ABB Ltd (SWX:ABBN)

CMD 2020

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Nov 19, 2020

Every day we are learning more about our changing world. Every day ideas are born, challenges become opportunities. To achieve our purpose, we need people who can turn ideas into reality, who can create success. That's us at ABB. Thinkers, engineers, scientists, innovators. We push the boundaries of technology to make industries safer, more intelligent and more productive. We address the world's energy challenges with solutions that make transport and infrastructure cleaner. Together with our customers and partners, we are helping to achieve a more sustainable future. Let's write the future together. ABB. Greetings to you all and a warm welcome to the ABB Capital Markets Day. We would of course have loved to see you in person today, but due to the circumstances we pushed into the virtual world, but we do hope you will find the afternoon valuable and that will give you some additional flavor on ABB and where this company is going. Today, you will hear from our CEO, Jan Rosengren and our CFO, Timo Johan Matilla, as well as our business area presidents, but also from 2 divisional presidents who will give you a bit of a more of a deeper into their respective business. You see the agenda here on the screen. We have in this agenda put in a couple of breaks to give you a proper leg stretcher. It is a virtual event. We don't want you to pass out behind the screens. We aim to finish the day at about 5 o'clock. For those of you who don't know me, I'm Anssa Finode and I will be taking over as Head of Investor Relations after Jess, whom you all know, who will be heading on for new adventures outside of the company. I will try and fill these shoes and I'm really looking forward to do my best to run this dialogue on the company close with you as investors and analysts, of course, together with my colleagues in the IR team. Before I hand you over to Bjorn and Timo, I would like to first of all to remind you that there will be Q and A sessions after each of the presentations. In order to put through a question, you need to dial in using your phone and there are instructions on how to do so on our webinar site. And also, I would like to put your attention to the important notices, which is on our use of our non GAAP measures. This covers our forward looking information that you may hear today, which could contain some uncertainties. And with that said and before without further ado, I will put you over to Bjorn and Timo. Please go ahead. Thank you, Annecy. And also I'd like to welcome you all to this Capital Market Day. Of course, I would have loved to see you all here, But this is not the reality of today. When we met last time in June, Timo and I were presenting the operational structure and the decentralized journey. Today, the focus is going to be on the businesses. It's going to be how our businesses are generating value going forward. I have been here now for approximately 1 year. And I am excited, but I'm also energized of how smooth the transition has gone. And I would like to thank my colleagues who have made this happen. You have heard me say many times, I think ABB has a strong fundamental. We are exposed to markets that are for the future. We are market leaders in the most of the operations where we are and the segments where we're operating. And we have a strong leading technology. So let me elaborate a little bit on this. Many of our customers are focusing more on being more energy efficient. And they do it because of financial reasons, of course, but also that there is a bigger demand from new regulation, but also from the new shareholders and other stakeholders who expect to see a more sustainable agenda among their investments. The world is moving towards electrification. And we see the electricity demand is actually growing twice the size than other energy resources. And what you will learn today is that if you look at the world electricity, a third of that is being converted into motion by electric motors. But only 20% of those motors are actually connected to electric speed drives. And that is the enabler for energy efficiency. So besides that the world is moving towards electrification, but also automation and digitalization, the speed of change is accelerating. And I think many of us have realized during this COVID impact that we need to have resilient, flexible and automated productions. I don't need to tell you, but you all know that the DNA of ABB, it's R and D. It is technically development. And we have been able to introduce game changing technologies during decades. ABB is investing 2019, said 4.7% of its revenues in R and D. And this is actually growing. We are about 7,000 people working with research and development, and about 60% of those are actually focusing on digital and software solutions. We have a huge patent portfolio protecting our intellectual property, 25,000 patents. You know, I love to talk about products, but we will hear a lot about this from our businesses going forward. But I'd like to highlight one product, which is actually black here on the screen. I don't really know. But that is the acid pod, which is one of the main products within the marine and harbor. And this product actually offers superior value for our customers. The energy efficiency is about 20% lower than mechanical transmissions. And it has strong flexibility for the owner. And we target here special segments like the cruising industry, like the offshore supply vessels, but also ice breaking vessels. And I'm sure none of you have missed that during the last months, we have actually booked orders for over $400,000,000 for the marine industry. I think this is something to be proud of. As you know, our operating model, the divisions, they are fully accountable for their business. That means everything from R and D to the end user. And as you can see on this picture is that the amount of investment in R and D in the different divisions varies quite a lot. So on the left side, you can see more of our so called traditional products. This can be mechanical transmissions, installation products or simple switches. Even even, of course, service, traditional service is on that side. As more you move to the right side, more digital, more software embedded in our products. And the division you see furthest to the right, it's actually our discrete automation B and R that actually invests more than 10% in R and D. We cooperate in our R and D centers around the world with universities, with start up companies, but also partners in the techno area where they are adding value to our R and D. You know, you have to earn your right by your customers. And I think it's quite impressive with ABB. Almost all of our businesses are market leaders within the segments that we operate. We say that they are number 1 and number 2, and we also expect them to be. And I sometimes get the question, why is it important to be number 1 or number 2? Number 1 is market share and profitability goes hand in hand. The other part is if you are a market leader, you have also a chance to be a price leader. But maybe the most important of all is if you are a market leader, you have the opportunity to invest more in R and D than any of your competition. And then, of course, you have all the scale effects, which are positive. We need to protect our leading position. And our divisions have the mandatory and accountability to drive growth. And we do expect it. I think we all know organic growth is the most profitable way of growing. But we also believe that acquisition, bolt on acquisition by division, can add