ABB Ltd (SWX:ABBN)

Earnings Call: Q4 2013

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Feb 13, 2014

Good afternoon, everyone. I'd like to thank everyone today for taking the time to make the journey to Zurich as well as the ones who are joining us over the webcast. I'd like to welcome you today to ABB's full year and quarterly results. Today's event will start with presentations from our CEO, Ulrich Spiethhofer and our CFO, Erik Alsvek. This will then be followed by presentations from 2 of our Executive committee members, Tarek Mehta, who is the Head of Low Voltage Products as well as Greg Shai, Head of North America and is also responsible for Business Integration and Global Service. After this, we will end with Q and A. For those of you who are participating via the webcast, please follow the instructions to line up in the queue for questions. With that, let me draw your attention to our Safe Harbor statement on Chart 2 for any forward looking statements we might make during the day. With that, I would like to hand it over to Ulrich Bieshofer, our CEO. Thank you very much, Alana. Results conference here. We look forward to share this afternoon with you our strong results that we have delivered in quite challenging times. Of the full year results and on the quarter. Erik and I will be sharing this presentation. Then we will update you on our expectations against the outlook and the targets of ABB that we have given ourselves. And you might remember in fall when I set out as the new CEO, we defined 3 focus areas, profitable growth, business led collaboration and relentless execution. And today, we want to give you an update what it really means for daily activities, how we are driving ABB now in these three focus areas and how will we deliver on value creation. So, if you take ABB in 2013, 13, the sum of the parts of ABB has delivered one more time. The revenue are up. We are at an all time high in terms of revenue, close to CHF42 billion in the group. The early cycle business have started to come back. The long cycle on the infrastructure and on the larger project side, mainly in the process industries. 4 of the 5 divisions performed really well. And I'm very happy that all division heads are here today. If you have later on the one or the other question, they might also come in and share their perspective on it. The operational EBITDA is up by 9% ahead of revenue growth, which is a sign for very strong execution this year, again, despite the difficult market environment. The integration of our large acquisitions is on track and we give you today a little bit more flavor where we stand on that one. This is something where we have allocated a lot of capital the last couple of years and I think it's important to share with you where we are in terms of of account and the market side and we will share more details on that one. We would not be with the margin where we are today if we wouldn't have established our relentless our relentless focus on cost reduction. In 2013, we have yet again taken $1,200,000,000 of cost out, which is an important pattern of ABB. This is not a one off program. This is part of our DNA today. And again, we will share with more results with you during this afternoon. The automation side of the business, if you take it together, has delivered a higher margin, which just proves that in difficult times, good execution was done. Power Products leads continuously the sector profitability in the relevant sector, which is something that Bernhard and his team have now done for many years consecutively and it's a very strong part of the ABB portfolio. And in Power Systems, you were all around when we came out a couple of weeks ago with the bad news that we had there. We got clear actions in operation. The action program is being implemented as we speak with Claudio Fakin, who is here in the audience today. The new leader is established. He's working already very well with the team and we are making good progress on implementing these actions. Free cash flow, a very important health indicator of any enterprise is at 94% in terms of the conversion, a very strong signal that ABB is in good health and execution is in order. All these results together, when we talked them through with the Board earlier this week, we suggested to the board and the board proposes now to the AGM the 5th consecutive dividend increase in line with our dividend policy of sustainably rising dividend a a share, which is now a nice steady development. So that's in a nutshell the ABB result for the year. Let me go you now a little bit more through the details. ABB, our vision is power and productivity for world. And a lot of people say, is this marketing round, what is it really? We get more and more business on sustainable energy, a significant part of our business portfolio is already there today and we get externally more recognized. A couple of weeks ago, we received the Syed Award, which is basically the award of the ruler of the Emirates for sustainable energy companies. We won that and we see that as a recognition of our very strong track record and our very strong execution on the sustainable energy side. Now if you go around the world, what ABB has been in 2013, it's a mixed picture. If you go through the different parts of the portfolio, if you go through the different regions of the world, automation trend is definitely higher than the power side of the business. And if you take Asia, for example, China being up altogether about 7%, automation in Asia being up 7%, that shows there is growth out there and we work relentlessly to realize it. In the Americas, we are up on the automation side with about 4 points. We are significantly down on the power side, which just shows the hesitance in investments in large infrastructure that we have observed now for quite a couple of quarters. Europe, we have a mixed picture, some countries down, the largest economy, the overall year is down, but if you look at Saudi, for example, that is down, the Emirates are up 30% and especially in the Q4, we had some good momentum coming, so I'm quite optimistic about that part of the world going forward. If you look at our business portfolio, I could probably spend the next 3 days talking about all the achievements. We have summarized here a couple of the different divisions. Let me start with Power Systems. Power Systems, we had a setback in the Q4 that we reported to you and that's something that we don't like. But what we like is the underlying quality of the business. We had some really good project successes, the connection between Ireland and Wales, which is the largest capacity HVDC connection that was ever built on the subsea side. The project, the offshore wind project that we did in Belgium where we installed an offshore platform on time, on budget and the customer is really, really happy just shows that in that business we got great people, we got a good team and there is a lot of good projects out there. We have established with Claudio the new leadership and we have strengthened further the HVDC positioning of ABB. Power Products leading the sector in terms of profitability, strong cash, strong results and very good momentum on the service side, which helps us to improve steadily the quality of the business over time. Process automation under valuematics leadership had all time high in terms of profitability, really well done in a difficult market environment. A lot of service activities, they're also compensating for less larger orders. I think that's a good one. And Tarak's business on low voltage, a couple of good new technology. The EMAX breaker that we have, a great breaker in itself that also drives energy efficiency, a great product. And then on the DEM side, Discrete Automation and Motion under Pekka's leadership, great work on the robotics side, continuous ramp up of the robotics rollout into general industries and good momentum coming from PowerOne, which is our newest acquisition putting us on the 2 position in solar inverters in the most attractive part of the solar value chain. So the numbers for the the divisions speak for themselves. All divisions profit is up. All divisions revenues is up. That basically means we have to house an order regarding execution. And on the PS side, the few projects where we had an issue, we have contained, we are working on it that we really get that also to the quality that we want it to be. The order side of the business shows the world as it is today. The more you are in the direction of OpEx, repeatable purchases, the better for the portfolio portfolio has done. The more you go towards large CapEx, large project, large infrastructure investment, the lower the order intake is in ABB. And we came out 2013 with SEK3 billion less backlog than we had previously, which is something that you will see later on will flow into the revenue in 2014. If you talk a little bit more about the PES situation, we said what it is. We explained it to you. Here are the actions that we are taking. And basically the actions are in 2 buckets. On the one hand, fixing the project issues, there we have ramped up the team quality. We have invested in more technical and functional expertise. We really learn in the offshore wind field, which is basically start up technology that we got into a couple of years ago. We are getting better at it. And if you look at the Belgium example, I think we have some platforms which are going well. But overall, this is still a pretty new technology that will be still moving up the S curve in terms of experience. It's a pretty expensive learning, but it's also very important technology. We work relentlessly to drive the quality of the portfolio, both overall and then the order side, the right commercial discipline, the right risk mitigation is absolutely key. Our pricing models need to reflect the intrinsic risk of the business to make sure we are rightly positioned from a commercial situation and also on the commercial term side. Power Systems is a good business and it's a good opportunity out there long term for ABB. So we need to invest, we need to get it in the right shape and we need to continue to reset and I'm very confident that under Claudio's leadership, this will continue in a really good way. Service, I already talked earlier about. Service is a key part. It helps us to stay in touch with the customer over the life cycle of the use of our product. It helps us to drive additional value for the customer. It is giving a certain balance to our portfolio over the and it's a profitable business that we really like. So we have invested strongly. And today, Craig Choi, who is on the Executive Committee responsible for North America, the integration of our acquisitions and service, will give you an update on where we stand in realizing the momentum and getting the results out of our service strategy. I'm quite optimistic that we will continue the path that we have started in terms of ramping up to service share in our portfolio and basically growing service ahead of the the we yet again took out $1,200,000,000 in terms of cost. Now how do we do that? First, everybody contributed. You see on the left side in front of you, you see the divisional split. Every division has taken out significant cost that has contributed to the cost out. If you look at the key levers, the levers are not mainly headcount, the levers are really around operational excellence and supply chain optimization. We have more than 5,000 projects in operational excellence running. Now you might say this is a lot. Well, we are active in 100 countries. We have many 100 factories. We have a lot of processes out there that we can work on. We have applied Lean 6 Sigma not only on the manufacturing shop floor, but also more and more in the processes on the overhead side, which is really good result. We have done a lot of homework in design to cost, which is very important understanding what is the cost base that we can allow and design towards that is a key element, the target costing approach in product design and also a design for reliability. The more reliability we have in the product, the better it is for the customers and us because then that means the customer has less cost to operate and we have less warranty cost on the product, which can be a key differentiator. On the sourcing side, the best cost sourcing that we have established over many years now is still yielding good results. We enter now more and more joint sales and operations planning where we jointly with the suppliers optimize the whole value chain, the parameters around the inventory levels, the cost to serve, the logistics stream. And if we get better there, we can take cost out both sides, which is beneficial for both partners in the supply chain area. A key area that we focus stronger on now is the indirect area, transport and logistics, overhead costs. There's a lot of third party spend in there and by pooling, by working better together, by making sure, for example, the demand pattern of shipments is better coordinated in key countries where ABB has an operation, we can take significant cost out and that's an opportunity that will be with us for the years to come. The integration of our 2 largest acquisition, we have picked the 2 largest, Thomas and Betz, and Baldor is well underway. Let me first talk about Thomas and Bets, Watarak and his team together also with Craig who is deeply involved in the integration of Thomas and Bets. What they have lived is remarkable in very difficult times out there. The cost savings are ahead of plan and I'm very happy about that one. And the Thomas and Betts leadership is so strong that they also took 3 years are over that we committed to get after 3 years' time. We said, 3 years are over that we committed to get after 3 years' time. We said we want to have a zero target above our WACC. We have achieved that and I'm really, really happy to share that with you. That's a key measure of the integration quality that we are delivering and we have exceeded even the target that we have given ourselves. We invested a lot in the quality of the business of Baldor to take it even to another level through automation and the global rollout of the Baldor value proposition of the products that they have, we have executed relentlessly on. What we have