Greetings and welcome to this presentation of ABB's Q1 results. Next to me here, I have our CEO, Morten Wierod, and our CFO, Timo Ihamuotila. And I'm Ann-Sofie Nordh, Head of Investor Relations. As per usual, Morten and Timo will talk through the results, and after that, we focus on today's announcement of portfolio change. Today, the presentation will be a little bit longer than we normally have before we open up for the Q&A. With that said, I ask you, Morten, to kick off the presentation.
Thanks, Ann-Sofie. A warm welcome also from my side. I would say that we had a strong start to the year. The team did a good job at staying focused in what has been a quarter with intense news flow. I would guess that we all have had tariffs on our radar screens. If I was to pick up a few highlights from the quarter, those would be: I mean, first of all, market activity was high, and it was good to see that demand was strong throughout the quarter, with a good finish in March.
In total, we increased comparable orders by 5% from last year. Secondly, we beat our own expectation for operational EBITDA margin in all business areas. On top of this, our margin got an extra boost from a one-timer, which contributed 170 basis points to the margin of 20.2%.
The third point I want to mention is the free cash flow of $652 million. This is good for a Q1, which usually is a softer period for our cash generation. It puts us now in a good position to improve our annual free cash flow from the $3.9 billion we generated last year. We also made good progress towards our sustainability targets. My final point is that we continue to be active with the business portfolio.
In early March, the team in Smart Buildings closed the acquisition of the Siemens wiring accessory business in China. This adds to our already strong product portfolio. Importantly, it gives us additional market reach through our distribution network across 230 cities. The deals add about $150 million in sales, and it is margin accretive.
Today, we also announced our plan to spin off the robotics division as a separately listed company. In our view, this change will support value creation for both companies. As Ann-Sofie mentioned already, we will cover this separately later on. As part of the annual reporting suite, we published our sustainability statement, and we made good progress in 2024. We are already close to fulfilling our 2030 targets for 80% reduction of CO2 emissions. At the end of 2024, we were down 78% from the 2019 base level. It
is not only about us. I'm proud to say that with our technology, we helped our customers avoid 66 megatons of emissions with our products sold in 2024. Over the last three years, we accumulated nearly 205 megatons of avoided customer emissions. I also want to mention safety, as this is something we cover in all our internal reviews.
Keeping our people safe is an important KPI that we follow carefully. Zero incidents is always the target. It is good to see that we continue to track on a low score, and we achieved 0.15 for 2024. Let's take a look at the market developments. The short version is that orders were stable or up in most of our customer segments. Like I mentioned, comparable orders were up by 5%. This was driven by mid-single-digit growth in our short-cycle orders, which improved in all business areas.
We also had 11% growth in the service business, but we had a slightly lower contribution from large orders. Some of the stronger areas were utilities, marine, ports, commercial buildings, and most of the process-related areas, although chemicals and pulp and paper are generally more muted segments.
Our robotics business had increased orders from the automotive segment, and our paint technology is the best on the market, and we had customers choosing to remain with us as they expanded their international footprint. One can say we travel with the customer. Data center is usually a focus topic, and there has been quite some news flow in Q1. The general sentiment remains very strong. We see some customers even accelerating their investments, even if some slower activity from one of the hyperscalers is noted in this quarter.
Rail remains a strong area. One example from our Traction business is the collaboration with Stadler in the U.S. We will supply converters and Pro Series batteries for train sets in Illinois and California as the U.S. moves towards greener rail transport. Even if the market is strong, orders in rail dropped from a high large order comparable.
Switching to the revenue chart, the $7.9 billion and 3% comparable growth was a bit below our original expectation. We did not convert the backlog or recent short-cycle orders as quickly as expected. Volumes were the larger driver to growth, with some added contribution from positive pricing. Turning to look at the different geographies, we were actually up in all three regions. The Americans, with good support from the U.S., was again the main growth engine and increased by 11%.
Asia, Middle East, Africa improved by 4%, and China turned to positive order growth after 10 quarters in decline. All business areas contributed to the China growth of 13%. Europe was up 1% with a mixed picture between the countries. Looking at our large markets, Germany declined, while, for example, Italy improved. Uncertainty triggered by the tariff news flow has put focus on footprint and operational setup between regions.
I have said to our teams to continue to focus on what we can control and take action to defend our market position and profitability. We have been successful in this area before. Our legacy of a local-for-local footprint serves us well. In the United States, we cover as much as 75%-80% of our sales with local production. We invest to increase this number. In Europe and China, we have already reached an even higher local value chain. I feel we are in a relatively good situation when it comes to local-for-local.
In addition, we also benefit from exemptions such as the USMCA. Turning to earnings, the chart shows that we continued the upward trend for both absolute operational EBITDA and margin. I said that I wanted us to become a plus 40% gross margin company.
