Ladies and gentlemen, good morning or good afternoon. Welcome to the ABB Q2 2016 results conference call. I am Maria, the conference call operator. I would like to remind you that all participants will be listening remote, the conference is being recorded. After the presentation, there will be a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Should you need assistance, please press star and zero to call an operator. At this time, it's my pleasure to hand over to Mrs. Alanna Abrahamson, Head of Investor Relations. Please go ahead, madam.
Thank you. Good afternoon, ladies and gentlemen, thank you for joining us for ABB's second quarter 2016 results call. With me today are ABB's President and CEO, Ulrich Spiesshofer, ABB's Chief Financial Officer, Eric Elzvik. They will give a review of the Q2 results an update on the execution of our Next Level strategy. The press release analyst presentation was published at 7:00 A.M. this morning can be found on our website. This call is being webcast via our IR website, as well as being recorded. Before we begin, I would like to draw your attention to the important notices on slide two of our ABB presentation regarding Safe Harbor our use of non-GAAP measures. This conference call may include forward-looking statements. These statements are based on the company's current expectations certain assumptions, are therefore subject to certain risks uncertainties.
With that, I would now like to hand over to Uli.
Thank you, Alanna. Good afternoon, ladies and gentlemen, welcome to our conference call. Let me start with the highlights of the quarter on slide three. We continued our solid progress on profitability, delivering double-digit operational earnings per share growth for the quarter year-to-date, even with revenues declining 2%. Operational EBITA margin improved 100 basis points to 12.7%, operational EBITA absolute increased by 5%. We delivered margin increase for the seventh consecutive quarter. All divisions were within their target margin corridors, demonstrating that our white-collar productivity program, as well as our other cost productivity measures, are delivering significant results. Base orders remained steady. Total orders were 5% lower, reflecting the timing of large order awards the longer deal cycles. Our cash performance was again very strong. Cash flow from operating activities was up approximately 80% to more than $1 billion.
Now let's consider our performance in the context of our three focus areas: profitable growth, relentless execution, and business-led collaboration on the next slide, number four. As mentioned, base orders were steady in the quarter amid persistent market headwinds. The global picture masks regional differences, and as you'll see on the next slide, it shows that our PIE formula for profitable growth is working. By consistently driving penetration, innovation, and expansion in target markets, we are able to dampen the impact of strong market headwinds. We see this reflected in our NPS results, which yet again improved, which underscores our progress in making ABB a more market and customer-focused company. In line with our plans, the strategic portfolio review of Power Grids is progressing well, and ABB will report on it at our Capital Markets Day in October 2016.
On relentless execution, we continue to drive profitability with all of our divisions within their target margin corridors by the end of the second quarter. The double-digit growth in operational earnings per share shows our execution programs are truly working. White-collar productivity delivered structural cost savings in all divisions and is now hitting the bottom line. A strong working capital management was one of the main reasons for the strong cash performance in the quarter. Finally, we strengthened our leadership team, appointing Sami Atiya, a highly talented and experienced leader with a strong industry and software background as head of our Discrete Automation and Motion division effective June 13th. Turning to the regional picture on slide five. Europe was strong, with base orders rising 7% and total orders up 2% in the quarter. Demand was driven mainly by construction, integration of renewable energy, and energy-efficient solutions for sustainable transport.
Base order demand was strong in Germany, Spain, Sweden, and Denmark, but weak in the U.K. amid uncertainties around Brexit. The Americas were weaker due to lower investments in process industries. However, consumer industries held up. Total orders declined 5%, with base orders basically stable. Brazil was a bright spot for base orders, which improved 24% on focused growth initiatives. U.S. base order demand showed some sequential improvement. However, large orders were very low. Demand in Asia, Middle East, and Africa was mixed. Total orders were down 10% and base orders 6%. China was strong as ABB won orders of more than $300 million to deliver equipment for 1,100 kilovolt Ultra high voltage direct power link. China overall grew double digit with steady base orders. India grew 15% and was strong in all end markets, excluding the process industries. However, these positives could not be offset.
The major decline in Saudi Arabia, where the demand was significantly impact by the current uncertainties related to the oil and gas and infrastructure environment. Our base order performance overall demonstrates that our PIE approach is helping us to deliver in the face of significant market headwinds and dampen the impact of those headwinds on ABB. With that, I'll hand over to Eric.
Thank you, Uli. On slide six, you can see the divisional performance. Let me take you through some of the highlights. To start, in Electrification Products, operational EBITA margin improved approximately 80 basis points on additional cost savings and also some positive mix. Capacity adjustments to address the shift in demand were implemented swiftly during the quarter. In Discrete Automation and Motion, steady third-party base order development could not be fully offset by the impact of the lower large orders. The implementation of the focused capacity adjustments and the productivity measures resulted in improved margin for the second consecutive quarter, and the division re-entered the margin target corridor. For the full year, we are aiming to be within the target margin corridor, but it will remain challenging as we are still adjusting capacity.