value. New technologies, some consolidation of the market. And that is important to protect our leading position. Let it make it clear once and for all. We want to grow all our divisions. We want to grow ABB. But one thing we have learned from before is that there is no idea pushing growth in unstable and unprofitable businesses. That is actually destroying value. No. 1st, you get your house in order, then you focus on growth. If we look at the portfolio, the famous bubble diagram that you know that I love, And we even made it a little bit more transparent for you this time by giving some color to the bubbles. So you almost can guess which bubble is which. But anyway, today, about 35% or 37% is today both profitable and stable. These divisions need to focus on growth. And we can see also historically between 2016 2019, they grew with actually as much as 5%. Then we have approximately half of our divisions which are still in the profitability phase, meaning they need to get their act together and get the profitability to the right set. And then we will focus on growth. But what you also see here, we do not have any divisions that are in crisis. The lowest performance divisions are around 9%, 10%. And I know that many businesses would wish they would be on that part. But for ABB, who wants to be leading player in these exciting markets, we need to reach the 15%. I hope you agree with me that ABB is well positioned, and we have a strong fundament. On the short term in front of us, we see, of course, the challenges with COVID. And it has been a challenging time to be able to serve our customers in a proper way. But we are also convinced that the COVID will not have impact on the long term trends. So let's look a little bit at the markets. And I picked together a number of PMI scorecards as well as about the industrial production. And what you can see in these scorecards is that during the summer, beginning of summer, end of spring and beginning of summer, we saw a V shaped recovery. But as you also can see that there are some markets in some segments who have not recovered fully. And some of them have actually flattened out, and we can see some resilience into that. So there are impacts of the new close downs in the market. So if you look at this downturn, and I think I'm in the age where I've had quite numerous of downturns during my careers, But I have not seen anything like this, and I don't think you have either, because it's different. The challenges that we have had this time has been in relation to serving our customers, keeping our operations up and running and driving service. You know, I'm the biggest fan of service business because that is the resilient business and actually compensates when market gets sour. This time, the service is more affected than our capital equipment. I have never seen it. And it is a big challenge. So when we see the recovery going forward, we will see something like a SWASH recovery. To be honest, I never heard that word, but they convinced me that you know what that means. Anyway, we will see during the next 3 years a recovery coming of approximately 5% CAGR per year. So there will be opportunities to grow. So let's look back a little bit. The decentralization process started before I came into ABB. And we were moving away from a 3-dimensional matrix organization into a decentralized. And we have accelerated that transformation into the structure, the ABB way as you see it today. And today, we have 18 of these divisions with full accountability. But one of the important parts of this transformation has been the dismantling of central resources as well as the country organization. And that has now been taking place during the last 2 years. And we have actually gone from central resources of 18,000 people to just under 1,000. And that's approximately where we should be. We've been looking at some of the reductions. Some of the people from the center have, of course, moved into the businesses because that's where we're conducting the value in the future. But some of them have also left. So due to the challenges we have in the market, we are actually today 10,000 people less than last year. And Timo has always promised you that we should reach the 500,000,000 in savings. And I got good news. Timo will talk more about it because he's quite excited about it. We are there now. We managed to take down the cost with €500,000,000 Then, of course, there's a lot of other activities, continuous improvement in our businesses. And in our operation, we actually have closed 45 sites, 45 sites around the world. And many of these actually comes from the acquisition of GEIS and the integration of that, making a footprint which is competitive. And Tarek will talk more about that later on in the presentation. You know, in the decentralized structure we have, we need some glue to keep the group together. And this summer, we introduced both the ABB purpose, which I will talk about a little bit later, but also the ABB way. So what is ABB? It's the glue that holds the group together. And we can actually divide the ABB way into 4 elements. The first one is our operating business model, but also the way we drive performance management. The second one is related to our people and our culture. The third one is our brand, which actually sits with a lot of value. And the 4th one is the governance. It's actually the procedures, the regulations that all our businesses need to follow. ABB need to add value to our businesses. The businesses need to add value to ABB. So the ABB way that actually answered the question, how do we operate? The purpose that was also introduced this summer is actually to answer the question, why ABB? And this is a project that has been running over a year and has included a lot of personnel, but also stakeholders from outside to define why ABB. And I'm today very happy to present it. It has been really well received internally in the Group to understanding why we have the group. So the ABB way actually the purpose actually comes from 5 different themes. 2 is related to our identity. That is creating success. And we know that it always starts with the customer. The other one is leading with technology, which is really the DNA of us. But the next three themes, that is actually the impact that we need to do, that we want to do with ABB. And the first one there is actually addressing the world's energy challenge. So what do we mean by that? Yes, the world is growing. More people are moving into the city and want to take part of the good life. But there are challenges when it comes to sustainability and increased energy needs. ABB has a tradition of supplying electricity to cities, to houses, to transportation. And we want to do that in a sustainable, in efficient and a cost effective way. The second one is transforming industries. We believe that the physical world and the digital world will merge. And we do believe that machines, factories, even cities will be connected, and they will be self diagnosed and to develop to be more automated and more efficient. And then we have the third one, which is related to what we the impact we want to do, and that is the sustainability. And sustainability is embedded in everything through the whole value chain within ABB. We'll come back to that a little bit because we have an exciting day where we are introducing our new sustainability targets. So in a decentralized world, importance is transparency, accountability and speed. The divisions, they have both the accountability, and they need to drive the speed in their decision making to be able to support our customers with their needs. The