That is what we delivered in Q1 when gross margin improved by 280 basis points to 41.7%. Admittedly, there was about 110 basis points of improvement coming from FX and commodity timing differences. We have shown we can reach the 40% level. Now we have to work towards consistency. The team did a good job also on operational EBITDA. Margin improved in three out of our four business areas. Only Robotics & Discrete Automation declined from last year. Importantly, they showed a positive sequential development, and the Machine Automation division improved to a break-even level.
On top of the improved business performance, we had support from a property sale we completed here in Zurich, which added about $140 million. This was booked in corporate and other and supported the margin by about 170 basis points to the total of 20.2%. Even without this one-timer, it is a good start to the year. It sets us up to deliver on our guidance to improve margin from last year, assuming no significant changes in the global economy. Now I hand it over to you, Timo.
Thank you, Morten. Welcome to you all from my side as well. Let's now talk through the different business areas, starting with Electrification. The EL team keeps delivering new records. In Q1, they achieved a new all-time high orders of $4.4 billion. This is up 2% on a comparable basis from the previous high, a testament to strong underlying markets. Customer activity was stable to positive in most customer segments. This includes our two largest segments of utilities and buildings.
Demand in buildings continues to be driven by the commercial market outside of China. The residential market was overall stable, although the China market is still weak. Morten talked about the data center segment earlier and the slower activity we saw from one of the hyperscalers. I want to emphasize that outside of this specific event, we still see a very strong data center market.
If we exclude this one hyperscaler, orders in data centers increased at mid-teen space. The base is now quite sizable, as we had data center orders of about $2.5 billion last year. Generally, it is still a very strong general environment in this tech segment. Turning now to revenues, Electrification delivered 6% comparable growth with contribution from virtually all divisions. Volumes were driven by conversion of the order backlog related to medium voltage and power protection.
Also, the short-cycle business improved by mid-single digit. The profit chart on the right side shows the steady improvement trend Electrification has achieved. At this quarter, there was no exception. Operational EBITDA was up by 7% to $886 million, with a margin of 23.2%. The gains from higher volumes and operational efficiencies more than offset higher expenses mainly related to SG&A.
All in all, a very strong quarter for Electrification, adding to our confidence for the year. Now, looking into the Q2, we currently expect low double-digit growth in comparable revenues and the operational EBITDA margin to improve slightly from last year. Now, turning to Motion, which delivered another quarter with order intake above $2 billion. That said, lower large order bookings, mainly in Traction division, triggered a decline from last year's record high level.
The strongest growth was noted in the service division, while the short cycle improved slightly versus the prior year. We saw favorable order development in HVAC for commercial buildings, as well as in power generation. The softer areas included the process-related segments of oil and gas, chemicals, and food and beverage. Rail also declined, but this was linked to the larger order comparable I just mentioned.
Shifting now to revenues, which was supported by both higher volumes and a positive price impact. The long-cycle divisions improved as they executed on their high order backlogs, even if this was slightly below our original expectation. This improvement was partly offset by a decline in the service division, while the short-cycle areas were broadly stable. In total, this sums up to an increase of 3% in comparable revenues to just over $1.8 billion.
The positive price development, coupled with continued operational improvements, contributed to a strong margin improvement of 110 basis points to 19.6%. Most divisions improved their profitability year-on-year. For the Q2, we anticipate comparable revenue growth in the mid-single digit range and the operational EBITDA margin to remain broadly stable year-on-year.
In Process Automation, we saw a continued healthy market environment, and orders came in at the high level of $2 billion, increasing 23% year-on-year. The PA team delivered yet another quarter with a positive book-to-bill, at this time 1.24, and the backlog is now $8.1 billion. The marine and port segments continue to be growth drivers. In this segment, we are mainly exposed to passenger vessels like cruise and specialized vessels, which could, for example, include icebreakers or coast guard.
Port automation also continued to see strong underlying demand. As for the other segments, we saw a stable to positive order development in most of the energy and process-related industries. The business climate, however, remains more muted in chemical, pulp and paper, and mining. Revenues got off to a good start and increased by 5% on a comparable basis.
The team executed on their steadily increasing order backlog with added support from pricing. The team has done a really good job on quality of revenues, as the order backlog gross margin has been increasing. As they now execute on this backlog, we see this supporting profitability in the business area. The contribution from the backlog more than offset the impact from lower volumes in the product division. All in all, it resulted in a new record operational EBITDA margin of 15.8%, improving 20 basis points year-on-year.
Looking at our expectation for the Q2, we foresee comparable revenues to improve in the mid-single digit range and the operational EBITDA margin to be stable or slightly up year-on-year. If we flip now to Robotics & Discrete Automation, it was good to see that this time both divisions contributed to the strong order growth of 17%.