also done is we streamlined the Baldor portfolio. With Baldor came a genset business. The genset business is strongly built around combustion engine technology. ABB doesn't have combustion engine technology at scale, so we decided to divest this business in a regular portfolio pruning approach and this is something that will be for us in the years to come that we regularly look what do we add to the portfolio, but also how do we develop the portfolio by taking out what is not appropriate in our overall business portfolio. We have not only integrated in 2013, we also went 13, we also went shopping and expanded our portfolio with some targeted acquisitions. PowerOne, you all know, PowerOne integration is well under the way. The customers really appreciate the product. I recently was in the Middle East meeting some customers in the special cooling technology, for example, that we have on the PowerOne large solar inverters is a key differentiator, for example, in very dusty environment. Having encapsulated cooling there differentiates us from some of the competitors. And I think we got really great product there that we now roll out. Neuron is a smaller acquisition in building automation software, which really helps us to bring the different building blocks on building automation together. LB Electronics is low voltage products in Turkey. Los Gatos is a measurement device acquisition in North America and Dynamotive was a smaller service acquisition for MotorSense Drive in the U. K. So altogether, we have continuously worked on expanding the portfolio, adding good companies. All these companies are good companies and we are happy to have them on the Board. The integration is well underway and Craig will later on talk a little bit more how we go about these integrations. So if you take 3 steps back, ABB has really a strengthened competitive position. And what are the pillars of this strengthening? A, on the innovation side, throughout the cycle, we have invested every year more on the R and D side. We have a tremendous amount of wonderful new products coming out of the pipeline and at a time when some others might not have newest technology because they cut R and D through the crisis. We are there with new products and the customers really appreciate it. One example, the new GIS range the customers, our NPS is up. The customer satisfaction surveys show us a 36%, which is about 35 it's a 6% increase compared to the previous year and we continue to use Net Promoter Score as a compass to really say, okay, where should we focus the business improvement opportunities. Our industry sector initiatives, we have changed the leadership there and leadership responsibility there by putting each of the division head executive committee members reaching running the divisions in charge of 1 of the industry sector initiatives to really foster more collaboration across ABB and make accountable visible on the most senior level of ABB for collaboration. People are the real core of ABB and we are working very strongly to improve our people value proposition, which is also being recognized externally. I don't know whether you saw it in the last couple of weeks. We got recognized in Germany, which is a market where we are strong in the presence. We got recognized as the top employer, the number one employer in our sector by one of the most important German magazines, and we are particularly proud about having that in this very important market. We have worked to expand our geographic scope, Sub Sahara, Africa being 1, another one being the Nigeria and Turkey where we're really ramping up. In Mexico, we built a couple of years a joint plant across the divisions. We are getting good results out of that. Indonesia is a focused market that we invest heavily in on the service side, on the sales side. And on Nigeria, we have some larger projects that we have conducted there. Turkey is a country that we have been very happy with, good momentum, good investment and also with a local footprint that we have invested in. Altogether, we had a pretty smooth leadership transition. You see many new faces here in this room today on the executive committee of ABB. The team has worked together wonderful, and I can just tell you from my own experience, ramping up in the new role, the team supported it in a fantastic way, and I'm extremely grateful for that. So if we summarize where is ABB today, it's a resilient shareholder returns providing company that is much better balanced than in the past, that has even better execution and provides very strong, even better results than in the past to the shareholders. With that opening, like to hand over to Erik, who will share with you the Q4 results. Thank you, Ole. So good afternoon, everyone. And let's now look a little bit more in detail on what we did in the Q4. So if we start on the growth side, we had a continued good development on our base orders. They grew 4% in the quarter, same number as the 3rd quarter. So we are on a better growth trend than in the earlier quarters for all the orders with values less than 15,000,000 dollars Also behind that the early cycle business in low voltage product in discrete automation and also in the Power divisions is on a good trend also growing in single digits. The execution on revenues was good. Profitability is up in all divisions. And on the large order side as Ulrich already talked about, we still see challenges as Ulrich already talked about, we still see challenges in terms of delay of awards of larger orders. What is very positive is the service business. You have heard from us over many quarters that we are focusing more on service. The growth in service in the quarter itself was 15% and on the revenue side up 4%. Cost savings is not only good for the full year as Ulrich went in quite some detail, but also in the quarter we have a steady flow of cost savings. So we recorded some $350,000,000 cost savings in the quarter itself. On the execution side, cash flow for the year ended up well. I will come back to that in a little bit later with more details. But overall on the cost saving, we had a 4 0.2% saving in the quarter. Turning to the regional development. In the quarter itself, if you start in Europe, we were down 9% mainly due to less orders in the power area. We know that the purchasing decisions are being partly delayed in that area, but automation was balanced which is again a fairly similar picture to the earlier quarters. Also in the countries in Europe, you can see we have mix of positives and negatives. And I would like to point out Italy, which is in from a low level now stable and growing again. Looking at Asia and Middle East, they are both positive, up 5%, respectively 9% and with better numbers in automation in Asia than power. And you see that some of the smaller countries are back to growth, obviously from lower comparables at the end of 2012 than it was in the early part of 2012, but we are still back to growth and that is very important. China was negative in the quarter, but it's very important to see that for the full year China is up by 7%. The reason we are down is 1 or 2 larger orders booked in 2012. But across the board in most of the areas in China, we are pleased with the development also in the Q4. Middle East, we booked a couple of larger orders in United Arab Emirates as well as in Kuwait. And then on the American side, we have minus 10%, partly pulled down with Brazil. Brazil continues to be a challenging market for us. But looking in the U. S. Which here shows a a -five behind that number we actually have a positive development in the automation business in the U. S. So there are clear signs of positive development into the details on the divisions. On the order side behind the minus 4 we had in the quarter on overall orders, we had good development in DM with a positive 10%. That includes the effect of Power 1. But even if we back that out, we have a positive development with a good growth in the Discrete Automation portfolio. Revenues across the board is positive 4%. And you can see all the divisions are continue to be up. Operational EBITDA as well is up in all the divisions. And on the margin side, we had up for the group and up for 4 of the divisions. And in discrete, it is slightly down. Again, this can be referred to Power 1, which has a lower margin than the average of the DM division at present. What I think is important to point out is the good increase we have in Process Automation, very good execution of projects there. We are up 1.5% in the Process Automation division. And obviously, in Power Systems, we had a negative result as you have heard in the announcement 2 weeks ago, but it is still somewhat than last year. Obviously, we had then also a large charge and we'll come back to that shortly. If you then walk the bridge, this is the comparison of the profitability in Q4 2012 compared to the same quarter in 2013, same way as we have done in the earlier quarters. What we see as very positive is that the cost savings I referred to before of €350,000,000 out paced the price pressures. We had a positive $67,000,000 from that in the quarter. Volume effects continue to be positive. Remember the revenues are up by 4% and out of that we have a positive effect on volumes and also the effect of very strict cost management both on G and A and general structure cost, but also a careful spending on R and D and sales in the quarter itself. Mix effects are basically balanced. This is up and down a bit between the quarters, but in the Q4 essentially balanced. And on the Power Systems side, it's a minus €13,000,000 but behind that you have to see that there is a €247,000,000 charge in 2012 and a €260,000,000 charge in 2013. So the Power Systems charges in both quarters have a major impact on the margin numbers of $12,500,000 in the quarter. So all in all, we ended the quarter with exactly the same margin as last year 12.5%. There are a lot of questions around the foreign exchange impacts on ABB. I'm very glad to report that on the total group we have very minimal translation effects. It's actually 1% minus globally despite quite some deteriorations and devaluations of the emerging market currencies, which we have seen also during this year continuing. So you can see very big numbers minus in Russia, in Brazil, South Africa and Turkey as examples. But the way ABB is spread around with its global footprint this is balanced out by a small positive appreciation in China against the dollar. China is very heavy in the calculation obviously because it's our 2nd biggest market globally. And also the European currencies both euro and Swiss francs and Swedish krona goes in the positive direction. And the fact of course that we also report in U. S. Dollars where U. S. Dollar itself is a major chunk of the equation makes the net effect fairly small on ABB. And if you roll this forward into 2014, we expect a similar pattern for the coming quarters. This will not change that much unless we have some massive swings in the currencies. This is only the translation effect. Important is also of course our global footprint and the hedging itself. With the factories and the activities we have in China, in India and in many other of those countries, we still keep a good competitive position in most of those markets. And there are very few markets where we have headwinds because of the currency where we have more imports. So ABB's global reach helps us very much in this respect. Turning to cash flow. We had good development on divisional cash flow in the quarter. It ended up with exactly the same number in $1,000,000 despite that Power Systems in the Q4 were about $200,000,000 lower than 2012. So the divisions overall have done a good job on the cash flow side. Overall for the year we are $150,000,000 higher. And you may remember that in 2012, we had a very big cash inflow in the Q4. So in 2013, we have begun the journey to flatten out the cash flow between the quarters somewhat more than before. And that will continue with a lot of efforts in this year and going forward to show a more balanced cash flow. Part of the cash comes from net working capital. We came down to 15% net working capital percent of revenues. So it's at the lower end of the 15% to 16% we had guided to. It is still not a number which we are happy with. We want to get back into our long term guidance of 11% to 14 and rather in the lower end of that obviously long term. So we have a lot of programs going on now down into the detail of the operations to change the operational pattern mainly on the inventory side, but also on the project execution side to improve further the net working capital percentage in the quarters to come. You will also ask yourself on the corporate side, why we have a big positive in 2012 and a negative this year. The main reason for that is that in 2012, we also had some derivative accounting effects in the cash flow and this was the last entry from that accounting practice that we had at that time. We created then a positive effect in 2012. So the swing is that effect is now gone and we are back to a more normal situation where we will have negative cash flow on the corporate side in most of the quarters. Looking at the development and the positions we have between the operational EBITDA and the net income. There were quite a lot of questions on the conference call 2 weeks ago. So we decided to put this chart in to show what which are the key items we have between operational EBITDA and net income on the group as a whole. Largest item is obviously the depreciation and which is all the normal depreciation and amortization from the business and also the amortization from the acquisitions we have done. So about $100,000,000 out of the $350,000,000 comes from amortization of acquisitions. Restructuring was $150,000,000 in the quarter. That includes the $50,000,000 of additional restructuring we have taken for the Power Systems, which we communicated in the call some weeks ago. On the acquisition costs and non operational items, we have the regular things that comes with acquisitions. But in this quarter, we had fairly big numbers from the first accounting effects on PowerOne, which is one time and will go away. We also sold some old assets in an airport in South Africa for instance, which we had on the portfolio for a long time and we succeeded to get out of it, but it cost us some charges on the corporate side. And also on discontinued operations, we had to take a few charges from some old divestitures that we have. So all in all, this is the picture between operational EBITDA and net income. On the EPS side, we ended the year with 3 percent up in earnings per share, obviously negatively impacted by the charges we took. And if we look at the operational EPS, which we have reported since a couple of of earlier. We produced $2,600,000,000 free cash flow this year in line with 2012 and you can see over many years we have been on a relatively good level. On the debt side and cash, we have at the end of the year some $6,500,000,000 of cash resources available. We kept the net debt on the negative $1,500,000,000 roughly and this is after obviously paying the dividend and also making the M and A investments where Power 1 was the biggest ticket with about $1,000,000,000 This is leverage we should have. We'll have some more leverage, but it's basically fairly well balanced. On the maturity profile on the €8,000,000,000 of long term debt we have, it's a quite attractive profile with a long maturity. We made a lot of efforts in 2012 to take advantage of the low interest levels. So the the interest cost on this portfolio is very attractive. And finally, the equity has continued up in 2013 and this is obviously before we then make then to continue to support the growth mainly and firstly on the organic side. And Ulrich will shortly come back to talk more about how we now drive the new push for further organic growth. This is investments in capital expenditure, in R and D, in innovation and further driving the growth, but also the good returns of ABB. And there is no question that item number 1 gives the highest returns on investment. 