transparency is the way we follow-up the business. It's the drive performance management. And I'm really proud of our financial department who have in this short period, we actually introduced the scorecards already in July. And we are working with them now, and I think it's an excellent tool to drive performance going forward. The ownership of the scorecards are the divisions. Based on them, they can take the right decision to develop positively. So now let's move to another important part of our strategy. It's actually accelerating value creation through digital. And our software and digital strategy can actually be summarized in 3 different points. The first one, in line with our purpose. Our digital strategy is fully focused on creating customer value, superior customer value. The second one is the differentiation comes from our strong domain expertise. And the 4th one is that the expansion within digital is actually led and executed by our divisions. So let me elaborate a little bit on this. So let's start to look at the focus, the strategy going forward, which is related to our offering, but also the way we interact with our customers. When we look at our offering, we look at it from 3 different categories. The first one is our traditional products. These are products that do not have much of embedded software. This can be simple breakers. It can be electric motors, installation, product asset or mechanical gear. It can also be traditional service. The second layer is actually software enabled product. This area is actually a very fast, a big part of our business, but also a very fast growing business. This is product, for instance. It can be drives with embedded software. It can be robots with controls. It can be our DCS, advanced switching gear, and it can be, for instance, PLCs. Then we have the top layer, which is the pure digital. This is software. And here, we have products like the robot studios, the design and application software. But we also have new products, which we have like our industrial analytics, the Genex that was newly introduced into the market. And to connect all the products, it's the ABB Ability platform. And I think you all know that we decided already in 2,060 to partner with Microsoft to build up our cloud platform. And we have adopted that platform according to ability with a soft layer, which make it very simple to connect our products. The offering towards our customer can be from 1 of these layers, it can be a combination to actually generate superior value for our customers. Let's take a look at a little bit what is the differentiation from many of our customers. 1 is our long relation with our customers. We've been for 100 years operating in different segments with certain industries where we actually build up domain expertise. So this expertise is actually built on our large installations, our global leadership within the businesses where we operate, and of course, our knowledge and history of that. So the digital drives value, and the digital drives new revenues, but it also improves our margins or our gross margin by adding more software into it. And it also pushes through many of our traditional products. The 3rd point in our strategy is, as you know, our operating model, the divisions and the business areas are driving the expansion within digital. And today we operate I mean, organically invest approximately 5% of our revenues into R and D and digital. And as I said before, 60% of the people in R and D is focusing on this. We are working with strategic partners, not only for the ABB platform, but also for other solutions. And we work with both on acquisitions where we believe going forward. Then to an important part, and I also said that during the last meeting in the summer, focus has been to go through our portfolio review. And we've done it with 3 different aspects in mind. We have looked at the strategic market attractiveness of the business, which both includes the market as well as the division by itself. We also look at the opportunity to create value going forward. And then, of course, the fit with ABB, which is also related to our purpose. And we have this morning announced that we will exit 3 divisions from ABB. But I do really want to underline. These assets are premium assets. They represent $1,700,000,000 in sales. That is about 6 percent of revenues. They have a higher operational margin than the corridor, which is the target for our businesses. But we believe that ABB is not the best owner for these businesses to develop further. We will look when and how, but there is no hurry. But we will look at that. And when it comes to turbocharging, I would like to underline this is a highly attractive business where we also considering that we might spin it off and put it on the stock market here in Switzerland. So there's one more further regarding the optimization of our structure. You will hear more from Morten later on, but he has made the decision that the motors and generators will be divided into 3 divisions instead of 1. We'll come back to that and talk more about that. We have also decided to change the name of the business here, Industrial Automation, to process automation, because we think that better reflects what we are doing within the business area. Okay. I'm going to hand over to Timo, and he will talk a little bit about some other numbers, and I will come back a little bit later. Thank you. Okay. Thank you, Bernd, and welcome from my side as well to this first ever virtual ABB Capital Markets Day. Unprecedented times indeed. Today, in the 20 or 25 minutes or so, I will first close the chapter of our major transformation under the ABB operating system and then focus more from CFO perspective on how we drive improved performance under ABB way. And let me open with a super important topic, driving quality of revenue. We discussed this at our 2019 Capital Markets Day and we have made good progress. First, we wanted to target secular growth trends and we have achieved strong double digit growth in these targeted high growth segments. The 6 sectors illustrated here on the side, including for example food and beverage and buildings. Here they make up now 22% of ABB revenues 2019 compared to 12% 2016. 2nd, more business on short cycle, more business with distributors. The distributor growth has been about 9%, CAGR 16% to 19% and it has been strongest in our motion business. And we will continue to build success together with our distributor partners, for example, creating common e commerce offerings jointly with them. 3rd, expanding our digital offering. As Bjorn said, this will drive new revenue streams, but it will also drive higher gross margin with embedded software and greater pull through of our traditional offering. We now have over 60% of our R and D employees focused on digital and software innovations, And we will continue to drive our domain expertise based digital strategy. Last but not least, our exit from high risk EPC activities has made significant progress. Launch orders now make about 5% of Group revenues, down from 17% 2015. Now that number of course included the power grids as well and we would expect this 5% to decrease further. Importantly, mostly of our large projects are now on the 50,000,000 or below category, making project risk more manageable, and they have as targeted more than 60 percent ABB content, which has gone up also during the recent years ABB content. And we will continue to drive better quality of revenue with these 4 pillars under the ABB way. And the business leaders will also talk more about this topic. Now clearly you need to invest to drive better