The robotics division saw positive order developments in the automotive and consumer electronics sectors. Both of these important segments remain generally challenging. We were able to grow orders as customers stick with our leading technology as they expand their geographical exposure. Other positive segments included food and beverage, the fashion industry, as well as industrial machinery. In Machine Automation, orders increased sharply from last year's low level. Inventory levels at our customers are normalizing, but we will have some inventory adjustments spilling over into the Q2.
We still expect orders to continue to slightly improve sequentially. Moving now to revenues, the robotics division reported a mid-single digit growth rate driven by higher volumes from the book and bill business. This was, however, clearly offset by significantly lower volumes in Machine Automation. In total, this resulted in comparable revenues being down 11% year-on-year.
Although the profitability was down sharply year-on-year due to the lower production volumes in Machine Automation, the sequential improvement was better than anticipated. The previously announced cost-saving measures in Machine Automation helped improve the margin, and this business is now back at break-even level. The robotics division increased margin from last year, supported by higher volumes and efficiency measures. It remains well into the double-digit territory.
Combined, this resulted in an operational EBITDA margin of 9.9%, down 330 basis points year-on-year, but up 200 basis points sequentially. For RA, in the Q2, we expect a slight sequential increase in absolute revenues and operational EBITDA. Now, let's move on to the cash flow. All business areas had a positive operating cash flow. It was supported by strong earnings, which offset the typical buildup of net working capital in the Q1.
The $652 million of free cash flow was, in my view, very good for a Q1. The year-on-year increase of $101 million was mainly driven by the real estate sale. The improved operational performance was mostly offset by higher payments related to taxes and interest. net working capital remained broadly stable. I think the Q1 puts us on a good path to improve our annual free cash flow from last year's $3.9 billion.
The last time we met, we mentioned some reporting changes, including return on capital employed. We now report Group ROCE on a quarterly basis, and it remains a focus area for us. The chart here shows that the strong trend continued in the Q1. ROCE reached 23% and improved 250 basis points from last year. The increase was driven by three out of four business areas as a result of higher earnings, the positive one-timer, and focused net working capital management. With that, I hand it back to you, Morten.
Thanks, Timo. With that, let's talk about today's portfolio of announcements. Our plan is to spin off the robotics division as a separately listed company. We start these preparations now, and we'll work towards a proposal for the 2026 AGM. If all goes to plan, we will distribute the business to shareholders as a dividend in kind, meaning shareholders in ABB will receive shares in the robotics company in proportion to their existing holding.
We plan for the robotics company to start trading during the Q2 of 2026, but we have not yet decided where the listing will take place. We are now looking at different alternatives, including Sweden and Switzerland. Why are we doing this? The prerequisite is, of course, that we think that it will benefit value creation in both companies.
Robotics is a strong performer in its industry, and this will become more transparent, and we think it will be rewarded for its strong position and performance as a pure-play robotics company. As you see in the chart to the left, robotics represents 7% of ABB Group revenues and 5% of earnings. I should also mention that numbers on these slides are pre-carve-out estimates. Some balance sheet numbers may change for the standalone entity.
Robotics performance profile is different versus the three larger business areas we have, and we believe it will benefit from being evaluated on its own merits instead of competing over capital allocation within ABB. Also, while it's a strong contender in its industry, there are limited synergies with other businesses in ABB. It almost already has a standalone profile, but without getting the full benefits.
Last year, robotics generated about $2.3 billion in revenues, and in my view, they have proven themselves under the ABB-way decentralized operating model. They have delivered a double-digit margin in most quarters since 2019, a strong achievement in what has been an unusually volatile market. First, it was COVID, when they had to shut down the hub in China.
Then the component shortages with the significant pre-buys, followed by the normalization periods. Now, they have shown order growth in the last four quarters. They've also been active on their portfolio. The low-margin system business has been exited. They now have the broadest mechatronics portfolio after expanding with Cobot & AMR on top of the already most advanced robotic offering with its control and software platform.
ABB Robotics is well positioned to help customers improve productivity and flexibility to solve operational challenges such as labor shortages and the need to operate more sustainably. I mentioned earlier the double-digit operational EBITDA margin. It is good to see that this has been supported by a strong gross margin improvement. Since 2022, the robotics gross margin is up by 600 basis points. Free cash flow margin is at the average of 10% since 2019, and the business is well invested.
They have state-of-the-art hubs for manufacturing and R&D in China and the U.S. We recently started the construction for a major upgrade of the European hub in Sweden. They have spent 5%-6% of revenues on R&D and launched its unique OmniCore platform last year, and their Picker technology is a good example of their strong AI-based solutions.
All in all, we think a listing of the robotics business will support its ability to create customer value, growth, and attract talent. We also think it will benefit ABB, which would consist of three business areas with sales and technology synergies. Why do I say three business areas? We will move the Machine Automation business to be a division in Process Automation to build on their software and control synergies, for example, towards hybrid industries.