Process Automation continued to face significant market headwinds as reduced capital expenditure and cautious discretionary spending in process industries impacted large and base orders. Operationally, EBITA margin was basically stable, as only initiated cost and productivity savings largely offset lower volumes and reduced capacity utilization. In Power Grids, third-party base orders grew 7% and compensated for the lower large orders. The operational EBITA margin of 9% was significantly higher on improved volumes, productivity, and cost savings. The ongoing step change and the white-collar productivity programs are delivering results. This result includes additional project costs for the remediation of actions taken with regard to the cable components. Let us move to our operational EBITA bridge on slide number seven. In this challenging market, we achieved approximately $143 million in net savings, which is comprised of our ongoing cost-saving program, price pressure, and our white-collar productivity measures.
You can see, these savings are the main contributor to the bottom-line improvements. The positive mix in Electrification Products, as well as the higher service revenues, helped operational EBITA. These improvements more than offset any negative impact from lower volume levels and project margins. Always, the other category consists of numerous smaller items like salary inflation, changes in corporate provisions, realized foreign exchange gains and losses, certain commodity supply chain costs, as well as other smaller one-offs. As in the year earlier quarter, the Forex translation had some negative impact, but less than in the prior quarters. All of these changes delivered a group operational EBITA of approximately $1,106,000,000 and an operational EBITA margin of 12.7%, which is a full percentage point improvement. For 2016, we guided that the majority of the WCP restructuring costs would occur in Q2, and we are on track.
We have booked $270 million of WCP restructuring and $57 million of WCP implementation costs in Q2. Turn to slide number eight, the capital management slide. We continue to improve our cash generation in the second quarter, with cash flow from operating activities up by approximately 80% to $1,082,000,000. The main contributor to this was our working capital improvement measures, as well as timing of tax payments. We also implemented a continuous value chain improvement system in key operating units worldwide. You saw in Q1 and now in Q2, our focus to have a more balanced cash generation throughout the year is working. Please remember for the second half of 2016 that we will have further cash out payments for the WCP restructuring. Regarding our share buyback, in the second quarter, we purchased shares with a buyback value of approximately $780 million.
Since the program was announced in September 2014, we have now purchased around 170 million shares with an approximate value of $3.5 billion. The buyback is a further demonstration of our commitment to drive sustainable value creation for our shareholders. Let me now hand back to Uli.
Thank you, Eric. Before we move on to our strategy implementation, I would like to make one additional comment on ABB's capital allocation priorities. They remain unchanged. As you saw during the quarter, we remain disciplined when it comes to M&A, even to rumored M&A in the robotic space. With that, let's move on to slide number nine. Stage 2 of our Next Level strategy, launched in September 2015, aims to accelerate ABB's transformation by moving our businesses closer to our markets and driving growth, as well as becoming leaner and more agile in developing our organization. On slide 10, you can see some examples how we are driving organic growth through our framework of PIE, penetration, innovation, and expansion. We delivered higher orders in all of the BRIC countries, as well as stronger base orders in three of them, while China was stabilized on a steady level.
Our penetration efforts to sell more of our existing offerings to accessible customers bear rewarded. Our innovations continue to strengthen our competitiveness and drive demand for our solutions in the quarter. Especially as one example in robotics, where ABB has the largest installed base of more than 300,000 installed robots today worldwide. We launched a suite of IoTSP services called Connected Services to improve robot uptime and optimize systems performance, as well as SafeMove2, the latest generation of certified robot monitoring software. Connected Services is an excellent example of how ABB is helping its customers realize the opportunities offered by the emerging Internet of Things, Services, and People known as IoTSP in a digitalized industry. As a true highlight of this quarter, our YuMi robot won the most prestigious global industry innovation award in robotics.
Through our expansion efforts, we gained access to the Japanese market for high voltage direct current, winning our first orders through our recently announced joint venture with Hitachi. The success paves the way for a new de-risked HVDC business model for the Power Grids division. Turning to slide 11. Our thousand-day white-collar productivity program is delivering structural savings in all divisions. After 566 days, we are well on track. Having realigned our divisional structure and taken out layers of management, we streamlined our group headquarters by more than 20% and consolidated it into one functional location from four previously. In addition, our two new global shared services centers are operational in Bangalore, India, and Kraków in Poland, marking a very important step forward in the global consolidation of functions like finance and HR. Consequently, we are well on track to achieve the 2016 targeted white-collar productivity savings of $400 million.
Let's turn to slide 12 and look at progress on our 1,000-day working capital program, which Eric is leading, through which we aim to drive best-in-class capital performance throughout the value chain in inventory and unbilled receivables. Working capital has decreased approximately $1.1 billion since the end of June 2015, and as a percentage of revenues is 150 basis points lower. We are on track to meet its target of freeing up at least $2 billion in cash by the end of 2017. Turning to slide 13. A key ambition of our collaboration focus is to drive more productive and efficient collaboration across our divisions, as well with our customers and partners.