2nd is to continue our dividend policy and drive the dividend up over time in a sustainable way. It's very close to our heart and we have continued that obviously in 2013. The third is to spend money on acquisitions. We have a good track record on the acquisitions we have done the 2 big ones which I have referred to and most of the others are also developing quite well. We do all those acquisitions only in a very disciplined way. We will make no crazy moves when comes to pricing or conditions around those acquisitions. We want to have good integration plans and make sure that we can take care of those acquisitions and create value for the shareholders. And finally, if we run out of ideas and we have too much cash, we will return it to the shareholders either as finally the dividend. The Board has decided to propose to the Annual General Meeting to increase again the dividend by 0 point 0 $2 to 0 point $0.02 to 0 point 7 $0 a share. That equals a 3% yield. It is in line with the cash flow free cash flow increase of about 3% as well as the net income increase of 3%. The Swiss shareholders will receive this in the same way as in the earlier years as a reduction of capital, which is a tax efficient way of distributing the money. And the whole trend over those years is that we're now on the 5th consecutive year of dividend increase. So with that, I would like to hand back to Uli again. Thank you very much, Erik. So let me just sum up the perspective on 2013 before we start talking about the next steps going forward. 2013 was a solid year. The team has delivered well as we have said. We're heading in 2014 in good shape. We have delivered growth. We have delivered on execution and the momentum is quite solid that we have especially on the execution side in the business. So how do we see the world? And how do we see the target and the expectation against our targets. If you look at the development of the world in the last couple of years and the expected development of the world throughout the planning cycle that we have given ourselves, 2011 to 2015, The rebound that was expected did not come out as strong as we thought. Alone in 20 13, the GDP growth of the world is about 1.5 points less than expected, which might sound not a lot, but it's about 1,000,000,000,000 dollars less growth that is out there. The investment decisions of our customers are a little bit more hesitant. Projects are delayed and you don't see that only on the ABB side. You also see it in the overall CapEx spending, which is about the delta in growth that we expected in over the planning cycle is 50% less on the CapEx growth than what was predicted not only by us but by experts at the beginning of this cycle when we put together the plan. That means also that our markets are being significantly we have given ourselves and I would like to take a bit of time to comment on one target specifically. In the first 150 days of being the CEO, I've met quite a couple of you, Eric and I were out there traveling, meeting a lot of you and there was one common feedback that the growth target that we have given ourselves was confusing and was not reflecting the like for like comparison that you would have liked to see. In the previous communication, we had a growth target of 7% to 10% and that included a part of Baldor Inventix and the feedback from you was please take that out and give me a proper like for like comparison. At the time when we announced the 7% to 10%, we had the like for like in a footnote and now we have refers it basically the 5.5% to 8.5% that you see here in terms of a like for like organic revenue growth target is the one that we already announced at the time when we came out of the target. At that time, it was in the footnote. In the future, we will use this as the main target to sure we are clear, we are transparent and you can easily follow-up on where we are going. Against that target, we have performed basically to the lower end of the range despite the significant lower CapEx growth and despite the significant lower market growth over the years until now. So the CAGR that you see here, the 5.3% is the CAGR from the start of the planning period until today end of 2013. In the EBITDA and on the free cash flow conversion, we are right on target. And that's something that I personally look at very, very closely. The margin and the cash needs to be in order in a business. And if that's in order, then you know from an execution perspective, you got a healthy business. We delivered on both of them and we are right in the target range that we have committed. The EPS growth driven by the 2012 and 13 hits that we had in Power Systems, we are not where we want to be with the 3% that we have here so far as a CAGR of the growth. The operational EPS, however, is 6%, which looks a little bit better, but we are no way fully confident comfortable with that one. The cash return on invested capital, at the time when we put together the target, there was the assumption that the acquisitive pattern would slow down. We have bought a little bit more. We have invested in PowerOne and therefore, we are quite happy with the 12 percent that we have despite a pretty acquisitive pattern in ABB. So that's the status check. This is where we are today. How does the world look going forward? Our market outlook has basically 2 elements. The long term outlook for ABB is good. It's really solid. If you look at the needs of the world on the power infrastructure side, the investments that will be coming, I'm very optimistic that our capabilities around reliable and efficient transmission and distribution offering will be in high demand by our customers. The same for the automation side, whether it's in the traditional markets to really make sure we are competitive we're helping companies to be competitive in the traditional markets or whether it's helping emerging players to improve their productivity, to improve their quality, there's long term a very good market out there and we are right positioned to take these opportunities. The short term outlook, however, is uncertain. We have some macro indicators that point towards a short cycle upswing and we have seen a short cycle upswing in some segments of the market, but it's too early to say there is certainty in this upswing everywhere yet. And on the long term, long cycle part of the hesitancy on decision making is still around. This is something that we have to deal with. This is something that we have to respect and get our house in order expecting that short term, the large infrastructure projects and the large investments on project side might still be subdued. So where does that lead us in terms of our top line development and where is ABB? In terms of the top line development, if you take the revenue trend, on the right side of this chart, you see a graph a symbolic graph for the revenue trends that we are seeing. From beginning of the planning cycle until today, a CAGR of about 5.3%. The remaining 2 years of the planning cycle, 2014 and 'fifteen, are characterized by the following drivers. A, we have a slower than expected macroeconomic development. I just showed you the fact around it. Secondly, we are going in 2014 with a €3,000,000,000 lower backlog than what we went into 2013 with. Thirdly, there is still delays in large project awards. The customers are hesitant to give this project out. And fourthly, we have started successfully the PS reset and it will take time until it's fully sell activity shows in signals of an improved order gross margin. It's too early to call it a full success, but we are in a good swing. So if we look at the growth trajectory here, we have a 5.5%, 5.3% CAGR until today. We're going to have a more moderate outlook for the next 2 years. And what it means in concrete terms is against the target of year in terms of revenue development and we expect 2015 to continue with the growth trajectory on the revenue side. That combined gives us a planning cycle over the full 5 years of 4% to 5%. That's the expectation that we have against the target over the planning cycle. The key drivers lower than expected economy and the PS situation that I've explained to you. A lot of our competitors would be happy to grow revenues at 4% to 5% in the CAGR. Naturally, it's clear we have the ambition to grow strongly in the long term future of ABB. Also when you look at it with the reset global economic development, the ambition level compared to the global economic growth is unchanged. So we are not taking down the ambition. The ambition leads just to a slightly lower CAGR in a market which is not developing as fast. The 2 key health indicators that we mentioned I mentioned before, the margin and the cash conversion, we have the clear expectation to stay within the margin bandwidth and the bandwidth for cash conversion that we have in our targets. On the EPS side, we will drive hard to get towards the 10% CAGR. And on the cash return on invested capital, given the more acquisitive pattern, our expectation is that we drive the C. Roy up to mid teen level by 2015. So these are the expectations against our targets. So we are not changing the targets, we are communicating to you our expectations towards this target that we have set for this planning cycle. Of you come and say, well, what is this company really about if you would have to describe it in a couple of sentences in a very simple way. And here we have put it together. Basically, products and technology that help with the automation of industrial plants. Both power and automation goes into 3 customer segments utilities, industry and transportation infrastructure. So there is quite a market out there for automation on the power side, power plant automation as an industry. And in the past, very often, some people confused the power offering with the utility customer space. We have a power offering that we sell in all segments into utilities, in the industry and also in the transport side. If you look at wayside electrification of the rail business, basically fixed infrastructure to provide power to the power lines of rail, that's also a power offering that we have. And given the nature of our global footprint, we do this all around the world and in every key market that we are active in, which are now more than 100 countries that we are active. So that's ABB in very simple terms, the what, the for whom and the where. Now let me run you through what these focus areas that we have defined mean for the ABB execution. And the focus is to drive stronger growth with a stronger focus on organic growth and to improve profitability of the business. And 2 key measures that will be much more in the a little bit and share with you what it really means and how we drive that and how do we go about it and where are we in the journey of ramping up the momentum. For us, profitable growth is around penetration. That means selling more of what we have to customers that we already serve somewhere. It's around innovation, having new value propositions for our customers, can be on the process side, can be on the product side and it's around expansion, going into new segments for ABB that we see as attractive and we see as value add for our customers and us. To get going in are, we conducted in the Q1 under my new leadership, we conducted a rigorous navigation check. And we said, so where do we stand in the key markets of the world? We took all business lines and all key countries and all business lines and all key industries and we met where we are in a very honest and transparent way. We challenged each other, we worked it through and on this traffic light slide here you see basically a conceptual picture how ABB has been assessed. Green means we are number 1 or 2 in the also helped us and we have spent quite a bit of time already together and we will spend much more time as a leadership team on all levels of ABB to prioritize and focus. To really say, okay, which of the yellow ones are we taking on? How are we taking them on? How do we place investments? In a certain market. Well, knowing this year, having it transferred on the table, in a certain market. Well, knowing this here, having it transferred on the table helps us to drive more collaboration. And we have a clear ambition to be number 1 or 2, that means green, in the segments that we focus on. These heat maps help us also to assess the portfolio quality overall. Where are we weak? Where do we need to add? And where should we maybe not play? You have