While robotics is only 7% of Group revenues, this portfolio change will have a slight positive impact on ABB's performance. The main target is to allow for both companies to optimize this value creation. We start working towards this now, and we'll come back with more details in due course and in good time before the AGM in 2026. Finally, let's finish off with the outlook.
We leave our 2025 outlook unchanged but acknowledge the increased uncertainty for the global business environment. We still expect a positive book-to-bill, and we see comparable revenue growth in the mid-single digit range, and we expect to further improve the operational EBITDA margin from last year. Since we had a positive one-timer in the Q1, I want to mention that the margin outlook for the year is supported by improvements in our businesses. It's not only driven by one-off gains.
For the Q2, we foresee comparable growth in the mid-single digit range and the operational EBITDA margin to remain broadly stable with 19% last year. Some of you may say that that stable margin development is underwhelming, but actually, it means we need to improve our business results in Q2 2025 to offset the positive impact of 30 basis points from a non-repeat last year.
Now, Ann-Sofie, let's open up for questions.
Yes, let's do so. Just as a quick reminder, for those of you who have dialed in on the phone, press Star 14 to register to ask a question. Please also remember to mute the webcast as your line is opened. I kindly ask you to limit it to one question. That way, we will allow for as many of you as possible to be heard. I can see there is a queue already. You can also put questions through the online tool in the webcast, and I will then voice them over from here. With that, we open up for the first question, and we have Max from Morgan Stanley first in line. Max, can you hear us?
Yes, I can. Can you hear me?
Yes, indeed.
Yeah, good morning, everyone. Just the first question I'd like to focus on is just the data center business. Look, while I appreciate kind of the business is up in order terms, mid-teens, ex this large customer, we obviously know it is a very large customer that we're talking about. I just wanted to understand, I think you mentioned this customer had paused ordering by 30-45 days during the quarter.
Have we now seen that go back to normal, and should we now expect that kind of data center orders as a whole will be more in that kind of double-digit order growth range for the rest of the year? Because obviously, while we don't want to kind of talk about one specific customer, it obviously is moving the needle on what's happening to the overall business.
Just trying to kind of understand, is that a good approximation for what we should see for the rest of the year, or do we think that particular customer will continue to be the exception in the industry and be a bit more volatile? Thank you.
Yeah, thanks, Max. As you said, with that exception, we had a mid-teens growth in the data center segments. Long term, we are confident also with the growth rate in data centers due to the AI trend that we see these days. What we look at, and I do not want to speculate, I think they are on the outlook from single or individual customer performance. I think you will see that in the news as well. I rather refer, let's say, directly to the source and/or the current news flow more than that we come out with any firm statements on what our other companies' plans.
Okay, thank you.
Thanks, Max. Next, the question comes from Andrei at UBS. Your line should be open.
Yes, good morning. Thank you very much for taking my question. I'll go with the obvious one on tariffs. I just wanted to ask whether you've taken any pricing action so far to respond to what's been announced in the U.S., and also just quite keen to kind of double-click on the U.S. for U.S. piece, which you very helpfully laid out. Within that U.S. for U.S., have you looked into your suppliers and their sourcing and kind of geographical arrangements, and have you seen any evidence of them coming to you with price increases if they happen to source from China or other high-tariff countries, and how are you responding to that, please?
No, we have, of course, looked at all of these elements, as you say. First of all, the main part is what we produce, the 75%-80%. We have, as ABB, more or less no import from China coming into those numbers, so that is not an impact for us. The other part is we already also a lot of the Mexico and Canada import, a lot of that is with exemption from tariffs based on the USMCA trade agreement, so that helps as well. Then it is what comes from Europe, where that will be exposed later on for tariffs, and there we will take price actions, as you mentioned.
There has been already taken price actions this year, but that is more of the steel and aluminum tariffs that have been implemented, and because that has been as a general price increase in the market on raw materials, and of course, that is something that goes through on to the other side. That is how we work with it when we talk about the suppliers and the suppliers of our suppliers. We have an overview on where it comes from. We have been working on that for quite some time to minimize especially the China exposure.
I do not have details to give you on. More I can say, I can confirm that it is worked on, it is understood, and it is mitigated to have lost effect.
That is why we can come also out with the guidance that we're doing, that we don't believe, I don't see this with the current knowledge. I mean, as of today or as of now, we don't see any significant impact on our overall performance.
Yeah, maybe if I can just.
Please.
Add super quickly on this one. We have done, as Morten said, a thorough analysis with and without tariffs, and the tariffs itself, they do not have a big impact. It really is the economic uncertainty which we are now dealing with, which we have to then see how it plays out. As I said, all of this has been taken up in our thinking on the guidance for the year.
Can I, we have a question coming through online here, sort of linked to tariffs, I would assume. Somebody asked, could you please tell us if there was any pull forward in orders in Q1?