quality of revenue. And we are focusing our investment behind growth. Under ABB OS, we had this prioritization. If you have extra dollar to invest, it goes to R and D or sales. This mindset continues under the ABB way. We will steadily grow R and D within our divisions. And within R and D, we prioritize software and digital, and we actually have had double digit growth on that area on software and digital R and D 19 to 2022. Overall, we look to increase our R and D to about 5% of revenue. And let me remind that good R and D is not only new product innovation, it can also drive better quality, better cost performance. And with the right combination of R and D investment in cost, quality and right product innovation, we think we can drive very good return out of our organic R and D. Then let's look at SG and A on the right side of this picture. I'm actually really quite proud of this achievement and the whole team is. We have continued to invest in sales while our G and A is down 5% and 6% 2018, 2019, respectively. And with ABB Way, this we will continue diligently this fixed cost prioritization. And this is actually a good segue to my next slide. Bjorn mentioned the €500,000,000 Yes, we are proud of this achievement. We have reached it about a year ahead of time. And the final number is actually clearly over €500,000,000 with less than €500,000,000 of implementation cost. About 70% of this comes from G and A and bit more than 50% comes from corporate and function. This is actually more than we originally expected. And we are down clearly more than 10,000 people since the beginning of the program. And progress on ABB operating system cost savings has also supported our margins. When we look at for example Q3, our revenues were down 4%, margins were up 30 basis points and we have actually quite a bit of extraordinary items still running through the numbers during that quarter. Let's then look at the corporate cost situation on the right hand side of this slide. We're making good progress towards our 300,000,000 target from 1,100,000,000, 20.18 to our target of 5 50,000,000 this year. We confirm the 300,000,000 run rate target for lean corporate excluding the non core. And our ambition is to reach this 300 or below from 2021, I. E. For full year 2022 latest. Headcount here is an important driver, but I think it's as important, it signifies how large the transformation for us has been. So as Bjorn mentioned, we started with about 18,000 people in the corporate domain. These people have either moved to business including PG, left the company or continued in the corporate. And to be clear, in many cases, our businesses replaced the people who came into the business. So the net number went further down. In our original blueprint, we had 1300 people to be in the corporate domain. Bjorn mentioned 1,000, I'll take it further down with 100. So we are expecting to have less than 900 people in the corporate domain with ABB Way. Very important, there is 0 overlapping operational activities. For example, R and D or quality operations, 0 in corporate. Treasury and tax, 0 in businesses. Very clean operating model. Another important topic for us and of course for our investors is the non core and overall minimizing legacy project impact. And we want to be very transparent here. We are looking to exit these as soon as practicable, but it will still take some time. I'll talk a bit first about the non core. We have made good progress with a tough portfolio. So we established the non core business Q4 2017 and now looking at end 2020, we are down from over 200 active projects which we were executing to less than 10. We have taken or will have to be have taken by the end of this year operational EBITA charges of about SEK 700,000,000 and we have also taken non operational charges of about €75,000,000 Now let's look at this going forward. So from 2021 onwards we have 2 main exposures and then some smaller. We expect max 300 of operational EBITDA impact. And this can happen later than 2021, because there are certain legal proceedings where we simply cannot control the timing and it is in our interest that we let them run on a, let's call it probability weighted risk return way of thinking. And there can still be some further non operational charges on non core. Then on other obligations, these consists mainly of the Kusile project and the steel structures in electrification. These are both coming from time before 2016. In Kusile, we have made a proposed settlement, which we think is very fair and also reflected that hope we can move there expeditiously forward. I want to be clear, as it says in our 20 F, the Kusile settlement does not cover the regulatory proceedings outside South Africa, which are currently not estimable. And as ABB, we naturally want to be good corporate citizen everywhere where we operate. We have a self disclosed, self reported, and we are working in good cooperation with all authorities. And this is naturally there also to minimize the exposure. On steel structures, we target settlement 2021. Let's hope we get there and we would get that sort of off. And then finally, I wanted to touch upon the Power Grids transaction, because again there we really want to show that we are transparent. We have said all along during the transaction that there are certain possible obligations mainly related to projects which were in execution already before signing of the Power Grids transaction. This is covered by SEK 300,000,000 escrow, which we have represented when we reported the Q3 numbers. Now this list is comprehensive. We continue to work through this balancing speed and cost for optimal outcome. I know it has been painful, it's still going to be a little bit painful going forward. But let me be very clear, we will not go back to this kind of large scale EPC. We drive the 4 pillars of quality of revenue, as we have discussed earlier today. Then let's move from cost to performance management, bit more from CFO viewpoint. So Bjorn discussed about the strategic mandates of our divisions and the scorecard system. And I want to be again very clear here. We aligned the divisional annual incentive plans with the right scorecard KPIs supporting their strategic mandates. So for example, if a division has a profitability improvement mandate, the biggest weight is on Op EBITA, then maybe operating free cash flow. On a growth mandate, biggest weight naturally, order or revenue growth, but also of EBITA because we, of course, want to keep that margin, that high margin running with the growth and all have productivity. This is the way we drive continuous improvement going forward under ABB Way. And with this, we make sure that all parts of ABB contribute towards the Group targets in the right way. So what will this new performance management system then deliver? As ABB Group, we are prioritizing margin improvement with an ambition to reach the upper half of our mid term 13 to 16 operational EBITA margin range as from 2023. Part of this uplift is expected to come from market recovery. But as importantly with ABB Way, we now move from central cost programs to driving systematic continuous improvement. And all business areas and corporate are expected to deliver meaningful continuous improvement contributing to ABB Group margin expansion. So when we look at the bridge overall, we expect a bit more than half of the margin pickup to come from what one could call self help and bit less from market recovery and other growth initiatives in our businesses. And each of our business areas will today outline their targeted margin improvements. And at the corporate level, of course, we need to bring the corporate cost down to under €300,000,000 and exit non core. That improved margin then of course needs to flow into cash. And our cash generation and cash conversion ratios have been impacted by our transformation. 