In the second quarter, our Electrification Products and DM, Discrete Automation and Motion divisions, worked closely together and won an order for energy efficient electrification and uptime improvement of a new greenfield car factory in Mexico belonging to Renault, Nissan, and Daimler. This solution reduces energy consumption by greater than 20% and increases productivity, representing true value creation for our customer, Renault, Nissan, Daimler. As I already mentioned, we strengthened our leadership team with the appointment of Sami Atiya to the executive committee as president of the Discrete Automation and Motion division effective June 13. Sami is a great colleague already and a highly talented, experienced leader with a strong background in product, software, and services in Europe, the Middle East, and the U.S., and he will play a key role in driving our offerings in DM for the Internet of Things, Services, and People in a digitalized industry.
Now let me summarize the quarter on slide 14. We delivered continued solid progress on profitability. Our execution programs are working. White-collar productivity is hitting the bottom line, and cash flow has truly moved to the Next Level. Base orders are steady due to PIE, but market headwinds persist. Moving to the outlook, in this environment of heightened uncertainty, we expect the market headwinds to continue. We will remain focused on executing our Next Level strategy, driving our growth initiatives and our productivity and working capital programs relentlessly. We will host our capital markets day on October 4 here in Zurich, when we will report on the further progress of our Next Level strategy, including the strategic review of our Power Grids division. On slide 15, let me close by reminding you what we really stand for. ABB is a pioneering technology leader with strong positions in attractive markets.
We have a crystal clear transformation agenda to drive earnings per share and cash return on invested capital, which we are implementing with rigor, discipline, and perseverance. We remain committed to delivering attractive returns to all of our shareholders. As demonstrated again in the second quarter, our Next Level strategy is delivering positive results, and we will continue to accelerate sustainable value creation. With that, I'd like to conclude my remarks and thank you all for your attention.
Let's open up the line now for questions. I would like to remind everyone that maximum two questions so that we would allow more people to be able to ask questions to Uli and Eric. With that, may I hand it over to the operator?
We will now begin the question answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands for asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Jeff Sprague, Vertical Research Partners. Please go ahead.
Thank you. Good morning or good afternoon, everyone. Question, just thinking about margins. The margin execution is quite solid, given the lack of demand support that you're getting, lack of help you're getting from the end markets. Could you help us think about when revenues do improve, your confidence level and the incremental margins on revenue growth? Is there spending that may have to work its way back into the equation? Whether it's growth-related spending or support spending or anything like that, could you please give us some perspective on that, please?
Yeah. Good afternoon, Jeff, and thanks for attending the call. When we look at the margin situation at the moment, I think the team did a really good job altogether, because if you take the revenue that we have delivered this quarter, it's an interesting situation because we have some of our most profitable segments contracting massively, and we have some growing segments that might not have the same margin dampening that contraction. Despite that negative effect, the team has delivered some margin accretion, which is substantial, 100 basis points in the quarter. If you look going forward, first, if the overall revenue comes back and the growth comes back, you can expect a drop-down effect on the margin over time. As you have seen, we have been very disciplined on our spending on all discretionary elements.
The white-collar productivity program is driving productivity, for example, in sales, and you mentioned sales explicitly. We have made significant progress in that field already, and we will make more progress in the future to drive productivity. Additional growth will not be eaten up and will not require huge amounts of spending to realize it. There is an expectation. It would be naturally best if our most profitable markets come back in a significant way because then the negative mix effect that we have had to compensate so far this year would then be reverted and help us with a margin acceleration. Look what we do for this year. The market headwinds are continuing. We are right into heavy weather sailing in many of our businesses. We have been very disciplined on the cost and the cash side here to date.
We are navigating ABB exactly that way. In some areas, we are investing quite significantly. If you take robotics, if you take food and beverage, if you take India, we are definitely investing to realize the growth opportunities out there, and in some other areas, we are driving massive cost reduction and restructuring in line with the segments. Our PIE approach and our heat maps give us a much more granular understanding of the different segments. I think I would say overall, we fly on the side, but the side is much sharper focused than in the past.
Thank you. Just a quick follow-up on growth. Obviously, you have a very different mix than, say, a Halliburton, but Halliburton yesterday, Dover today, all trying to call the bottom here on energy-related CapEx. What is your view on that? Do you see signs of bottoming? How do you see that playing out in your portfolio over the balance of the year?
Look, given current volatilities and the uncertainty of the market, I'm very careful calling any improvements in any market at the moment. Altogether, we see on the oil and gas side the first signals that customers might be thinking about some CapEx investments in the future again. It's too early to call it a tender activity. It's too early to call it a swing in the market. There are some signals, but I would be cautious calling that too early a change in the direction of the market.
Thank you.
You're welcome, Jeff.
Thanks, Jeff. Next question, please.
Our next question comes from Martin Wilkie from Citi. Please go ahead.