No, we did not see that in the Q1, that people were pre-buying. I think that is just due to the uncertainty of what kind of would you buy to be able to mitigate. No, we have not seen that.
Very good. We go back to the conference call, and we open up the line for Martin at Citi. Martin?
Yeah, thank you. Good morning, it's Martin. Thank you. Good morning, it's Martin. Can I ask on the order pipeline? It seems no immediate impact on tariffs on orders so far, but when you are talking to customers about the pipeline for the remainder of the year, are customers worried about the environment and seeing the potential for significant pauses on decisions for the year ahead and perhaps which industries are more worried around that? Linked to it, you've obviously talked about some capacity expansion in the U.S. Is that primarily demand-driven, or is it more to give you further hedging against tariffs as well? Thank you.
Yeah, thanks, Martin. The order pipeline, when we're looking at it, is still strong when it comes to the overall and the long-term need for Electrification and automation. That is clearly there. You see some of the decision-making, as we mentioned, may take, and we saw that already in the Q1, that it takes a bit, may take a bit longer time to get that final decision. We win and we get the order, but sometimes you take another round, maybe with the board for major investments.
What we see is that the no-regret moves, they are being taken. That's the same on our side. Others where there is much bigger uncertainty, these are where you take another extra round and may discuss. That's how, I mean, uncertainty is not good for decision-making. That's clear. That is the, but we are taking this uncertainty into account when we also make our forecast for the Q2 and year-end. It is something we believe we have under control and not kind of worried about it, but it will take a bit more sales work also to get the papers signed. I think the second point, maybe help me here, Ann-Sofie.
Capacity increase.
Oh, capacity. Yeah.
Demand-driven or tariff-driven.
Yeah, thank you. It is driven very much by demand-driven because we do not have many of these investments. It is driven by its kind of products that have special U.S. or what we call NEMA North America standard. Therefore, we need more capacity because the demand has over time been bigger, been larger than supply. We are expanding because we see also a long-term that goes with the two announcements we had in the Electrification business in Senatobia, Mississippi, and Selmer in Tennessee.
It is about $120 million. We are expanding those two facilities for low-voltage bus bars and for low-voltage circuit breakers that are used by utilities, that are used in industry and in data centers. That goes into that general capacity build-up. Of course, there will not be U.S. tariffs on it when it is produced in the U.S., but that is not the primary driver of it.
Very good. We've had. Thank you. Thanks, Morten. We've had a couple of questions come through here online regarding the portfolio change announcement. Basically, the question is, why now?
Yeah, we believe the robotics business is now ready to stand on its own two feet. The synergies with the rest of ABB is limited when you look at technology and customers. Their Electrification, Motion, and Process Automation very much have common, much more common technology, common go-to-market, common customer base, and even common competitors. We believe this is a good value creation opportunity both for ABB and also for the ABB robotics division being a separately listed company. Therefore, it will take a bit of time. We said that in Q2, so a good year from now is when we can do the listing, as there are some internal work on the carve-out and the preparation to be done.
Therefore, we need that time, but I believe now it's good timing because the robotics business is among the very best in their class and being measured against peers. You will also see that, and I think then they don't need to fight for capital inside ABB, but have now access also for investors in the market. There is now an opportunity to get a hundred cents on the dollar on robotics investment, as was not the case at ABB, where it's about 7% of revenue and 5% of our earnings. That's where we believe the timing and the team is ready to stand on its own feet, and it's a long-term good business in automation and robotics.
Yeah, I mean, maybe just add there, of course, it's important also what ABB will look like after the spin happens. There we are seeing increased gross margin, maybe 40 basis points increased, operating margin maybe 50 basis points, clearly higher return on capital. I think the growth rates probably will be about similar. If you look at history, we would also have a notch higher there. It really kind of shows that these are a little bit different kind of companies.
With that, we have a question coming through from Alex at BofA Merrill Lynch.
Yeah, thanks, Ann-Sofie. Morning, Morten, Timo. I appreciate you taking the question. I wanted to talk about Electrification if I could, please. I appreciate it's one question with two parts. Question on the acceleration on the growth guide into Q2, low double digits, very strong. I just wondered if you could give us a sense of what's driving that and the visibility that you obviously got in Q2, but for the full year.
Just linked to that, the margin expansion. You mentioned about a month or so ago at a conference, the differential on margins between the North American business and the rest of the world in Electrification. I just wondered if we're starting to see that gap starting to close as we see the margins moving up here and whether that's something that can accelerate through the year. Thank you.
Yeah, so let's start on the Q2 growth outlook. We have some of the revenue where we were a bit short in Q1. We saw that some of those deliveries were slipping over to Q2. That's why we are confident we have a strong order backlog and order book now being on a record high level. Even just to mention, like on Electrification, it grew by another 11% in Q1, even if the order growth just for the quarter was 2%, but the order book increased by another 11%.
