 (0)43 317 79 58
www.abb.com
©
C
o
p
y
r
i
g
h
t
2
0
2
1
A
B
B
.
A
l
l
r
i
g
h
t
s
r
e
s
e
r
v
e
d