Thank you. It's Martin from Citi. The first question was really on the cost savings and the white-collar productivity. When we look at your bridge, it looks like your cost savings were quite a bit ahead of the run rate that we might expect for the full year. Just wanted to understand, was the price versus cost element a lot better? Was it white-collar productivity delivering sooner than you expected? If you give us a bit more color as to what we should expect for that plan, and if you could just give us the details for the white-collar productivity savings specifically, that would be very helpful as well, thank you.
Look, I will make a couple of remarks on white collar and then hand over to Eric on the bridge. The white collar program is really a success. We are taking out massively cost. We are becoming more agile faster in many areas. We are taking some very decisive actions. It is very important that we are not only looking at the last cost chunks, but we also look at the signaling effect of certain changes. For example, here in the headquarter in Zurich, we have consolidated four buildings into one. Headquarter staff is down by more than 20%, and that is a strong signal to everybody around the world that we are sweeping the steps, not only outside, that we are also sweeping that here in the headquarter.
If you take the three dimensions that we are working on the management complexity, as you know, we have taken out whole lines of management that we had previously. I have today four divisions and three regions. When I started, we had five divisions. I head a global market and eight regions, so I needed 14 people to run the world, and today I need seven. That is something that has been now multiplied across all the divisions in the regions in a really positive way. The second piece is around the business functions. If you take, for example, the rollout of salesforce.com, we have it rolled out now to more than 80 countries. At the moment, it is more than a cost than a benefit, because we are still in the ramp-up process here.
We see in the countries that are further advanced in implementation, we see significant productivity improvements. This is one that will really fully hit us a little bit later in the future. Then look at the support services. At the moment, we have basically start double staffing because we are staffing up Bangalore in India and Krakow in Poland, and at the same time, we still have the resources in the existing functions. When they are fully executed and this move is fully done, you can expect an additional impact. Overall, white collar is progressing very well. Your catch is good. We are really on track. We might be even a little bit ahead on track, but in these market conditions, trust me, we are really firing on all cylinders to get good momentum going.
With that, I hand over to Eric to put that in the context of the overall EBIT bridge.
Thank you, Uli. Yeah, Martin, in this $143 million plus or the price effects, the traditional cost saving program of 3%-5% of cost of sales, as well as the WCP savings. It's clear that the reason that we are way ahead on the positive side on the net is clearly a big contribution from the WCP savings. The other savings are also coming well along, but it's a big contribution from the WCP saving in this quarter.
Okay.
If I could take my second question on the.
Go ahead, Martin.
Sorry. The second question was really on the corporate cost, really for the second quarter, you've come in probably below the run rate that you might infer for your annual guidance. Just to get some sort of sense, does that mean that we can expect corporate cost for the full year to be lower than you previously talked about? Is there a different weighting this year that we might expect to come back in the second half? Thank you.
Yeah, I take that one, Martin. The second quarter was a low quarter, a good quarter. Obviously, some of the cost savings on white collar also goes to the corporate side. We have earlier talked about $400 million, $450 million of corporate cost on operational EBITA level. I would say, as we see it today, we would rather be around $400 million, maybe even somewhat below $400 million.
Thank you, Martin.
Thank you very much.
Next question, please.
Next question comes from Mark Troman, Bank of America Merrill Lynch. Please go ahead.
Thank you. Good afternoon, Uli, Eric, and Alana. Just ask two questions on demand, please. Firstly, this quarter was characterized by lower large orders. I wonder if you could comment on the pipeline and visibility you have on that, both, say, on the power side and I guess on the energy side, on the longer cycle side. The second question, following on from I think Jeff's oil and gas question. Are you seeing any difference between upstream and downstream trends, especially in the light of the Saudi weakness, base oil the weakness and what's going on there? Also mining. Oil and gas you seem to be seeing signs of bottoming. What about the mining? Is that in the same situation? Thank you.
Good afternoon, Mark. Thanks for your question. Look, let me run you through the large order situation that we have at the moment. It's really massive structural differences between the different businesses. In the second quarter, you have seen that basically in Power Grids and in Process Automation, base orders relative to the large orders were better, and we have had a quarter that was very low overall on the large orders. On Power Grids, the tender pipeline is healthy. The market out there is active. Connecting renewables over long distances into the power grid is a very attractive value proposition that ABB has. I would say on that one, it's a temporary effect in the quarter more than it is a structural effect longer term. On the Process Automation side. There is a massive contraction on large orders compared to the previous year.
Remember last year we had, for example, still quite a bit of marine large order in there for oil and gas supply vessels, and that market basically has dried out this year. There is a structural element that will be there for quite a while on the Process Automation side, especially related to the oil and gas activities, and we have to say that as it is. Going forward, in terms of bottoming out, I would be very cautious calling that too early. We see a different pattern on upstream and downstream. On upstream, it remains a contracted spending pattern. Even on the OpEx side, there's very timid and cautious spending. On the downstream side, we see some signals for some tenders coming in, and there is some activity out there for larger projects that might come in the pipeline.