That's a good setup and a good outlook when it comes to the Q2. We talk about margin expansion, as we say there, especially for the, we mentioned that in the Electrification business, North America is diluted to the Electrification margin. It still was in Q1.
It will still be in Q2, but that gap is getting smaller. I think that's the focus for the team and has been for several years and how we can close the gap to the rest of the world level. We have, you will see not just in Electrification, but we have all four business areas are expecting a margin improvement for the full year. I'm sure Timo can mention a bit about the one-off that's special, but the operational performance is expected to increase in all four of our business areas at year-end.
Do you want me to throw in?
Yeah, maybe.
A bit of an opening there. Yeah, so when we look at this, I mean, when you look at our corporate guidance last year, we had a very strong sort of corporate performance. We were about $150 million. Now we're saying $200 million, so that would be a bit of a negative on the full year. When you combine that with e-mobility, we are going to see some tens of basis points positive on that whole corporate e-mobility combined. And then, as Morten said, also the businesses, we are expecting them to improve.
Okay, and then we take the next question from Sean at HSBC. Your line should be open.
Yes, good morning. Thank you. Question around Process Automation. You make a very interesting point on your competitive advantage of being the only supplier with direct access to Electrification and Motion. How much are you seeing that already as part of the existing strength in Process Automation orders? Is this something that will be, let's say, something that you push much harder on going forward? You have also highlighted the marine side of things. Just wondering if there is any regional focus of where you see particular order strength there. Thank you.
Yeah, I think that is very much a play. The strength between our Process Automation, Electrification, and Motion business is very clear in areas, for instance, in LNG, where you do drilling, you do the whole pipeline with compression, and you do the terminals, and later on you even do the LNG ships. If you look at these four applications, that's a nice ABB combination of automation systems, of motors and drives that is to get the right compression for compressors.
It's also with Electrification because no motor or no drive or any automation system is working without electricity and all the switchgear that is needed. If you look at LNG to be as one, we have some very successful, especially North America project. We are working the three business areas or the divisions that are relevant here.
They work together as a team, as a common task force. That is how we go to market and how we support project OEMs and end users on the ground and later on also with service and taking care of that equipment over the lifetime of 25, 30 years plus, which is the expected lifetime. It is the same if you are talking about our marine business, a propulsion on a cruise ship.
You will see there from the room, you will have the electric generator, the switchgear, the drives that are driving the speed of the motor and the torque, and then the propeller system known as Azipod leading in the cruise industry. These are just a couple of examples where you see that this Electrification, Motion, and Process Automation really working together in tandem. Where often Process Automation takes the lead versus the end customer.
They are the one carrying the ABB flag there, but then with strong support from their brothers and sisters coming from the other divisions. That is how we work together. I think that is, or I know it is a unique combination, which is highly appreciated by customers. Latest confirmed, I was in Houston at the CERAWeek this year, and this is one of the winning arguments why we are performing really well in these segments compared to many of our competitors.
I think there was this regional comment. I can just confirm that PA orders were very strong, broad-based. Actually also in China grew, but also Europe grew and the U.S. grew or America, so very broad-based.
Very good. We have a question from Simon at Jefferies here via the online tool. Can you please elaborate a bit on what you saw in the U.S. during the quarter? Did the market hold up and perhaps particularly so in the short cycle business?
Yeah, no, it did. We had growth in all four business areas in the United States. It was 9% on order intake overall, and all business areas contributed to that growth rate. We had also a strong margin, so there was not really a big change throughout the quarter. It was a healthy business generated in all three months over. That was overall a good start to the year in the United States.
Very good. We take the next question from James at Redburn.
Yeah, good morning, everyone. Thanks for the time. Timo, you mentioned that economic uncertainty is the biggest risk, and I totally agree. That makes sense. I got the impression from other comments that your orders at the start of April are kind of largely unchanged. A comment we're hearing from a number of companies, but I guess in reality, the tariffs did not start in the first two weeks of April.
This is the first week, and I would not normally ask about live trading, but are you seeing anything in the order running rate and the daily rate of this week that is materially different, particularly in the U.S., that would suggest that we are going to see any economic impact? Tagging to that, where you have that import, the 20-25% import, some of it comes from Europe. Where you've got a product coming from Europe to U.S. customers and you're raising price, are you seeing customers accept that, or do you think that they will switch to a local producing competitor?
I can start on the last part of that question. Again, giving you an example from the Electrification business, where the portfolio is so wide, it is very difficult, especially to have, I mean, very difficult to have a full production everywhere in the world. Some of the, there are different standards between the U.S., what we call the NEMA standards, and in Europe and the rest of the world, which is IEC.
There is to use some of these IEC products that are produced in Europe by all companies, which goes into, for instance, into a machine built in or a project built in the U.S. that is re-exported or exported outside the United States. This accounts for some of those products that are not produced in the United States. We do not see, I also do not think, or I know that anyone, nobody is really producing those components in the United States. Therefore, it will come as a price change in the market because for most of these cases, there is no local alternative available.