seen us divesting the Gen Z business of Baldor. I mentioned that before. We got an airport out in South Africa in the Kruger National Park. That is not really a core business for us. We got that one out and we will develop the portfolio continuously by adding and by pruning it's appropriate. So let me give you some examples around profitable growth and bring a little bit more life into discussion and I will give you some penetration innovation and expansion and also say whether it's about a new offering, a new customer segment that we want to strengthen or geography where we want to do more. And here are the examples. We will not go through all of them, otherwise we would be sitting here until tomorrow morning and I know that you don't want to have that one. So let me take out some highlights. Localization of footprint, making sure we have a competitive offer locally designed based on local product management in key markets is a key differentiator of ABB. And Bernard and his team recently opened 2 new factories in emerging markets, factories in emerging markets, switchgear and transformers. These factories are producing locally designed to local demand product and they are being sold in the local market in line and based on our global manufacturing processes where we have the rigor, the execution, the quality assurance example for innovation, better doing An example for innovation, better doing more on the innovation side for growth is the use of DC technology in new fields. Wally Martin and his team together with Pekka have developed a ship electric propulsion solution for our ship. And the benefit for the customer is the propulsion set needs less space on the ship, so you can have more cargo and there's fuel efficiency of up to 20%. On a ship, more than half of the the will help us to drive growth by having attractive value propositions for our customers. You saw the press release hopefully this morning that we came out with on EV charging. Together with Daimler and Build Your Dreams in China, we will revolutionize the Chinese in China together with these partners. You have seen probably today the press release on the Daimler side. BYD had a press release. We coordinated it. All the 3 of us went out together. This will be thousands of chargers. Historically, the biggest charging network that we had was Netherlands with 220 chargers, 220, and now we are talking about 1,000 of them that we're going to do together with this partners. This is an expansion. This is a new segment. It's a new offering of ABB building on our strengths in power electronics where we have to scale in our drives business on the operational side and the supply chain side. We have the quality and we have now an additional segment head and we are clearly this is a breakthrough development, not only for ABB, but also for the world overall. Working with customers together will be a stronger element of ABB's future growth, even stronger than we have already. One good example is the collaboration that we have with Statoil on subsea technology development. Taking the platform subsea sea into 3,000 meters of depth, which is 600 kilometers out in the sea is a technological challenge. And between Stadhill and ourselves, we are investing about €100,000,000 over the next 5 years to really get this technology up to the maturity level that we can really install it at scale. If that's operational, a company like Statoil can save up to €500,000,000 of CapEx annually by replacing existing technology not with same technology with new subsea technology. We should not only always talk about large things, sometimes the small things for relevant. If you look at the moment in emerging markets, how many diesel gensets are being used to, for example, run irrigation pumps for water supply in farms, in remote areas, in emerging markets, that is something that is a quite common practice. And in India, we have now developed a set of basically a solar driven pump solution off grid where we help farmers to get the water out of the ground. It's a panel, it's an inverter, it is a drive and a pump that basically helps the farmer the farmer to pump the water out independent of diesel fuel and independent of the grid. The government of India was so impressed by that solution, which is really packaged and easy to install that they have subsidized this now. In the Q4 of last year, we have the first 500 already out and I expect many thousands to come over the next year, especially in emerging markets. Last example that I want to give you is an example of market expansion. I mentioned Africa before. Sub Sahara Africa is an opportunity for ABB. And we recently in the mine in a mine in Zambia, in the Kalumbila mine, we installed a substation and a complete power supply. This is the largest copper mine in Africa. ABB is powering it up with very reliable infrastructure and electricity supply. So you see there's tremendous growth opportunities out there. These are amongst well mapped in our heat maps and now we're going out and invest in them and drive relentlessly the performance improvement in these segments. The 2nd key focus area is around business led collaboration. This is about getting more value out of ABB for our customers by combining and bringing together the strengths of different pieces. Today, I want to show you 3 examples. 1 for package solutions, bringing the offering of different divisions together to serve a customer. The second one around account management, teaming up to serve an account globally. And thirdly, shared platforms on the operations side because we have not only collaboration opportunities towards customers, we have a lot of operations operational improvement opportunities within ABB. On the packaged solution, you have seen probably the press release a couple of weeks ago, we won a really great order up in Sweden, where we basically build a new high speed drain without building a new drain. The concept is the propulsion set, all the electronics is being ripped out of the existing tin box, which a drain basically is. We're putting the new technology in, which amongst others was proven in the upgrade of the ICE 1 high speed drain in Germany. We put that in there and the customer basically gets a new drain without having to spend the money on the tin box. On this project, Switzerland and Sweden, the different divisions have worked together in a fantastic way. I was up there together with the team signing the contract with the customer. It was great to see people from all over the ABB world working together across the different divisions to get this order for ABB. The second example is around account management. Look, food and beverage is an industry that we are penetrating and where we are working very strongly get more out of. Here's an example, it's Pepsi. In Pepsi, we have basically helped them to operate bottling plants. They have many of them more efficiently. And really, the target is here to reduce the electricity bill of the plant by up to 10%. Now if you run a bottling plant, the energy consumption is significant. The investment itself pays for itself in less than 2 years. So also for the CFO of Pepsi, this is a great value proposition. And the 3rd example that I want to use is a share platform example. I talked about Africa before, our joint operations in Longmeadows in South Africa where we basically host all the divisions, whether the common IT platform, common HR will be a model for future market penetration. From there, we are also hosting efforts to tap stronger Sub Saharan Africa. So this is a great model for us to get more synergies within ABB by operating smoother together. On cost, I've already talked about the traditional pattern of ABB and cost reduction before. Let me talk about a couple of new areas on cost reduction. We have committed to take 3% to 5% equivalent of cost of sales out of our cost base every year. And since 2008 when the crisis started, we have done this and we will do this going forward. We will not give up and we'll keep the momentum. And how can we keep the momentum by continuing what I showed before, but then by adding additional areas. One is white color kind of white color people. So can we free up resources for growth? Can we have more sales time focused on serving internal administration? Absolutely, yes. And this is what Bright Color Productivity is about. The second area that Eric has the responsibility for in ABB is have a stronger focus on cash management. Our inventory turns are today not where we want them to be. We want to drive this harder. We free up capital to make sure we use the capital for growth rather than having it locked up in our warehouses. And on integration, Greg will talk later on more about integration experience that we have now really not only gathered, but also institutionalized and personalized. This is an area where we will continue to deliver over the years to come. So just to pick one example on the white color productivity side, this is an example out of our robotics service world. As you know, our robot is a service intensive product that is being used in automotive and general industry. Historically, getting a service contract was a couple of weeks of work going back and forth with maintenance leader and says, look, here's the operating pattern. This would be the right service pattern that I would suggest to you, which is being supported by a configurator on the iPad. And if the maintenance leader says, yes, I'm very interesting, I would like to have a quote, he says, okay, how many days a week do you operate? He presses a button and he gets the result of it. He can do the quote there. And if the operator and maintenance leader wants, he can sign the contract there right away. Enormous amount of productivity gain and also a much better customer momentum. So, let me sum up the areas the focus areas. The navigation check is done. We have a systematic approach implemented. We have focused activities underway and we have the performance management established. And with these elements together, I'm very confident that we're going to deliver more value in the future. The global team is mobilized and is ready to deliver. And Tarak will now show you how penetration is being worked on in his business to give you a very concrete example what's happening now today as we speak. Over to you, Tarak. Thanks, Uli. Good afternoon, ladies and gentlemen. It's a pleasure for me to share with you what our low voltage products team is doing in terms of growing profitably in the market, penetrating the market with products and solutions and our partners, which are the distributors. Let me give you a little bit of a short history lesson on where we are from a low voltage voltage products perspective. If you remember, we started the journey in 2010 as a division. And over the last 4 years, we have taken this business as a collective team from 4.6 $7,000,000,000 roughly $1,000,000,000 of growth each year. Not only has the top line improved, but also we've been able to take the bottom up correspondingly from $900,000,000 to $1,400,000,000 What I'm particularly proud of that we have managed thanks to the Thomas and Betts acquisition is geographically balance the low voltage products business products business voltage products market. So as you can imagine a growth like this requires an organic component and an inorganic component. So let me walk you through what we are executing based on what Uli just described to you starting in the Q3 and then moving on for in the Q4 and into 2014. So you can imagine the top 15 markets for our business up there. We classify our customers into specific categories end users which use our products on a daily basis original equipment manufacturers that develop machinery equipment solutions for the end users, where they incorporate our products into the electrical protection and distribution system. Then you can imagine control product, control panel manufacturers, which you call panel builders or distribution equipment manufacturers and depends on which geography you're talking about. And all of these we serve through our distribution partners in different relationships we have worldwide. So as Uli mentioned before, green means we have a position of strength. We are in the top 2. So we map our 60 product lines, 115,000 to 130,000 SKUs globally into the 60 product lines and we map those 60 product lines' strength in each of these 15 markets by customer type and by our relationship with our distribution partners. And based on what we see as the inventory, we have put together a project 70 70 individual projects to grow. I will take you through a few of them, so you get a better idea of what do we mean. So the Xs represent a targeted attention on a specific customer type in a particular market with either a product, a solution or a distributor relationship that we will leverage to grow. And let me walk you through a few of those examples to give you a better feel for exactly how we're executing in the voltage products as a team in these markets to really penetrate the market in a profitable way from an organic perspective. So if you look, these are typically the products that you would imagine that we would use to grow the business. So what Ulrik mentioned before, we are very proud of the EMAX 2 circuit breaker, which actually acts as a power manager. So it actually helps with load shedding and managing the consumption of power and energy for our key customers. That product particularly has a great opportunity in Germany and U. S. To gain market share and allow us to grow organically. It's one of our best products in terms of the operational performance and we believe it is targeted in the right segments for growth. A second example I can share with you is customer for us. And this product was designed with the support from the German colleagues and the Chinese colleagues in the Genwe business, business, which we acquired about 3 years ago. And this product now in 2013 has won many design awards, has been one of the fastest growing products we have in China in terms of year on year growth. So these are just two illustrative examples of how particular products targeted on a specific geography to a particular set of customers result in a significant amount of growth for us on the organic basis. The last one you see