Would I call it overall a changing market yet? I would be very cautious doing so. The themes that still sell in that business is energy efficiency and productivity, uptime improvement, to make sure that on a relative base against your competitors, even with low revenue per barrel, you have a factor cost advantage in this business. You asked about Saudi. Saudi was a particularly weak quarter in the second quarter. You know what's going on in terms of the changes on a government level. You have seen what's happening on the oil and gas side. That is something that we are watching very carefully. Our presence in Saudi is strong. We got a good team down there. There is definitely a very weak market activity in that part of the world at the moment. Last, you asked about the mining piece. Mining remains soft.
Whether the turn of the software is there already or not, I think in the view of current market uncertainties, volatility, and the most recent events that destabilize the world even further, I would be very cautious calling that market turn already.
Thank you, Mark.
Thank you very much, Uli.
You're welcome.
Next question, please.
Next question comes from James Stettler from Barclays. Please go ahead.
Yes, thank you, good afternoon, all. On Power Grids, the margin was 9%. That included some charges on DolWin2. Can you talk about how we should think about the margin going forward as you complete the exit from all those legacy contracts? Will there be an additional benefit on that? Secondly, on Discrete Automation and Motion, with the change in management there, will there be any strategic changes in the division? Thank you.
Good afternoon, James, thanks for your question. On Power Grids, I think Claudio and his team are doing a wonderful job improving the profitability, the business model, the underlying quality, especially also the risk profile of this division. You have seen a significant margin increase again in this quarter. Yes, you're right. That includes some charges and some costs that we had on the cable connectors for the 320 kV cable system that leads into DolWin. That is something when you have technology installations that can happen. We'd rather catch it in the testing phase and fix it. What we're doing is we're fixing that situation and take the cost. The stability of the margin and improvement of the margin shows the underlying quality improvement in Power Grids. Absolutely, should you see over the next quarters and years a further margin improvement.
That's not only in terms of having a different quality tender backlog, it's also the business model. As you have seen, we announced this quarter the first orders in our Japanese joint venture. That's a completely different business model from a risk profile than we had before on HVDC partnering with Hitachi. I think the hard work of Claudio is starting to pay off in his team, we see the results. Hopefully over time in the future, there's more to come. On DM, Sami is an incredibly gifted leader with a strong background in artificial intelligence and robotics. In fact, we are so proud about our two-armed YuMi robot. He did a PhD study on a six-armed robot. Let's see what impact he will have on that business altogether. I think he brings a strong background on solutions, on service, and on software.
I wouldn't expect a fundamental radical shift, I would expect a very strong shift in line with our overall aspiration to shift the center of gravity of ABB. We will continue to push harder on digital-based solutions. We will drive software differentiation. We will drive service even more. Altogether, I'm highly optimistic that Sami, together with his well-proven leadership team, will get DM back on an even better momentum. The division has, despite the leadership change this quarter now, achieved the lower end of the target margin corridor. This is nothing to be too proud about, but it's good to be back in. If you look at the sequential improvements the last couple of quarters, we are definitely in that business out of the trough, and we're working very hard to deliver further improvements.
Thank you, James.
Thank you.
Next question, please.
Next question comes from Andreas Willi, JPMorgan. Please go ahead.
Good afternoon, Ulrich, Eric, and Alana. My first question is on the second half organic sales outlook. I think you got asked in the press call this morning about it, whether there is still an expectation of a return to positive organic growth in the second half, but then you said something, it is too uncertain. Maybe you could just clarify that message. The second on the strong profitability in Process Automation, given the top line. Maybe you could give us some indication on how mix helps there and how profitability within service and within equipment is developing so we better understand the underlying trends there. Thank you very much.
Look, good afternoon, Andreas. Thank you very much for your questions. If you take the market that we are facing at the moment and the events of the last couple of days and weeks. Look, in Europe, we had the last couple of weeks, multiple times, a crisis team that we had to set up within minutes. If you take Turkey, if you take France, very, very sad developments that we really regret very deeply. In such a world where you have, in addition, Brexit, you have in the U.S. the elections coming, which typically slows down then certain investment appetite. I would be very cautious to give any predictions for the second half of the year in detail. One thing is very clear, it is our ambition to bring ABB back to growth.
Naturally, we are working very, very hard to realize that ambition as fast as possible. Whether it is in the second half of the year or later is too early to call, given the current uncertainties and the volatility that we face. If I move over to PA, I think Peter is a leader that has a very good grip on the future outlook, on his backlog, and the understanding of his cost base. When he saw certain parts of his business portfolio turning negative on the orders, he swiftly acted on the cost base. The good news is in PA, many of the activities in PA have quite some lead time. If you are a responsible leader and you have good visibility on that, you can adjust your cost base in a significant way.