2020 is impacted particularly from transformation and also from our planned pension outsourcing, which we partly completed Q3. Despite this, we are tracking well versus 2018 2019, and we continue to expect resilient cash delivery for this year. Now looking forward, many of our cash drivers will be more favorable. So first, cash flow from operating activities. We expect to see improved margin. We move to very granular networking capital management from percentage of revenue to each of the components. We have scorecards on each of the 3 components. Fewer transformation burdens and one time charges are clearly expected going forward. And also our effective tax rate is moving from 27% to 25%. At the same time, we would expect our CapEx to remain approximately at the 7.50% level this year due to COVID, partly it's going to be probably a bit lower than that. And we will also expect lower finance cost driven by capital structure optimization. And importantly again, very clear responsibilities on cash delivery. Our divisions all have operating free cash flow. It includes restructuring cash out. It includes CapEx in their targets. And then corporate is fully responsible for tax and finance cost from cash perspective. Bjorn discussed earlier about ABB Portfolio Management and the planned exit of the 3 divisions. These are of course very important portfolio management decisions. But equally important is that under ABB Way, this systematic portfolio management happens in different levels of our organization. The business areas and divisions are fully responsible for their performance. And under this framework, 1st of all, we would expect to move to a situation where we have some 5, hopefully 5 plus bolt ons on our divisions. It might take a little bit time to get there. Then similarly, the divisions and business areas use the framework to drive transformation and smaller exit decisions or business improvement decisions. And the business area best presidents will again talk a bit more about this area. And I want to mention this is a real change on how ABB drives both organic and inorganic growth. Let me then cover ABB's adjusted financial framework. So the changes on the framework are kind of like marked on this slide with these little flags. So first, we are redefining our growth framework. We are targeting 3% to 5% annual average growth through the cycle. And we say about 2 thirds could be sort of comparable or organic, about 1 third inorganic, maybe in the beginning it could be a bit more on the organic side. I'll come back to this on the next slide. On the Op EBITDA margin, 13% to 16%, upper half as from 20 20 3 onwards. On motion, we are upping the margin from 14 to to 18 to 15 to 19. There is no change in the other business areas. There is no change in ROCE, in free cash flow conversion or EPS. However, as I discussed, we expect to move on the effective tax rate from our current 27% level to 25% as from 2023 onwards. And for modeling purposes, you can look at that like as a linear decline towards that 25% number. Let's then look at our revised growth target a bit deeper. There are 2 key points I want to note here. First, ABB Group as a whole is still more in the stability and profitability phase than in the growth phase. And when we move firmly to our aspired margin levels, we will naturally focus more and more on driving growth. And second, we think we will deliver better value from our acquisitions when we focus on bolt on deals driven by our divisions. Importantly, our investors will continue to be able to focus the comparable growth. From the comparable growth, we exclude FX impacts and also transformational acquisitions and divestments, I. E, if we would be selling or buying a whole division or if the revenue would be more than 5% of the Group. And on inorganic growth, we measure bolt on acquisitions and divestments in our divisions. And we will continue to execute acquisitions under systematic criteria. First of all, the acquisitions naturally need to be synergistic with our core and with our strategy. But if you look at more like revenue synergy driven deals, there we want to see higher return than our weighted average cost of capital, latest after year 3. If you look at more like cost synergy driven deals, there we want to see accretive EPS very latest after 1 year. Let's then talk about our new margin equation. So ABB's new margin equation is very straightforward. Group margin 13 to 16, upper half as from 2023 consists of the business area margins. And the business area margins consist directly of the division margins, I. E. All the business area costs sit with the divisions. And then corporate needs to be 300 or below and there is no cost allocation from corporate to the business areas nor to the divisions. So this is a super clean model from accountability and speed perspective. There is no place to hide, no place to say, but I got this cost from corporate, so you know, I didn't do this or that. And it really drives transparency, accountability and speed, as Bjorn also discussed about. Before I summarize, let me discuss a little bit about ABB's capital allocation priorities. Our capital allocation priorities remain unchanged. 1st, fund organic growth. 2nd, pay rising sustainable sustained dividend per share. 3rd, value creating acquisitions. And 4th, return additional cash to shareholders. And we expect that our operating cash will well cover funding organic growth and dividends. Our capital structure optimization program is an efficient way to deleverage and improve long term performance. We can fund planned bolt on acquisition with acquisitions within this framework and our commitment to the 7,600,000,000 to 7,800,000,000 share buyback remains intact. And we continue to target singular credit rating to maintain financial flexibility. So for my final slide today, let me summarize. We have achieved well over €500,000,000 net savings as targeted under ABB operating system Simplification Program. With ABB Way, we target to clearly improve operational performance by driving our stability and profitability before growth framework, combined with differentiated scorecard KPIs and for incentive plans in different divisions. Overall, as an ABB Group, we are still more in the profitability phase than in the growth phase. So our primary mid term target is to drive margin accretion. We continue to evaluate our portfolio in a systematic divisions aim to strengthen our overall business portfolio. As Bjorn discussed, we want to be number 1 or number 2 in the markets where we participate in driving better quality of revenues leading to profitable growth. And finally, our improved cash generation will enhance our flexibility to invest in both organic as well as bolt on growth, while providing attractive returns to our shareholders. And with that, I want to thank you for the time and hand back over to Bjorn. Thank you, Timo, and thank you for the insight. Very, very, very interesting. You know, one of these investors, maybe it was an analyst, who told me that your margin corridors are pretty boring. And I have a tendency to agree with that. From my perspective, when I look at the group, 13% to 16% is quite a big difference. I think it's much easier to say we should be above 15%. Yes. And of course, 15% is inside 14.5% to 16%. So that's very clear. It's actually a little bit lower I hope you agree with me. Now we're coming into a very important