is the Smiths line socket system. It's particularly designed for critical power applications hospitals, data centers that allow you to on a hot basis, on a touch safe basis add electrical circuits and remove electrical circuits. And that you can do while the electrical system is operating in the hospital or in a data center. And you can realize the value of having a very high uptime in those particular products in these segments, which are of extreme interest. If you move from products to solutions, here is a solar offer. Solar solutions offer from a product point of view all these products of ABB work together. We put them in a package that we deploy on a global basis to a distributor partners. And the goal of an offer like this is to be global and provide a solution for people who are doing commercial scale solar power plants almost anywhere in the world. This business has grown extremely well for us in the last 2 to 3 years. I'm very pleased to see that we have been able to replicate the model not just in one geography, which was Europe to start with, but this is also extremely successful for us in the United States, also in India and particularly very strong performance in China in the Q4 for us in 2013. So we're offering this across the world and it gives us a great leverage from an organic growth point of view. If you move on from product solutions to our distribution partners, you remember with the Thomas and Betts acquisition, we got great access to distributors and the Thomas and Betts relationship with distributors. That relationship now is being leveraged to pull through with the Thomas and Betts team running our business in United States, they're helping us pull through the ABB low voltage products in North America. Correspondingly, our strong relationships in China, in Western Europe, we are using those relationships to pull the Thomas and Betts products through our distribution partners see countries where we have invested actually in a different way to partner with distribution channel partners. See countries where we have invested actually in a different way to partner with distribution partners channel partners. There we have put 4 100 salespeople out on the street. The idea is to create demand, generate the value propositions for the local markets that convince the end customers that we were just talking about to use our products. And then we service that demand from a logistics perspective through our perspective through our distribution partners in order to deliver the kind of performance that allows us to scale up very quickly in a geography using a distribution partner relationships that we have. So these are three examples of how we leverage what Uli just talked about, do an inventory, take a focused effort, figure out exactly where we want to dedicate our resources either on a product side, on a solution side, or a partnership side. And in many of these examples, because we have a common view, thanks to the view of pie across the different divisions, we're able to compare notes between business segments within ABB and say, okay, in this particular market, if you have a strong distributor relationship, Pekka why don't I help you sell some more of your products in that market, because we're able to work together, team together. It's the common view that allows us to collaborate at a business level. And I'd like to hand it over to Greg who can probably go through a little bit more in detail what does business led collaboration mean. So with that, I thank you for your time and hand it over to Greg. Thank you. A That could be looking at it externally with our customers and saying how do we grow, how do we deliver even more value to our customers or to our shareholders in terms of greater growth, better returns. So what I'll do is walk you through a couple of areas now and maybe talk a little bit about how we go about business led collaboration within the management team and across the company. And we really break it down into 3 areas. 1, it's the spirit of really working naturally together. Tarek hit on it when we find opportunities to collaborate where we can help each other, how do we do that to create more growth. We look at our customers' needs and make sure that our organization is not a limitation to getting the right solutions in front of the customers, selling products as bundles, bundles, packages. When you look at the objectives here, it's really to drive that cross BU and cross division interface tasked the EC members to take these different areas tasked the EC members to take these different areas of business led collaboration and really drive it and lead by example. In my case, it's in the area of service and also integration. How do we bring companies in, collaborate with acquired companies to create even more value together. And really the underlying cornerstones are to take this learning in these examples and really drive a collaboration process that is really permeated across the whole company and we can take it not only on a global basis, but in our local countries, in our local businesses. So let's take a look at 2 areas where we're doing exactly this and talk a little bit more about how we're doing it and what we expect to get. The first would be in the area of service and service and integration are really the ones that I want to go into more deeply. In service, about 2.5 years ago, we kicked off a service strategy. And with that, we set a goal to say that we can grow our service business even faster than the group in total. We thought this would be very good not only for us financially because our service margins exceed that of the group. We thought this would be good from a customer standpoint because our value proposition with our customers is really a long term commitment to our customers. Our customers are making investments in buying our products and systems and services that are 20, 30, 40 year investments. And it's really important for a supplier like ABB to be there along the entire lifecycle of that investment, so that we can not only help them install, we can help them maintain, we can train new people as they come on, we can refurbish and we can upgrade that equipment. And that's a great revenue stream for us and we wanted to get even better at doing that. So as we kicked that off 2 point 5 years ago, we found that we are generating that momentum, that additional growth, but we also have found is the installed base is a huge opportunity for us. We've identified around the world $300,000,000,000 of actively running products, systems, software that's out there in industry. When we talked about who we are from the grid all the way through to the factory, on those grids, in those factories, dollars 300,000,000,000 worth of equipment. And so with that now, we've cataloged where does it sit. Over the last 4 or 5 years, we've built an internal database of which customers have which equipment and where are they. And we have about 200,000,000,000 of that 300,000,000,000 dollars now catalog to know where they sit by address, what type of equipment, GPS coordinates and that allows us to work that installed base and really mine that for additional revenue growth. Today, we think we're capturing a little better than 25% of the annual opportunity on that. We like to take that to a higher level where we could capture about 40% of that installed base opportunity as an annual annuity that comes in. So how have we gone about that? We've gone across the entire organization and we found the best practices and we've looked at those to say which ones can we productize as service products. We've done in each of the 5 divisions very collaboratively working across. We've done it out in the countries to say which countries have those great innovative ideas, how do we catalog those, how hadn't seen it before. And this is really the engine behind how we're driving that hadn't seen it before? And this is really the engine behind how we're driving that growth. In addition, what we've done is we've added additional people to cover that installed base, service sales, dedicated service sales people, service engineers that can go out and be there not only for reactive service, but proactive service to go out and work with customers, talk about how we can help them stretch their assets and get greater return. So we went about this 2 years ago with launching what we called how to win. Sure, it was about adding more service sales and you see that on the vertical dimension. It was adding more product management with the 400 product managers, but it was also about how do you grow a service business culturally? How do you put the right building blocks inside the business division by division, business unit by business unit and really continue a journey to drive a culture around service. And that's what you see here in each of these boxes are different elements of what makes a successful service business and we simply call these how to wins. These have been rolled out now. We took the first set of countries on wave I, 2 years ago, the 2nd set which covers now 50 countries in the last year, and we think this is going to give us the ongoing momentum in terms of how we collaborate and bring ABB together for our customers to drive even more growth. So let me take the next example of what is under way on business led collaboration, and I think it's an excellent one for us to talk about here today. It's acquisitions and the post merger integration. This is very much about driving growth, their own, bring them inside ABB and create an even better company together than what we had before we started. And so having been personally involved with this, being the integration manager on Valdor, working closely with the DM division with ULE, having been personally involved on TMB, on Thomas and Betts being the integration manager, working closely together with Tarek. What we've done is taken all those experiences that we've had over the last 4 or 5 years as we've bought companies, large, medium, small and take that as learning. And how do we start to break it down now and create the next level of excellence in terms of how we do integration? The things that can drive an institutional know how so that we can take people that are strong and leaders and have great capability, but also put them through the things that we've learned, so we don't have to do this 1 by 1, because there is fantastic work that's going on here. And of course, every acquisition is slightly different, but there aligning at the time of the due diligence to make sure that aligning at the time of the due diligence to make sure that you know what you're buying and why you're buying it and you start to think ahead of how you're going to integrate the company. And so that's really the beginning. And we take it through retaining, really creating a space for the new company's management team not only to breathe, but to thrive inside ABB and to really feel connected to a new company as strongly as they felt connected to the company that they were with at the Time acquisition. To support those teams really encourage when we talked about Ballador adding some automation, adding some capital, doing the things to help them grow and we've done that over and over. Enhance, now we have to look for the cost synergies. How do we do that in a smart way? Sure, at the time of alignment, we had a business plan, but now engage the team together and say, here are our assumptions. Do you have ideas that could make this even stronger? What should we do together driving out cost in supply chain, overhead G and A, but the best good ideas of what we could do, we grab those ideas. Also, the best practices can come from either side, either the owner, ABB, or the acquired company. Creating this culture is very unique, and I think it's a real differentiator for ABB. Because if you look at ABB, we're in many places around the world and we're extremely multicultural. Why not take that same respect and cooperation that we have within the company and apply how we do things, a lot of it has to do with penetrating deeper into markets. Tarek has a great example in TMB. TMB is helping in the U. S. And in Canada and Mexico in a great way with Tarek's business. Let's have that same help when we go to China, where we have 20,000 people in ABB. And I think TMB had a couple of dozen. And we say, okay, now what can you do when you bring ABB and TMB together in China to get that growth? And that's really the growth plans and of course implement. But it's implement not just to create results, it's implement to have credibility. You're building trust when you bring companies together and it's the say do ratio of what we commit to and what we deliver in terms of how we work we basis and coming back to make sure we're on track. So with that, let me summarize 2 key points. 