Peter is probably, of all the divisions, the one who is furthest advanced in implementing White Collar across his management structures. He has taken massive costs out in a very rigorous and disciplined way, and at the same time making the division even more market-focused. That part is going extremely well. The service business is one in PA that has a significant share of the division overall, as you well know, Andreas. On that one, we have seen a short-term massive contraction, and now we see a dampened demand, but the demand on the service side is okay. You have seen altogether in ABB, we had a 4% service growth in a difficult market or environment, and PA definitely benefited from that one in the quarter. On the equipment, we have never stopped R&D, and PA is bringing out some very, very attractive new products.
If you take, for example, the new generation of Azipods, fantastic energy efficiency. They are being sold into the cruise ship sector. When you look at the fact that basically all of China is going on a cruise, there's about 100 ships in the backlog. There is some field where we can still sell. You have attractive technology, which is the newest, latest technology, leading edge in terms of productivity and energy efficiency, you get paid on it. Altogether, the massive contraction has been dampened. On the one hand, with some order pattern that was running against mainly the oil and gas and mining contraction. On the cost side, responsible cost management and good quality, attractive new products is the mix that we are driving to compensate the market headwinds that we are facing.
Thank you, Andreas. Next question, please.
Next question comes from Ben Uglow, from Morgan Stanley. Please go ahead.
Good afternoon, Ulrich, Eric, and Alana. I had a couple. First of all, again, we're going through the different divisional margins. Can you just give us more feeling or color around the Electrification Products? Nice margin expansion there, effectively on flat revenues. What exactly is driving that, and how should we think about it in the second half? That was the first question. Secondly, Ulrich, can you give us a sense of what's going on in China at the moment between your various businesses? How do you see the underlying trend in low voltage versus Discrete Automation and what we're seeing in power at the moment? Thank you.
Ben, let me get started. First of all, good afternoon. Let me get started with the EP development. Look, I think Tarak and his team are doing a great job. The margin is up 80 basis points. Despite a pretty soft revenue, he's down a comparable base minus one, and that's something that we have to appreciate and have really to give some credit to. In EP, it's a similar story as I just told you on the PA side, on the equipment side. There is good new product coming out. If you take our Ekip SmartVision breaker that has additional functionality. If you look the building automation and home automation range that Tarak has, which is growing and it's very, very attractive to our customers. Altogether, innovation and new fresh technology for our customers and distribution partners is important driver there.
The second driver, I would say, is a front-end distribution and sales efficiency. You might remember, 1st of January, we brought together medium voltage and low voltage under one roof in Electrification, and we are only seeing the start of the efficiency gains and the fantastic collaboration opportunities that we have on the channel side between medium voltage and low voltage, especially towards the industry. There's tremendous improvement opportunities ahead of us, and Tarak is managing them in a very, very responsible way. Also he has done his homework on white collar. Tarak has taken out management complexity in the division. He has changed the business model, in terms of who runs supply, who runs demand. With that simplified the division in a remarkable way. He has more hands at the customer than ever before.
Altogether, that's probably the key drivers on the margin development in EP. Now let me move over to China. China was a big area of concern for quite a while. We had contraction, we had reductions. This quarter, I'm really happy that we have total orders which are up 18% and base orders, which are basically have steadied out and are flat now in a still challenging market environment. China is still going through a transition period from an investment or consumption-driven economy. I look at China like a continent, and if you go to the different parts of this continent, if you go to the Hebei province, for example. I was very recently in Wuhan. In Wuhan you see as many cranes as you used to see in the Middle East. The province, which has the GDP like Poland, is growing at 9%.
There is growth out there. We just have to find it. Chunyuan Gu and his team are doing a tremendous job in reallocating resources. I call it the eastern banana along the West Coast, east soft at the moment. That's not growing as strong as it used to be. There are many parts of China which are progressing quite well. Now, if I run you through the different divisions, EP is still facing some challenges on the spending on the process industry side, on the residential side, because the trend is down in China in this quarter. If you look at DM, basically robots is strong and the rest of the divisions, especially driven by the process industry, is a tough one, and we need to face that.
If I take Process Automation, I talked about the marine part of Process Automation, which is basically the only one which is up, and the rest is really down to a very deep, weak domestic demand. There are still over capacities in metals and cement, in pulp and paper. Then if you move over to Power Grids, the China base orders have grown double digits, and we won a $300 million order for HVDC in China from State Grid. When you look what that is, that's again an implementation of our fantastic technology. It's a 1,100 kV system that has never been done before. It has more capacity, it has higher reliability and lower losses than any other technology in this field. Naturally, when you have that, you get paid for it and the customer takes that.
On the infrastructure utility grid side, China is still solid, and we are extremely well positioned with our leading-edge technology. On the process industry side, it's soft. On the consumer-driven side, like auto, there is growth in the 3C side. That's a little bit of granularity on China, Ben.
Thanks, Bernd.
That's really helpful. Can I just one quick follow-up?
Sorry.
On the pipeline.
Bernd. Sorry. We have a long list of people. Yes. I'm sorry.
Okay. Sorry. Apologies. I will get back in the box.
Okay. Thank you. Next question, please.