subject for ABB, but not also for me personally. I think the sustainability part of ABB is actually the DNA. ABB has always been a big contributor to sustainability. And I think from that perspective, it is important now to take this extra step to push the boundaries to set up the future. You also saw in our purpose that sustainability is a part, important part of our achievement, what we want to achieve. So we have now today presented our long term sustainability targets. That means where are we going to be here 2,030? And we have decided to focus on 3 different pillars. One is to enable a low carbon society, which I think we all feel very dear for. The other one is, of course, preserve resources. We know the scarcity. More people on Earth. We are using more of the resources. We need to make sure that we take care of them. And social progress. So if we look at the targets that we set up, give me some of let me give you some of these examples. And I think one important part is that ABB operations are going to be carbon neutral 2,030. This is a big challenge, I can assure you, in all our operations around the world. That is our target. But if we actually look where we can do the biggest impact when it comes to climate change, It's actually what our products can help our customers to be more efficient. That's where the big impact comes. And we have set the target that year 2,030, our customers are going to be able to reduce their emission of CO2 with 100 megaton. When I heard that number before, what is 100 megaton? We throw ourselves with large numbers. But this is actually equivalent with 30,000,000 cars. It is actually equivalent with 40 coal powered plants, and it is actually equivalent with a small size of a European country. So it really shows what kind of impact ABB can make. The second part is regarding the preserve of resources. And I think circularity needs to be the focus. And we have decided that 2,030, 80% of the ABP product and solutions should be covered by our circularity approach. And then when it comes to social progress, we want ABB to be an attractive company to work for, But we also want to be a good citizen where we operate. So we are also pushing the boundaries on this part. So let me summarize a little bit. As I said from the beginning, this day is not about Timo and me. Today, it's about the businesses. Today, we're going to look into how the businesses are going to create value going forward. And I'm quite excited about that. So by this, I think I want to thank you all for bearing with us and listening to us. And we move over to Q and As. And then we're going to go over to the more exciting part of the day. Thank you very much. Thank you. And with that, we open up the Q and A sessions. And I already now know that there's quite a few people in the line. So I ask you please to limit yourself to one question at a time. And we open up with Shane McKenna from Barclays. Please go ahead, Shane. Yeah. Good morning, Timo and Anne Sophie. Hope you're all well, and thank you for taking my question. I should say question rather than question. But I appreciate today's presentation. As in June, I'll see if I can sneak a further one in. You're targeting stability, profitability before growth. But given the cut to organic growth guidance from back in June of 3% to 6%, to today is now 3% to 5%, of which now onethree is organic. What has changed since then? Is there a particular division or end market that's driving that reduction over the medium term? Or is this you being much more selective on sort of higher margin revenues? And if I could just sneak one more question in for IA because it's not clear in the slides or should I say process automation, the targeted margin of around 14% in 2023, Does that include or exclude the contribution from the turbocharging business? If you could clarify that, that would be great. Sorry for sneaking another in. Thanks. Sure. Let's Thore take the first about growth. And I want to underline the same thing I did in my presentation. We are going to grow all our businesses. But you also see that we are not going to grow businesses that are not really delivering the financial performance. Give you an example. I think there are so many companies, underperforming businesses that are acquiring companies with good margin, better performing margin. What happens? Of course, the good performing company actually slides down to the performance of the buyer. It should be the other way around. Exactly like Tarak and his team did with the GIS. You should have a high performing business, then you buy an underperforming business, and then you improve the business. That's how you're going to do it. Yeah, during the beginning of the target period we have forward, we say that, of course, we still have a little bit more than half of our businesses that we need to put a little bit more emphasis of getting the margin in place. While we have about 40% of the business, they're going to go for full speed growth. And I do expect that these businesses today is going to make around 5 to 10 acquisitions per year. That is our target for the business. So I can assure you, we are going to push growth. The reason why we pulled it down a little bit, it's just realistic. Look a little bit at our history part here. We need to give you guidance where we can make sure that we fulfill the part. And now I think we should do it. We should grow more than 3% per year. That is our objective, and that is what we're going to push. And of course, I would love to grow even more than 5%. So should I comment? Yeah, why don't you take the second one? Yeah. The second one was on the margins. And clearly, out of the 3 business areas where there would be this possible exit or expected exit. Again, we are not commenting on the timeline of the exit. The biggest proportion of the impact would be in IA. We are not moving away from the target and Peter will talk more about that later today, even if we would have executed the turbocharger exit, nevertheless it could require also some inorganic activities on the other side. But I want to comment this from Group perspective. If we look at this with or without the portfolio changes, we would expect as a Group to be on that or operating on that upper half of our expected our target margin range as of 'twenty three onwards in all scenarios with or without these three exits. Thank you. Very clear. Thanks a lot. Thank you. And with that, we'll go to the next question, please. And that's Martin Wilkie from Citi. Please, Martin. Just a question on the cost savings. Obviously, your EUR 500,000,000 cost plans complete ahead of schedule. In the past, you've had some big corporate wide plans, the white collar productivity and so forth. Given there's not been another big announcement of a cost plan today, should we just infer that, that is now a divisional responsibility as part of those targets? There's no longer a need for a corporate wide plan. And then related to that, when you look at the bridge that you've kind of given, Timo, we can see productivity within that. But when we look historically, oftentimes that productivity has been eroded by pricing, by cost inflation and the retention rates have often been relatively low. How can we think that there's going to be more retention of that productivity in the future than there has been in the past? Thanks. Okay. Thanks, Martin, for the questions. So first of all, we are not having another corporate program because corporate has become super small. So there is, I mean, we are still going to go down on that. We are going to reach that 300,000,000 target. But the whole point of the