1 is business led collaboration is alive and well, and I think it's unlocking huge opportunities for us to go to the next level inside the company. And I think number 2, this will drive additional value as we continue to do this and build upon the concepts that you see here. So thank you very much. Let me turn it back over to Uli. Thank you very much, Greg. So in the last two examples, we wanted to demonstrate you what this focus area as an action really mean and that we're really living it every day. We have changed the pattern of ABB. We're working differently together, building on what has worked very well in the past, taking it to the next level of performance and really make sure that out of collaboration, out of the next level of execution and profitable growth, we can drive more value creation. So to sum up, let me just share with you what we expected today and what will come. Today, we shared with you where we are in the year, what the quarter results were, the expectations against our 2011 to 2015 targets that we are not changing. We are telling you the expectations against these targets and the three focus areas in actions. We have embarked now that we have kicked off the three focus areas. We have embarked on the journey to formulating the ABB long term strategy. And when we are together in September at the Capital Markets Day, we're going to give you the comprehensive strategic outlook of the ABB of the future long term beyond the current planning cycle. So to sum up, today ABB has delivered a solid year. We have executed well. We took cost out. We have grown revenue to an all time high. The team is working extremely well together. The leadership transitions have been done in a very smooth way. We are facing an interesting market environment where the long term times and deliver continuously value. The priorities are clear. The team is ready to act and we are committed to deliver more value to our shareholders in 2014. Thank you very much for your 2014. Thank you very much for your audience. And now I hand over to Alana to manage us in the Q and A session. Okay. Just a few couple of rules before we actually start. We'll take some questions here from the room and then we'll take a couple that are on the call right now. Please do not ask a question until you have a mic in your hand, so that everyone on the phone can actually hear you. We have 2 people on either side here with a mic. If you have a question and you're on the Internet or on the webcast, there are instructions on the side as to how you can ask to be put into the queue. So with that, we start with the first question. Andreas? And please when you start can you say your name and the company you're from so that everyone on the phone can actually hear you? Yes. Thank you very much Andreas Willi, JPMorgan. First question on your comment on the outlook. You said it's a challenging year for revenue growth. Do you expect to make progress on the underlying EBITDA margin excluding the charge of 13% and to what degree do investments for the growth focus impact or not impact 2014 in terms of sales or R and D you may plan to increase? And the second one on the larger orders, the customer hesitant. At the Q3 results, you kind of indicate that you would expect that to kind of reverse or start to come through in 2014. What's your view now? Is this first half, second half year event in terms of some of these large order bookings you have been waiting for? Thank you. Okay. Before I get started on TRY-five done my navigation check right, happy birthday and all the best to you. In terms of the outlook for revenue growth that we have given you, look, the CAGR that we have formulated is 4% to 5% over the planning That is including the previous years in 2014 2015. If you look at a business that has a €3,000,000,000 lower backlog compared to the previous year and if you have a business where the large order intake is still slow, we cannot expect a huge revenue growth in 2014. However, we are optimistic that with all the efforts that we are taking now on creating additional orders, we will get back to the revenue growth trajectory in 2015. So that's the pattern that you can expect in that context. On the EBITDA side, we have committed to stay within the range and work on that one continuously. The one offs. And if that all comes through, is there room for upside potential? Yes. Am I committing to deliberate on it? No. Today, this is what we will report on throughout the year. That was the first second point. The third point on the investment pattern and the investment focus, look, the long term strategy of ABB at the moment to become stronger and stay a leader in power and automation is unchanged. The heat maps help us really to identify their areas for growth. Now the first priority as Eric has laid out is organic growth and we will fuel this organic growth. It can be investment in salespeople, can be investment in marketing intelligence, it can be investment in local product management, it can be investment on the service side, it can be investment in CapEx in certain areas. So we have a clear path now and we have clear priorities defined how we allocate the capital, how we allocate the time to really make sure that we get the biggest possible result out of our investments there. On the order side, let me hand over to Erik. You want to take a hit at that point? Yes. So on the larger orders and the pattern, if I understood your question correctly Andreas, we have still a big tender log mainly in power, but also increasingly so on the automation side. But the awards of those projects is as low as it has been in the earlier quarters. So it's hard to predict when that will tick up. But for sure we see that there should be a bigger award of projects in 20 14 than in 2013 from what we see today. How much we will be able to get out of that we will see when we get to the specific tenders, but the activity is high. Michael? Sorry, Ruth is coming right here. Michael Hartmann at HSBC. If you look at what you've been talking about today, if you look at penetration and expansion and operational excellence or relentless execution as you call it, none of that is new. We've been hearing that for about 15 years in various guises. Your competitors are doing the same. So what are the 1 or 2 key attributes in your value proposition? And or what are the 1 or 2 key competitive advantages, which actually allow all of those initiatives to lead to higher profitability? I think the one is on the growth side. We do it together as a team. So we really sit down as an executive committee. We have a monthly growth board where we bring all the perspectives in and then we discuss where should ABB focus on and we help each other with our experiences. We jointly define where we should focus on. We discuss large innovation projects jointly and see how do we kind of run that. On expansion moves and acquisitions we go through jointly. So I think that's one of the differentiators in the term. The second one on the execution side, I think we do it better than most others to be I don't want to arrogant here, but if you look at the track record of cost reduction since 2008, every year relentlessly taking out the cost. Last quarter again €350,000,000 that's basically where you can set the clock and we have a good process going. We are continuously also expanding the scope of this cost reduction exercises and we do the the scope of this cost reduction exercises. And we do it in a smooth way with our business interruption. We don't have large layoff programs where we problems with the unions at a large scale. We don't have business interruption from a quality side. We are really running that in a relentless way. And I would call this 2 of the key differentiators. So the teamwork and the way how we implement these activities clearly differentiates us from others. Let's take one from the left hand side here. Good afternoon. It's Andrew Carter from Royal Bank of Canada. I had 3 questions, please. The first one was just looking at the backlog and obviously that's down 10% year on year. I wondered if you could actually give us an idea as to what the number would be if it didn't include Power Systems perhaps, obviously, because you decided to walk away from some orders there. It might give us a better feel for what the other businesses are going to do. The next question was just on the base order trends. And I think when you were presenting, you suggested that the number that you gave for Q4, the I think the 4% growth was adjusted for PowerOne. And I think the number is unchanged from what you presented last quarter, which you said had got didn't adjust for Power 1. I just wanted to make sure that there was that those numbers were like for like and consistent and that we could be confident about that being an organic growth in the final quarter. And just sort of really carrying on with base orders, would you mind just sort of running through what you're seeing on a geographic basis in terms of base orders? Because I think that would be quite useful. Okay. Look, if you allow me, I will take the last one first and then hand over to Erik for the 2 other ones. If you go around the world at the moment, it's a really interesting situation. Take for example Japan. We see in Japan a ramp up of our own orders and we see a Japan a ramp up of our own orders and we see a ramp up of our business activities there which is really great. The reason for that is great. It was the very unfortunate incidents around Fukushima. But Japan is investing in infrastructure side and we see good business coming out of that one. They're also rebuilding some automation and we are participating in that one. Korea is another one. In Asia that we are quite happy with the development. There is quite a strong partnership between the local team. Valimati has their strong business in Korea serving the customers very well. India, at the moment, they are waiting for the elections, which come in May. So we have to see at the moment investment is a little bit moderate and that's something that we also see. In the China side, the automation piece on China side automation base orders are really coming up and we are grateful to that. But I think we are pretty well positioned. Mind you also, our robotics business is being reported under base orders, which is growing very well in the trend of more qualitative growth in China. If I go then to the Americas, in Brazil, at the moment, there is really not the momentum anymore that we saw a couple of years ago and it will probably take a little bit more until it comes fully back. I'm in Brazil in a couple of weeks' time. We're opening a new factory there, and we're still committed to the investments in that market. In North America, in the U. S, the more towards OpEx the order goes and the more towards consumables the order goes, the better the momentum is. On the power infrastructure side, we don't see yet a large momentum. We see good tender backlog. And if you go then on the automation side, automation side, on the large process investments, there's a lot of process capacity being built or being initiated at the moment in North America. It takes a while until we get the orders there, but that's the picture there. Then you go over to Europe. We had a really good year in Germany, which is the largest European economy and that has grown quite well. And I expect that our very good positioning there, also the employer positioning, the way we work on the channel, the way we bring new products out is really good results. In Spain, parts of the markets have picked up again. So we are cautiously optimistic on that one. So there are just a couple of snippets. If you take 3 steps back, you would say, the more OpEx oriented the spend is, the more likely is that we get growth going, the more large CapEx and up the value chain it is, the more hesitant customers are. So with that said, I hand over to Eric on the order trends and the dollars comes from Power Systems. So the other divisions including Process Automation also has a reduction in the backlog. So if you refer that to a 10%, you can say that 2 thirds come from Power Systems and the rest come from the other divisions. Obviously, in the product divisions in low voltage and to a large extent in DM, the numbers of the backlog are not that big, because it's a higher turn rate on the backlog to orders. On the base order trend, you are correct that the 4% includes the effect of Power 1 in both quarters, but it's not a major effect on the number. Okay. I think Martin? You. It's Martin Bilkey from Deutsche Bank. A couple of questions. Firstly on Power Systems, you comment that you like the underlying quality of the business. And so given what we saw obviously a few weeks ago when you talked about some of these problematic contracts, does that mean that the reset that you did last year stepping away from these EPC contracts, is that the only stepping away from businesses in Power Systems that we should expect you to do? So essentially what you have now is what you intend to continue with? And the second question relates to that across power more generally, so including power products. You showed us a heat map with the greens, reds and yellows in terms of businesses where you're 1 or 2 or lower and that might be used for divestments. As part of that, do you also think about where those businesses might be 5 years from now in terms of competitive dynamic and pricing? And is a similar process going on around that? Thank you. Thank you, Martin. I think the two excellent questions. On the Power Systems division, look we have delivered 5% margin this year despite the setbacks that we had. So a lot of EPC companies would be very happy or a lot of system companies would be very happy to have 5% and you deliver that because you got your house in order in quite large parts of the business. If you look at the HVDC Subsea Connections that we have delivered, great execution of the team, on time, on budget, customers happy and there's a lot of business out there. If you look at the way the global power grid is developing, distance becomes one of the key issues. And we are the company that can help lift the distance. If you have a renewable plant, a wind large wind power plant in Northeast of Japan and you have the power consumption in the be ABB. If you go to the U. S. On some of the large power connection taking hydropower down to New York, if you look over in Russia, if you look here in Europe, in Europe, today's tremendous amount of opportunities around long distance and we are the right guys to for long distance power transmission at very high voltage level with good technology, but highly reliable and low losses. So this is a business, I like it and I think we should continue to invest in and go in that. The specific issues around offshore wind, we have entered that market a couple of years ago because we are committed to help the world to develop a stronger renewable energy pattern. So in that, it is a start up technology that was started a couple of years ago. And unfortunately, the ticket that you have in the start up technology is not $5 it is $500,000,000 or $1,000,000,000 We learn on it. We have become much, much better in understanding the key requirements there. And this is something when you start to have that, we're getting better at that. From a portfolio perspective, low value add EPC contracts where we don't pull through anything for ABB and just do a little bit of construction for somebody. That's not our business. And we have really in the reset exited the most of the activities there and we will continue to do so. The offshore wind, we get that better and better established and the operational process are becoming better, the technologies mature. For example, how do you build