Next question comes from William Mackie, Kepler Cheuvreux. Please go ahead.
Yes. Good afternoon, everyone. Thank you for taking the questions. The first, if I could come back to understanding a bit more of the moving parts within Discrete Automation and Motion. Specifically, you've highlighted the jewel of the robotics business growth and margin expansion. Last year I note there was a high level of restructuring to implement the changes underway in the business, yet we haven't seen much margin expansion for the division. Could you perhaps throw a bit more light on how the power conversion business is developing, and also what lies ahead for us within the motors and generators business unit? That's the first area.
If I come back to the bridge, is it possible for you to explain why, given the benefits of Power Grids project execution, that we've still seen a negative drag on the projects effect within the bridge for the Group EBIT? Thank you very much.
I let the fun part on Bridge be answered by Eric, and I start on the DM side. Look, if you take DM, it's a pretty broad portfolio. Let me go through business by business to help you understand what's going on. The robotics piece is going well, so we are happy. We are pushing that very strongly. We have fantastic technology coming out. When you win the Global Innovation Award, when you get a lot of customer attention, even from new segments, you know that you're well-positioned. We should not be arrogant. We are putting a lot of investment to make sure that we are really driving growth in this business in line and ahead of the market developments. Our ambition is very clear to further take share in this growing market in the robotics field.
When we talk about motors and drives, let me remind you, ABB on the motors and drive side is very strong in continuous motion actuation. That means any continuous flow out there in industry is where we are particularly strong. That's the area of mining, of oil and gas, of pulp and paper, which is significantly impacted by the market at the moment. Therefore, that was the main area of restructuring. If you just look at one example, the Baldor footprint in the U.S. has been significantly restructured following the weakness in the market. When you take customers like Joy, who this morning got taken over by Komatsu, they were down significantly on their order intake. Naturally, we need to align resources with that. That's something that we are doing in a responsible way, and we take the restructuring that is needed to go through.
The one thing that we misjudged last year, let me just repeat that, was really the service contraction. We would have never thought that the service activity in DM contracts so much, especially in the oil and gas side. That happened. We were slow in addressing it, but now it's fixed, and we get back to the margin corridor in that field. If you take the power conversion piece, there's the solar piece in. You see the solar market booming, and ABB is participating actively in that market. You see the rail. You have the rail business in there. Our sustainable transport solutions in rail are very strong. We have a high level of productivity and energy efficiency in our solutions, so the customer demand is there. You also have excitation and rectifier solutions in that field. Naturally, that's something that's quite weak at the moment.
Altogether, I would say robotics in DM, robotics is up. Motors and drives challenged by the process industry, and in power conversion, it's truly a mixed bag. With that, I turn over to Eric to answer your question on the Bridge side.
On the project margins in the Bridge, which is a bit negative as you have seen. In the Bridge includes obviously positive effects from projects that are going better. It includes negative effects of other projects that are going not as good as expected or worse than last year. Also, of course, this item includes the issues with the cable joints as we have alluded to earlier today.
Thank you. Next question, please.
Next question comes from James Moore from Redburn. Please go ahead.
Yes, good afternoon, everyone. I have a couple. Firstly, could I ask, if you strip out the WCP, was the net of the normal three to five versus price similar, better, or worse than we were last quarter? Within that, has pure price changed at all? My second question surrounds your comments about the PIE heat maps. You talk about taking share to dampen end market headwinds. I wonder if you could say across the four businesses where you're taking the most market share by product or by region, or whether there are any pockets of share loss.
James, thank you very much for your question. Look on the white-collar versus the regular cost saving. We are not disclosing the details of that mix. As you have the $400 million commitment on white-collar that we have made, and as you have heard that we are very well on track, you can probably make your own calculation in that context of it. If you go through the PIE, let me go through, on the one hand by business, on the other hand also by region. The region that is most successful, there are two places in the world where we are most successful in implementing that, and the management teams are probably furthest advanced in using PIE. One is Europe and the other one is China.
If you take the European piece, if you look at our growth pattern there, we went through country by country, we had, for example, parts of Germany, where we particularly were weak in the past in terms of our setup. We realized that we had given the market away too much to some of our competitors, and we have invested now in the appropriate resources to gain market share across the, for example, the DM piece, for example, the low voltage piece, to make really sure we are driving that in an active way. If you go further up, if you go to Finland, we have had a very good success in data centers.
You might remember this is a country where a lot of data center activity is at the moment, and we are focused strongly on that, and we have a very strong development in taking share in that part of the European economy. Altogether, I would say the European, Bernhard Jucker, with his country managers and his local division and BU managers, they're really crunching the growth machine and doing a wonderful job in beating the market. If you look at the order development in Europe, especially the base order development in Europe, I think that shows very clearly that we're taking share in this field. If I go over to China, Chunyuan Gu and his team are really a role model how you drive it. The first was the geographic segmentation.