Yeah, and on the trading, I think we can only say there that we have not seen anything kind of like in the trading sort of these months, which would sort of fundamentally change any view, any customer behavior, anything like that. I think we need to leave it at that.
Thank you very much.
Thanks, James. We open up the line for Daniela at Goldman Sachs.
Hi, good morning. Thank you so much for taking my question. I just wanted to ask regarding low voltage and supply and demand in the market, you're adding capacity. We also see a lot of your peers adding capacity. Just maybe if you could give some color on that, especially like where are lead times, what's the sort of visibility that is there, especially if we go into a slightly softer U.S. macro part of these products are short cycle, but just to give us a picture of how the supply demand is.
As you said, the increased, the expansion of our facilities is to meet that extended or the expanded demand that we see in the market. Again, to also limit the number of imports, what comes from outside, because that's why we also take some of the components that come from Europe today is because we don't have enough capacity in the United States. I see there is still a, there's still much longer lead time than the industry was used to. We still have work to do there to get it further down. I don't see any short term or mid term kind of overcapacity or issues in the market.
It is the whole trend of Electrification, even if the global economy goes a bit slower, nobody is immune, but I see that the Electrification and the automation trend that we are facing, especially, and I mentioned in infrastructure, that is not going to change quickly because those CapEx plans are made, those are ongoing projects, and we see that that is desperately needed, especially in the United States in some of the infrastructure investments. Therefore, I do not have any short or mid term worries when it comes to capacity. It is more as I say, we are still building capacity at this point of time.
Very good.
Got it. Thank you.
Thanks, Daniela. We have a question here from Olof at Danske Bank. He says, what impact do you expect from the stimulus package announced in Germany? When do you expect that to impact, if so?
Yeah, I mean, overall, it's good that Germany starts also to investing again. It has been a bit of a tough situation in Germany for the last two years, and we do see some more optimism on the ground by also with large customers, but there is still too early. There was no impact in the Q1, and we will not see that in the Q2 either. It is because from planning permitting into starting building until the Electrification automation is in the ground is more of a, so from there of an impact point of view, we are more into the 2026 onwards. I think it's kind of, it's good to see that there is a more an environment of investing again, and I think the mood starts to change.
That is maybe the, I think is the first and important part that customers and our partners start to look at the opportunities and not kind of looking backwards or everything that went wrong, but more of what can we do in the marketplace. There is a bit more of optimism that will help in, and for us, it's about all those investments in either in infrastructure, getting more affordable, but more reliable energy supplies of Europe and Germany especially will support the business of ABB. I think that we are well positioned to take part in those investments that will come, but a bit still a bit early.
Very good. We open up the line for Anders at ABG. Are you with us?
Yeah, thank you. Just, yeah, exciting news on the robotic spin. I just wondered about the thought process behind going for a spin rather than a trade sale. Is there anything to, I mean, if those discussions came up here, is there anything that would sort of prevent you from, or would you engage in such discussions if it came up here?
Yeah, I can start. I mean, you continue to. We have looked at, of course, the different options when we do make such a decision. The options what we are launching now is the separate listing of the robotics company because we believe that is also a good opportunity for the shareholders to participate in that value creation opportunity that we are confident about.
That is why we chose this road. Portfolio management is an important part of the whole ABB way operating model. We are always looking at different options. That would also be the same here as we have over obligation to our shareholders to consider any option that may occur. Right now, we are on the path of listing, and that is the work that is ongoing. That is our clear primary plan at the moment.
Yeah, maybe a little bit also on the thought process. If you look at some of the previous transactions, what we have done, I think the key point is that is there a natural industrial consolidator in the business, hopefully two or three of them, and then it's sort of easier to go for the trade sale, which was very much the case, for example, in the bearings business, whereas in Accelleron, that didn't exactly exist. Here it's not necessarily the case either. I think that's sort of a little bit just on the thought process.
And while.
Sorry, thank you.
Thanks, Anders. While we're on this topic, there's a question here from Ben, just to clarify, will Machine Automation be a separate division in Process Automation, or could there be other changes in Process Automation?
No, they will be a separate division there. I believe they are on a clear path of improving their performance. We talked earlier about, they had a record performance in Q1 last year that has declined since when they had kind of used the backlog and customers were sitting on a large inventory. Now they are gaining back. We said that now in Q2, they will come, we will be ending that situation at the customer site. Therefore, we are more back to a more normal order pattern and revenue situation. Therefore, I am also satisfied to see that we are able, that plan that was made is followed, and that was good to see now.