this platform out there? Do you check it up with a grain or do you get a floating platform where you take at the very end the air out and let it drop on the ground and then it sits there? There are different risk profiles in that one and we have had some very good learnings around that. Now on the portfolio, look, different aggregate levels, you can do that for power overall and say how are we positioned. And I mentioned Sub Sahara Africa before. That's one where the heat map shows very clearly that we have tremendous opportunities and we should invest there. And we're investing now. Bernard is investing. Claudio is investing down there. Valimati and Pekka are driving that. Doing this together and mitigating the risk of entering a new market subscale, getting rather coordinated in there as ABB will help us to have a higher investing in certain pieces that might have been a surprise. The investment in PowerOne, a lot of people said, why do you go into that? And that's exactly one of these 5 year decisions or 5 to 10 year decision where we said, okay, at the market at the moment the market is down, great opportunity to buy a good asset, to integrate it. And when the market comes back, then we are well positioned with a number 2 position. So yes, absolutely, we're doing it that way, Martin. Okay. We're going to take 2 calls or 2 questions from the, I guess, conference call. First one? The first question from the phone is from Mr. Simon Tonneson from Credit Suisse. Please go ahead, sir. Yeah. Good afternoon, everybody. My first question is on with regards to your organic revenue growth targets. I still find this quite confusing why you're still sticking to the target of 5.5% to 8.5% growth when you actually do expect 4% to 5% over the period and particularly that you've given that you don't provide any more of the organic growth numbers on a divisional basis. But more specifically, I'm interested in on the basis that your organic sales growth in 2014 looks slower, let's call it low single digits, what kind of order intake or maybe even book to bill do you need to see in 2014 to get to your revenue expectations that is currently implied for fiscal 2015? The second question is, maybe Eric, could you give a bit more color around cost savings expectations for 2014? Is it okay if we model sort of the SEK1.2 billion that we've seen now in SEK13 billion going forward? And should we expect pricing pressure to remain at the levels that we've seen, I. E. Model in the bridge a similar net savings amount for the quarters? And then lastly on free cash flow guidance for 'fourteen, maybe you could I mean you talked quite a bit about net working capital expectations historic range. There were some press articles stating that you're looking potentially into divestments of non core businesses. Is that something you consider going forward? And I mean, in that regard, you talked about in terms of capital allocation about special dividends or potentially buybacks, which is something that is new. Which ones would you prefer? And given that if you continue to flag at least historically that the M and I pipeline looks good, is it ever likely that we could see ABB doing a share buyback? Thanks. Okay. Thank you very much, Simon. I'll take the last one and the first one and leave the others to Erik. Let me start on the last one on the divestment and acquisition pattern of ABB. Look, we will develop this portfolio going forward. That's our job. That's the job of a good leader to take a portfolio and continuously develop it. That means we will expand the add new attractive segments be it a customer segment being new technology and we will keep doing that. But what we will also do is we will regularly look at the portfolio and say what does not fit into the direction or the current situation of ABB anymore. We have done that in the past. We have done it in the last couple of quarters and we will do this in the future. And at the moment, when there is time something to announce, we're going to talk about more details. On the use of the cash, look, I love to grow this company and I think the best one be if we reinvest. The good news is with all the work that we have done on the navigation check, we see tremendous opportunities to invest low risk, high return investment if you do it right. The service piece that Greg has laid out is a very attractive one and we will keep investing in service in a very strong way. You will see us really continuing to push it and we will also make acquisitions to continuously expand portfolio. So there is quite a lot of opportunity to spend or invest the capital that we are creating. And if we would run out of ideas on the organic growth side, if we would run out of the ideas on acquisitions and if we would have served the shareholders with the right dividend, then we would absolutely consider share buybacks, but that would be the 4th priority and this is because if you would have issued new targets today, then you would have said why do you issue new targets in September again. Given the pattern that we wanted to give you an update today and really issue targets, long term targets in September, we decided that we go now with our expectations. We share with you where are we against the targets that were defined a couple of years ago. And in September, we will then issue the long term targets for ABB, both in terms of the quality of the targets and the quantification and the ambition level against these targets. Now on the organic sales growth, to give you a little bit more flavor, I think you caught it right. The backlog going into 2014 is lower than the previous year's backlog. That means we need to work really hard to get additional orders. This is what we are doing. The PIE approach has helped us to really focus and identify opportunities. This is not a one off exercise. This is continuous work where basically now every country, every business unit is working on. And when you travel around the world in ABB countries, you find now basically in every office, somebody working somewhere on a heat map, which is great because it really helps to allocate the funds and resources. We need to have a good book to bill in 2014 and we need to have a good emphasis and good delivery on the short cycle business, and then we will be in line with the expectation of 4% to 5% CAGR of the cycle that we have communicated before. With that, I hand over to Erik on the other two questions. Yes. So you also asked about the divisional targets and they are in the pack. We didn't have them in the presentation today, but they are in the pack which is on the web. So we continue to disclose the divisional targets as well as the achievement against those targets until end of 2013. On the cost saving, the guidance remained the same as we have had in the earlier years 3% to 5% of cost of sales. It is a wide band, but that's what we guide to. And the achievement in 2013 is somewhere in the middle of the band. So that's where we stand. The pricing pressure continues. Many areas of ABB there is a slight constant pricing pressure and we will have to live with that. And the cost savings is the main lever to counter those price pressures. On the free cash flow, yes, we expect to have an improvement in free cash flow this year, partly from the efforts on net working capital and also obviously seeing a year without as big charges as we have had for the Power Division Power Systems Division. And when it comes to the non core divestments, if they will come, we will announce them when they come like we did last year with the Genset business in the U. S. Those will impact the balance sheet if we get cash back which obviously improves our financial position. But we don't see them as a core part of the free cash flow communication and guidance. Okay. Next question from the conference call. The next question is from Mr. James Moore from Redburn Partners. Please go ahead. Good afternoon, everyone. Thanks for taking the questions. I have 2. One on the PS margin and one on the organic sales growth. On the PS margin, if PS sees a €1,000,000,000 or €2,000,000,000 revenue decline in 2014 from the reset, won't fixed cost absorption knock the EBITDA margin down to well below 9%. I'm thinking this because nearly half of PS revenues are product based grid systems and network automation. And I know you've walked away from the 9%, but could you say if you're confident of reaching say a 7% operational EBITDA margin in 2014? The second question is on organic sales growth. Can I pick you up on your organic sales growth transparency? Because neither the 5.3% status check nor the 5% FY FY 2013 are actually organic numbers. You've not stripped out the 1,000,000,000. But you have committed to stripping out acquisitions over €50,000,000 in €11,000,000 and again today on page 35 in your targets. And you say it's not a major effect, Eric, but I calculate it's about 1% of sales for 13% and over 2% to the quarter and even 8% to 9% to DM in the quarter. So please let me have the actual correct 2013 organic sales growth and the correct 3 year status growth compared with the target. PES one first. If you look at the PES situation, the PES one first. If you look at the PES situation, we have clearly communicated in a conference call a couple of weeks ago that we aim towards the 9% to 12% margin range. That's what we said and that's what we will continue to work on. Now when you have a business where you have a lower order intake and where you might have a negative development in parts of the portfolio on the revenue side, then you need to manage the cost and we have done that very successfully in the past and we will take the right measures to manage the PS situation close as possible to to 12% margin over the remainder of the planning cycle. With that, I turn over to Erik on the organic sales growth side. Yes. Thank you for the question, James. The 5.3% accumulated CAGR for the 1st 3 years of strategic planning period is on like for like basis. There the acquisitions are out and we are committed to report that with acquisitions out except for the very minor acquisitions. The 4% on base order growth in the 4th quarter includes the effect of Power Systems. That's the way we have reported the quarters earlier this year and we stay with the same pattern on the quarterly reporting. Power Systems. Sorry Power 1, sorry. Excuse me that is obviously Power 1 and not Power Systems. Okay. With that I'm going to take one of the questions that we got in over the 13 earnings base that includes and excludes the 260 win charge? Or is it based on something else? The CAGR. The CAGR of the Okay. What is the base year? The base for the EPS is the EPS of $20.10 on the basic side. And we have then for the 1st 3 years a 3% increase on the basic EPS. And the basic EPS includes everything. That is the bottom line you see there including all the charges whichever year you look at. We have also shown you in the same table a 6% CAGR on operational EPS. Operational EPS excludes restructuring and some of the one time charges that are below the line. That starts from a higher base in 2010 obviously, because it is a like for like comparison with the same definition. But that is up by 6%. Okay. We take a question here Olivier and then Daniel and Athena. Can you give Daniel? Yes. Olivier, it's no accident. Three questions please. First one on Power Product. It was never really a guidance official, but you were sort of guiding last year about 14.5 percent to 15 percent EBITDA margin range quite precise for that division. Is that still valid going forward? Or actually do we get some improvement because of pricing being not as bad as before? Just to have your view on that. Secondly, on the issue of how the large order translate into sales. So right now we have projects above $15,000,000 of sales which are about 12% of orders for 2013. What is it for sales? Would be my second question. You can help us assess the downward risk. And maybe the last question. When you answered previously on the guidance, you said you're going to update us in September now. What actually leads you to be willing to wait until September? Is there something specific you want to check out there before updating us? I mean Okay. Because you could have done it now basically. So that's my first question. Thank you. No. Look, let me take the last question first on the September piece. We need to do homework to develop the long term strategy of ABB. That's a team effort and we're going to take our time at the moment. There is no reason to be nervous about what we're doing at the moment. Developing the long term strategy many years out for ABB, I want to do this together with the team and we're going to take the time. We took the Q1 to do navigation check and get going. Now we are implementing the focus areas and we get the momentum going. And in parallel to that, we are embarking now on the strategy exercise and we plan to give you the plan then in September. On the Power Products piece, look, on the Power Products guidance, the official guidance is 14% to 20 percent EBITDA margin and or the target that stays unchanged. Bernhard and his team have done an absolutely wonderful job over the last couple of years to navigate this business. Some of you were very nervous about price pressure that was addressed with very good execution, new technologies because it's not only cost cutting, it's also new technologies that really help us to differentiate with the customers. And I will not continue giving you a guidance on 0.5% margin bandwidth. But what we will do is we will work relentlessly to keep the strong focus on Power Products and making it continuously a better business. That means we want to grow it and we want to grow it profitably within the bandwidth that we have given. Eric, you take the large order piece? Yeah. So large orders, you are right everything above $50,000,000 are large orders. It's about 12% in 2013. Given that it has been a higher share earlier, it is likely also higher share in sales. But we are not tracking add to the question add to the question on the targets. The targets remain the same. We set targets from 11% to 15% and that's why we are not changing those targets. That's the target that we set. And what we do we guide you with expectation where we will end up. And what we're going to do in September is for a period beyond 20 15. We will see exactly how far it will go. But that's the new set of targets that is valid for the longer term. So for us it is a very clear logic in how we do it. Hi, Sebastien Routier from Societe Generale. Two questions on the target understand that revenues from these large orders will go down next year or this year in 2014. What's your plan for 2015? You expect to catch up fully that decline? Or do you still see the large the revenues from the large orders being down in 2015 again? 