accountability and speed is that this happens in the business. And then it is actually a good segue to your second question. Why will it now happen better than in the future? First of all, in this new model, divisions are fully responsible of all of their costs. And second, as I said in my presentation, and this of course very strongly driven by Bjorn as well, every single division will have this 3% productivity target in their annual incentives. So let's say you grow 5%, your costs go up 2%, and if you are flat, your costs go down 3, that's approximately the thinking. We measure productivity with a very simple measure revenue to headcount so that we would see the expected impact. Thank you. Okay. Thank you very much. Thanks. And now we will hear from Andreas at JPMorgan. Andreas, are you there? Andreas, are you there? Yes, good morning. Thanks, everybody, for the time. I have a question on R and D, where you today made some comments about accelerating, particularly on the digital side. Maybe you could elaborate a bit. You said you reviewed the ABB Ability and Digital Agenda over the last 6 months. What triggered the desire to accelerate that? Has it something to do with kind of the general acceleration in digital during the pandemic? And if you look at your measurement of R and D, the 4.7%, including the digital investments, You talk about 5%. That's a relatively small increase, maybe $75,000,000 or so. What can you really do with that amount of money, given some of the much bigger numbers that others have spent? And how do you specifically going to invest that into what areas where you can make a difference? Yes. Let me talk a little bit about this. I think it's very warm on my heart. As you saw today that each division is responsible for how much they spend. So we have some working with traditional not so much digital investing much less, while many divisions which have a lot of software embedded digital within them are investing much more. We don't say from corporate, we are going to invest this much, and then it's going to happen. These are the businesses that determine themselves how much do they need to invest to be able to be competitive, come up with new solution and drive this. And what we have seen during the year is that the number of the part of our business, the sales of the portfolio is growing when it comes to pure digital products as well as digital embedded software embedded products. So that is really the most and the fastest growing part of the business. So we are not setting a limit at 5%. That is where we are today. I would not be surprised if this would even be higher next year. The only thing I can assure you will not be lower because we have our scorecards. We can follow these investments. So if we see any division that is actually cutting on their R and D, we raise a red flag and we are straight on them. That's what the transparency actually is giving. But I do believe that we will continue to drive the digital, and we're going to do it according to the strategy that we are presented. And we feel pretty comfortable about that. So I mean, it's the revenues went down, just your number, 4.75. The revenues, of course, have gone down because of the pandemic. So of course, the margins have gone up a little bit. But we should be around 5%. I feel it's the right number. And of course, 60% of the engineers, the researchers are actually today working with software application and embedded software. There was a question also on if I comment just on where is this targeted. So for example, I think in the robotics will be an area where we would expect R and D to go up, just to give an example. Yes. Thank you. And we take the next question, please, and that's from Matthias Holmberg at DNB. Thank you. You've already touched on the sales growth target, so sorry for dwelling on this. But if I look at the swoosh recovery scenario that you referred to Bjorn, which implies a 5% market CAGR until 2023, How should we think of that you're only targeting 2% to 3% or say 3.5% organic growth backing out to 2 thirds from the overall growth target. Am I understanding it right that you're expecting organic growth to be below the 5% you see for the market? And if that is the case, can you help us understanding a bit where this discrepancy is coming from, please? I think this 5% that I said your next 3%, that is not ABB. That is actually the market that we see will recover in this part. Our ambition is, according to our growth targets, is to be above 3%, between 3% 5%. And that is our targets year after year. We will, of course, if the market gives the opportunity, we will, of course, grow faster. And of course, some of our businesses who have been hardest hit by the COVID will of course also bounce back a little bit faster. So some of the numbers might look a little bit higher during next year. Yes, if I comment on that as well, I mean, we said that this is a true cycle. Now we are in a very unusual year, of course, here sitting at 2020, so it does not exclude at all a scenario that we would grow with the market. I mean, it's difficult to know where the market exactly goes now next year and so forth, and then we'll see it to recover. So we are not by this saying that we expect to grow slower than the market again, and this is through the true cycle. I think the most important is that in a normal scenario, we have realistic targets which we can meet and beat and move forward with that. That's clear. Thank you. Thank you, Madias. And now we move to Daniela Costa from Goldman Sachs. Daniela, please go ahead. Hi, good morning. Hope you can hear me well and everyone's all right. I have two questions. One question I wanted to follow-up on. You talked a lot throughout the presentation about the focus on digital and software, R and D increases and all of that. I just interested to understand sort of why did you decide go the organic way here versus, for example, some of your peers, which decided to do like a one big step into getting into software and then accelerate growth from there? Just curious on that decision. And then one question for Timo, just a quick question on the tax rate, the 2 percentage points improvement. Where exactly does this come from? I guess you're talking about it has sustainable going forward, but you mostly have done around 27 or higher in the past. So actually a meaningful impact interested in the context? Thank you very much. Yes. Thanks, Daniela. Why don't I take the questions here? So if you look at these large software acquisitions, as we said, we execute our domain based digital strategy. There are companies out there which have bought software businesses. And then the question is, will these software businesses they have bought somehow significantly improve their market position in the product businesses, which drive embedded software and of course in the traditional product business. Our view about is of that is that it is not the case. We don't know, of course, how this works forward. We are comfortable with our strategy, and we think that when we look at bolt on acquisitions, they bring best return when we invest within our divisions. And there, of course, we are interested in buying technologies. We're okay to pay high multiple on businesses, which support and make our current businesses even better. This is different than buying a software business and deciding we are now in software business. So that's how we look at that. And of course, if you want to add. And then on the tax rate, so this is a change partly driven by the fact that we have now fully executed the PG carve out. Our geographic situation is a little bit