We realized that there are many 1 million people cities in China, especially in the mid and the west, where ABB was totally underrepresented. We reallocated resources from areas where we usually would have restructured them into that part and made sure we give that part of the market more attention. Our efforts in food and beverage around the world are paying off. We have a dedicated team on that. We have hired a managing director of a food and beverage company. At the end of last year, we made him in charge of our food and beverage program across all of ABB, and he is basically driving the heat map and the activities around food and beverage. Here, let me just explain you a very concrete couple of elements.
The one is making sure we take more of the existing portfolio to existing customers, increasing the share of wallet of customers. We had many customers in food and beverage where we basically had one BU active, and we are doing more on that one. The second piece is really around the innovation side and thinking through, if you go to a Kellogg's Muesli plant, for example, or a Kellogg's Cornflakes plant, you need wash down equipment for the changeover in the plant. Not all of our equipment was suited to be used in a wet condition in a changeover where you basically hose down the whole line on a changeover. We have invested in R&D, and we have invested in getting the right product out to participate in the market in that way.
The third part on the expansion side, food and beverage is a classic expansion element, but I can tell you, if you look at the market of packaged food and how it's growing in India, at the market of packaged food and how it's growing in China, it's tremendous. The rice sacks are disappearing, and more smaller and smaller packaging sizes are coming, and there's a tremendous opportunity for us to do more. As you can hear from my comments, we drive this not only on a global corporate level on overall segmentation. We have it broken down really on a credible local market understanding on all the different industry. We are quite detailed, and we work on that, and that's definitely a good story. We are not perfect on it yet.
We still have countries which are not as far advanced in rolling that out, and you will see continued efforts around it.
We will have time for two more sets of questions.
Thank you very much.
Thanks, James. We will have time for two more sets of questions, please.
Next question comes from Andre Kukhnin from Credit Suisse. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. Firstly, can I just ask more specifically on pricing how that developed in Q2, and whether that was much different to Q1?
Is that your question? Okay, I hand over straight to Eric.
Good. Andre, the price situation is obviously still with some price pressures we have experienced for quite a long time in the markets we are in. I would say the level of price change is not changing that much now between the recent quarters.
Got it. Thank you. Secondly, you're very clear on your appetite to count a bit for Midea, could you comment on any potential implications of what that, Midea, sorry, on particular implications on what that combination may mean for your business locally in China and in Europe?
Look, if you look at that situation, we have a clear acquisition pattern. We want to buy in situations where there's a good industrial logic. We want to make sure when we do deals, we create significant value for our shareholders. We also want to make sure that the integration complexity is not too big and there's a natural good fit. We applied it on any situation, we have also applied it in the context of that deal, and you see the consequences of it. The combination of these two players is an interesting one. Look, we are in China since many years. We are the leading robotics company in that field. We have great technology. We have a full-blown local value chain with local R&D, with local manufacturing, with local sales and distribution. We have invested strongly on the engineering side and the application center side.
I would say we are positioned strongly. If you look at our combination, there is no significant short-term value coming out of that for Europe. In China, since ABB has 20,000 people and a strong footprint in China, we will face the competition in a well-prepared way.
Thank you.
Thanks, Andre. Next, last question, please.
Our last question comes from Guillermo Peigneux-Lojo from UBS. Please go ahead, sir.
Hi, good afternoon. Guillermo Peigneux-Lojo from UBS. Just maybe a follow-up on the savings and more the pace going forward. Very strong delivery in Q2, but I was wondering that if we stick to the previous plans, I guess the momentum on the savings is actually far from its peak. I was wondering whether we should see actually this contribution to increase further throughout 2016 and the beginning of 2017, even. Thank you.
Yeah, look, Guillermo, I think in a tough market environment that we are facing at the moment, it's very important that you are extremely disciplined in cost and cash, and that you make sure you take all the opportunities that you have on the cost optimization, productivity improvement side as swiftly as possible. You might remember when we launched our Next Level strategy, we confirmed the EBITDA margin ambition over the cycle. Yes, we have moved a little bit now, we are 100 basis points up, but it's very clear that our ambition is to deliver further margin accretion over the years to come in our overall effort to improve this value creation in ABB. If you take the overall cost out on supply chain and quality and operation excellence, the 3%-5% ambition stays unchanged, and we will deliver on that one this year.
If you take the white-collar productivity piece, we are very well on track to deliver at least the $400 million this year. ABB all together is becoming leaner and lighter. The good news is you don't see that only on the cost side. You see it also on the agility side. You see it at the amount of time that we are spending with customers. Our NPS score this quarter is up in a significant way, and one reason of that is also that we have, for example, salespeople spending even more time with the customers. Your assumption to expect further accretion is correct. Let's see how that comes, at what pace, and we are not giving any specific guidance on that one.
Thank you, Guillermo. With that, we would like to conclude our Q2 results call. Let me remind you again that we have our Capital Markets Day here in Zurich on October 4th, and we welcome you there. Thanks again.
Thank you very much.
Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You will now disconnect your lines. Goodbye.