2nd question would be on the EPS growth target of 10% on the 10% CAGR. If I calculate you have you forecast about 3%, 4% top line growth on average for 2014, 2015. If I exclude the chart you have in 2013 that's about 15% CAGR expected for 2014 and 15% at the EPS level. So a much stronger growth at the EPS line than at the top line. So some margin gains I presume here. And I would like to know if it's like the revenues back end loaded towards 15% this earnings growth? And final question on the heat map. Could you share with us how much of the group portfolio is green, yellow, red and gray? And where do you want to be in 5 years' time, let's say? Okay. I can start with the last one. That's a very easy answer. No. But I can give you the clear hint that there is enough yellow and red to keep us busy over the next couple of years. And that's all I'm going to say about that one. On the EPS growth, if you look at it, we had 2012 2013 some special impacts, as you know, as you are well aware. We have 2014 a year. I said in terms of revenue, it will be a challenging year. In 2015, we want to be back at the growth trajectory. And that means clearly back at the profitable growth trajectory. So your assumption that it's more back end loaded is probably correct. On the targets, I'll let Harry comment. Do you want to take that one? Yes. On the large orders. Yes. Yes. So the large orders obviously come in big chunks and it is not so that the large order in 2013 would generate the revenues in 2014 necessarily. It all depends on the timing and the loading in the factories. A large cable order could be taken 2013 for delivery in 2016 or 2017. So it all depends on how this backlog times out. But it is equally clear as you say that we expect to have more large orders in 2014 and that will be needed for the continued growth into the future. But it is not so predictable and that's why I also will avoid to talk about how much revenues we have in large orders, because it's extremely difficult to track that on a consolidated basis. Obviously order for order you can do it easily. But on a consolidated basis that is meaningful to you to listen to. One more here in the room before we take the call. Good evening. Alessandro Foletti, Banca Bergu. Just a very simple question. Your growth targets for the service business, can you I imagine you have given to your internal team a growth target. Can you share with us more or less the range of that target? No. No, the growth ambition that we have is to grow the service activities faster than the rest of the portfolio. And we're going to stick that. We have delivered on that the last couple of years. If you look at the service growth in the last quarter, you see a really nice pickup in all the initiatives that Greg has mentioned that we have out there. The investments in salespeople and the platform has really paid off nicely. And we will continue to grow faster in service than the rest of the portfolio. How much faster we will not guide. All right. All right. You don't want to say that. Okay. Can we take one from the webcast? The conference call. Next question from the phone is from Mrs. Daniela Costa, Goldman Sachs. Please go ahead. Thank you. Good afternoon. Two questions two quick questions. One, I noticed that you did a small acquisition on the building given your views there. And if so, given there are some large some of your competitors are quite large in the field, how do you plan to expand there? And then second, just wondering on your return targets on the Croix targets, it came down this year. Is that entirely due to the Power 1 deal or to M and A in general? What would have been the trajectory? Where would you have been if you hadn't done M and A this year? Would it have been have improved then and by how much? Thank you. Yes. Look, I'll let Tarak answer the first question in a minute. Just some comments in general. I showed before what ABB is really about. It's about power and automation for utilities, infrastructure utility industries and transport and infrastructure. Buildings is a part of infrastructure. And yes, absolutely, there's an automation space out there. We're already active in it and we want to do more. And Tarak will now comment a little bit more on that one. Yes. Thanks, Uli. As Uli said, we have a building automation business that's not that small. And the acquisition of Neuron allows us to really combine our actuation building automation business with software. We're combining hardware and software with Neuron acquisition. We have to see how from a business model point of view, we operate in the building automation space as you said correctly. The big automation players are extremely big. At this point, we want to understand the market first, see how the hardware and software work together in a way that's a little bit different than the current solutions in the market today. And once we have some real results, we can probably come back with a clearer guidance, especially in Rich, Yes. Rick you want to take the 0? Yes. I can take the CROI. So Daniela with regards to the CROI, it is correct that Power 1 obviously weighs a bit on the CROI. As we all know the CROI is a very demanding definition, because we add up all the money we have invested. We add back all the depreciation we have taken on those assets with basically all the cash that has gone out the door for those investments on the asset side. And against that stands the cash flow that we are coming in. It's a cash flow return on investment. So the largest negative way in on the SEKRA in 2013 is actually the negative cash flow in Power Systems division. Power Systems was negative close to €200,000,000 for the year. And if you would assume they would have been on a normal level that will have been quite an effect on the group. Okay. With that, I take one of the Internet questions here from Raimo Rosano from NOI Helveci Bank. Good afternoon. Given the short term worries you mentioned about the growth outlook in 2014 I. E. The 3,000,000,000 dollars lower order backlog, the rather low book to bill, won't it be difficult to achieve any organic growth in full for the full year 2014 and even more so in U. S. Dollars given the strong devaluation of 14 versus 20 13 whereas consensus is still around 3% growth for 2014? Okay. That's an interesting question. Look, we like difficult tasks and this team is good at taking them on. So we are fully committed to do our utmost to get the best possible revenue outcome for 2014. That was the first part. In terms of the currency, Erik, you want to take that? Yes. As I reported on 2013, we have a very small negative effect overall for 20 13 on translation effects. When we roll that forward into 2014 even with the present currency rates, we expect that not to be so significant. And when we make the like for like comparison on the growth that we have discussed earlier during this call, it is always done on the like for like also with the currencies. So it could be that on the reported dollar number it will be impacted somewhat by the currencies. But on the like for like it is on same currency level. Let's take one from some from the room here. Wil? Good afternoon. Will Mackie from Berenberg. Two questions please. First of all sticking with the currency, we've talked a number of times about the translational effects. Could you walk us through the transactional exposures that ABB has cross border and how you can manage those in the years ahead? And secondly, we talked about the outlook across the Power Products business or Power Systems for large projects. Perhaps you could throw a little color onto the prospects within Process Automation. You highlighted some of the pressures around mining in the release. We've seen a number of majors in the oil industry cutting CapEx right upstream. How does that affect your outlook for that part of the business? Let me take the second one first and then I hand over to Erik on the currency piece. Look, on the Process Automation side, if you look at the markets that we are active in ranging from pulp and paper over the marine part into the process industries on the metal part and in oil and gas side, when you meet with these customers out there, it's an interesting world. On the aluminum side, for example, the aluminum there is significant overcapacity still out there. So you would not expect that there is major investments coming. If you look at the big miners, they are cautious about the spending. And if you look at the oil and gas part, in terms of new large greenfield investments, some of them have been more cautious, but the absolute amount of opportunities for us to grow. So altogether for Value Marti's business, I think hopefully on the process side, we see a little bit more appetite to start spending money again. On the oil and gas side, this is something where the investment level are very, very high. They have come down a little bit. The absolute amounts are still attractive enough that we should be able to get the business going. But I'll let Verdi Martin maybe make some comments on the market situation there. First of all, I have to confirm that the mining side is really the one which has been fairly low activity level over the last say 6 months. And I would be a bit surprised if it would change very quickly. Looking at what's going on in the mining companies though, I think there's a little bit of sign that something will start to happen, but I guess that that will be on the second half rather than first half. On a process side, I would say that there's some positive signs in Asia for Pulp and Paper. So those two industries seem to start to work again. And I would say it's not on a graphical papers, but it's more on a hygienic part and the packaging part. So those 2 seem to be quite okay. Aluminum as Ole said, the companies are prepared to invest, so they have the plans in their drawers, but I don't expect that to happen very quickly. Marine, which in our case has 2 main parts. 1 is the offshore and one is the propulsion business, which is partly to LNG and partly to cruising business. The a high level. And as Ole said before, upstream oil and gas is still very strong. There is some projects which been delayed. But on the other hand, there's quite a lot of new exploration going on in new areas like Africa. We are very keen in looking at Mozambique, Tanzania, other areas where we haven't traditionally been in so strongly. So I would rely on oil and gas as the biggest segment followed by marine and then some better news for the mill centric industries from Asia. Thanks, Benin Matti. Erik, you want to take the currency piece? Yeah. So on the transactional side, as I said in the presentation, we have basically a fairly good natural hedge. We have a lot of value added in the big emerging markets in China, in India, but also in many of the medium sized emerging markets. And on the European side, obviously we have some exports out of Europe. We also have a lot of sourcing from lower cost areas in Eastern Europe also in Asian countries. And that of course helps to lower the cost there. We are also exporting out of India for instance where of course we are taking benefit of the low cost selling that into other areas of the world. So it goes both directions. There are a few countries. Brazil is one example where we don't have as much footprint as we need compared to the moves of the currencies. So I would not say that there is no negative effect. But overall, it is not such a big situation which ranges from a day to another the whole pattern. A situation which ranges from a day to another the whole pattern. Okay. The last call goes to the conference call. The last question is from Mr. James Stettler from Barclays. Please go ahead, sir. Yes, good afternoon. Thank you for taking the question. Just longer term based on what we're seeing in Power, so lower than expected demand, rising competition, new entrants, do you expect the way the Power business to decline from the 46% level in 2013? Can you also talk a bit about how big high voltage is within both power products and power systems or how big it was in 2013? And then finally in terms of pricing, how did pricing for base orders in Power develop throughout 2013? Can you see any trend there? Look, long term, I love the power business, absolutely. And I think there is a very bright future for it. If you look at development of the world over the next decades and what needs to happen on the power side, it's amazing. If you look at the difference that technology really can make to fulfill the ambitions on the power side, it's a great business to be in and I'm very, very happy to have it. We don't disclose details on BU level. So we have a good high voltage business. Little bit of nervousness side, look, I know there is a little bit of nervousness historically around pricing. I'm not nervous about that. Bernard and his team have delivered an excellent way to compensate pricing with new technology and cost takeout. And that's quite a normal pattern in an industrial business that you have price pressure. And if you're the market leader, some others try to attack you. We will stay the course and we'll manage the business as we have done technological innovation to stay ahead. Bernard is continuously optimizing with his team the footprint and is driving that forward. The cost out is going very well. If we manage continuously to have a good service journey that we have had in Power Sofa, I'm very optimistic about this business and its quality within the ABB portfolio. And with that, I would like to close today's session. Thank you very much for joining us on the webcast and here in Zurich. So have a great day and we'll see you in September in London. Thank you very much.

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