That will remain in Process Automation, and they will keep as separate divisions, but working together on projects, even with the Motion business or Electrification, where this makes sense, or they will work with their colleagues and team members in Process Automation when automation solutions or PLC solutions, for instance, in tunnel projects in the energy industry, it's done, then they will be a contributor into those projects as one example. This is how we work across the company where one division takes the lead towards the customer, but then working also with their colleagues in other divisions. Of course, that will continue also when they are in Process Automation.
We keep going on the portfolio spin topic here. Here's one question from Gael. Could you also talk about the competitive environment in the, or for the robotics business?
Yeah, I think if you look at how robotics are doing, and again, when I say, I think they will benefit from being measured and compared with their peers in the robotics industry. There you will see that they are having a very strong performance, both from a top line, but also a bottom line performance. Being among the top and the very best in their class.
Therefore, that's the, also I see the benefit of having that focused company which we now will have. I think they're also doing a good job when I look at what's happening in China coming up now and launching this year, more of a China for China portfolio for lighter application, which is kind of it, the robotics market in China is quite different from the rest of the world.
Therefore, we have also adopted to that new reality, not just from a competition, but also from an application and technology point of view. I think ABB has put on a really good job, both of coming up with new products that are fit for purpose, fit for some of these light applications, but at the same time also using local components and sub-assemblies, not using imports from, let's say, the West, but using those local Chinese components at the right cost level versus what they use in China, but also having with that performance that is expected from customers because that's again what drives it.
I think there is how you need to adopt this local-for-local strategy when it's a new application and things which robots are being used in China for other things. I mentioned I think on these calls earlier, the soup kitchen, ramen soup or noodle soup being one, but many of these kind of a much higher robot density than what we see in Europe and especially in the United States. Therefore, it is also a different portfolio. I am happy to see that that portfolio is coming online and now with a kind of big expansion now in 2025.
Okay, we changed topics for a little while and maybe towards you, Timo, could you elaborate on why backlog execution was lower than planned in the Q1 and does it change your view on the full year outlook?
Yeah, happy to. I think that really is only a timing issue. There is nothing dramatic on that, a little bit more in Motion and a little bit in EL. In Motion also, we had a little lower service revenue actually than we expected. Looking forward, we actually saw very strong growth in base orders, actually higher than our normal order growth. We do not usually talk about it, but just wanted to mention that because it converts faster.
We also had, and that was 6%, we had 11% growth in service, which also service orders, which also supports revenue for the year. When we look at the overall backlog, we have maybe 3%-4% coming from backlog when you look at the backlog conversion of the $23 billion and 60% expected to convert this year. We should be overall in a pretty good place regarding our revenue guidance for the year.
Very good. We open up the line for Eric at CIC Market Solutions.
Yes. Hi, good morning. I got a question on the U.S. reshoring. I understand the objective of the Trump administration is to accelerate reshoring, but to reduce immigration as well. I suspect you are well placed with your automation business there. I was wondering what's your view on that? Do you currently observe any acceleration on that side? Do you observe any, I don't know, more optimism from your local teams on that particular issue? Thank you. Thank you.
Yeah, only automation.
Reshoring.
Reshoring. Yeah, this is, I have to say, it's been a trend that has been ongoing for quite a few years now because with the risk of tariffs being one, but also I think the importance of being closer to customers is just a trend that has been becoming more and more important. We have done it as ABB, but I know we're not the only company in the world that has moved production closer to customers. I think that was a bit of a learning after the whole COVID shutdown in the beginning of 2021. I think this is just the trend we are seeing. We do say that's what we are helping also our customers when they are building up more of their local manufacturing. I think that's the important.
I can also use an example that we had even from China, which just shows this where in the electric vehicle space, when some of the leading electric vehicle companies go outside China and set up new manufacturing, that being in Indonesia, that being in Thailand or here in Europe, we are also following customers abroad.
That's why it's important to have this global presence, but you can also travel with the customers out when they establish new production so that what we've done in China or what we've done in Europe or in the U.S., when they go out to a new region, we can bring that technology and the know-how from their original design and also do kind of more of a copy-paste outside.
There is where some really good wins also in this quarter in that space, not just in the U.S., but even going out of China, becoming more local in Asia or in Europe in the automotive industry as one example. We do not see it only there, but also in other industries. This importance of being truly global, but acting local and having service, having people on the ground that can support, is one of the key elements why our customers choose to work with us on large projects.
Okay, thank you. Do you think the Trump administration policy could accelerate that trend in the U.S.?
Yeah, I mean, there will be more investments in local manufacturing in the United States. That is clear. I think the flip side here, as Timo mentioned, is kind of the question mark, how will it affect the global economy? Of course, it will drive some more investments in the United States in manufacturing. That's clear. How it will affect, it will have on the global economy is for me more the question mark, but that it will drive some more investments in the United States. That's clear.
Understood. Thank you.
Thank you. Time flies when you're having fun. We're going to have to make that our last question. Thank you very much for joining us today and have a lovely spring break if you're getting one. I'll see you soon.