different. And we have now had a bit more time to focus also on this responsibility split, as I said, operating free cash flow, fully divisions and business areas, tax fully corporate. Now when we have this new framework, we have looked into it after Power Grids exit, and we see that we have a good path to get to this 25% 2023, and then a target to stay on that level. Of course, that assumes that nothing crazy happens in the global taxing environment, which would totally change the picture. Thank you. And now we open up the line for Alastair Leslie from SocGen. Are you there, Alastair? Yes. Hi. Good afternoon. Thank you. Just a question on the bolt on M and A comments that you just made. I was just wondering whether the business is going for growth, kind of ready to make the kind of, I think you said, 5 to 10 smaller acquisitions a year. Bjorn, I think your successor at Sandvik effectively said recently you needed to push the divisions to be more proactive around M and A and change the mindset there to take on a little bit more risk. So I was just wondering if you sort of see similar challenges at ABB, given the kind of the move from a centralized structure to a decentralized structure is kind of in its infancy? Thank you. I think it's a very motivated question. I think traditionally, we know that all these acquisitions have been driven centrally and the businesses have not really been so much involved in them. This is, of course, changed now. And the ownership of the business is actually out there, which means that the divisions can acquire businesses. They can consolidate the market or they can buy technology to add on to it. The important thing is that the business keeps its leading position and continue to grow and delivers value. That is important. Do we have that now in the businesses? I think the business have started now to focus with help of banks and other one who will find good attractive targets, but also through our domain expertise that we have in the different businesses what could. So we are putting in a lot of pressure on that part. And I think that growth will come through acquisitions. That's my experience. Takes maybe a little bit time to get. You need to be too to tango, and you have to find the right price to drive it. But yes, we will have a focus, not only us in the executive committee, but also the board is very interested to see what kind of add on acquisition that is going to be. I said that I think a company like ABB should have between 5 to 10 acquisition power. And of course, we say that when you are stable and profitable, you go for growth. That's also where you start focusing on that. Then you also talk about consolidating businesses in the market. While you might not really be there on performance and if their business is stable and you really need some technology add on because that's crucial for the future, the division is also allowed to make that acquisition. So I just want to underline that. Maybe from technical perspective, of course, this pipeline development in each of the business areas is again part of the portfolio management strategy. Thank you. Great. Thank you. Thank you very much, Cara. Thank you. Guillermo from UBS, please. Your line is open, I hope. Yes. Thank you very much. Guillermo here. Good morning or good afternoon, Nancy, Timo and Bjorn. I wanted to ask one question on portfolio management. When looking at, for example, Industrial Automation and when identifying some of your positions that are basically low on the market in terms of market share or positioning in the market, You also find potentially low growth prospects as well, basically referring to OTC in which you have a 3% to 5% market position. And you can say a relatively lackluster growth outlook as we go forward. And similarly on instrumentation, which is again, it could be impacted to some extent by low growth and also a 3 to 5 market position. So I wonder whether why actually on portfolio optimization or portfolio management these divisions remain at ABB? Or what's the in a way, the message for these divisions going forward? Thank you. Well, if Guillermo, Timo here, why don't I start this? I would actually say that this question should be best answered by Peter when he comes and talks about the business. So we have announced now today what we are planning to do on the overall portfolio on divisional level. And of course, we are not going to announce anything more. And I think it's important that we go through the business area presentations and see how our business area presidents look at their portfolios and how they are making better performance with these portfolios and what their thinking is on there. So at least I'm not sort of here. I think also important here that this is not a one time shot. We continuously challenge the business areas and divisions if they are core for our business. And we'll continue to do that. We'll see now which businesses are actually developing according to the plan. If we see businesses is not really living up to the quality standard of ABB, we might take different decisions. So now we set this up, and we will be shooting hard, and we'll be reaching our targets going forward. And we'll see what happens further on. I hope it answers some. Yeah. So Guilherme, you tuned in for a question later on with Peter. I can see he's already started preparing. We're moving to Alex, please, of Bank of America. Are you there, Alex? Yes, I am indeed. Thanks very much, Anthony. Good morning, good afternoon to you all. So I guess I'm going to ask a slightly in person question, I'm afraid. You mentioned the 13% to 16% range was called boring. You said a number of times, June and today as well that you believe we should be talking about 15% -plus for the group. So why not make that an explicit target? Is this just a point about being able to develop consistent track record on expectations, etcetera? But just wondered if you could maybe address that. Thank you. Yes. I don't know. We could, of course, have done that. But I think we were pretty comfortable with the targets. We made some adjustments. We're going to let the businesses work themselves into that. What I've been talking about is 15% and you know that that is in my heart and I will in the end make sure that we will get there as a group. But I think we had these financial targets which have been worked out very seriously during a period. We have made some adjustments to these parts and I think we are pretty comfortable with the levels here. But you know me and of course, you can hit on me if we wouldn't reach it. So but from my perspective, that's where a group like ABB should be. And I hope you agree with me. Thank you. Thank you, Alex. We move on to Joe Giordano from Cowen and Co. Please, Joe, go ahead. Hi. Thank you. On the 3% to 5% growth, do you guys feel that at this point, you're more equipped to maybe outperform when the markets weaken not decline as much, but maybe challenge to outgrow in the peak of the market? And then I know we'll get to second question in robotics when you do the presentation there. But for markets like that where there's a robust private market but things are changing rapidly and markets like logistics are expanding very quickly like how well equipped do you think you guys are to move quickly in a market like that? Thank you. Yes. Let's first take the bottoms side part. I think you will have an excellent because these are the subjects that will be actually covered by Sami today. So I think we wait and let he and his team do answer the one. When I come on the growth side, are we going to outperform the market? And so I think we'll need first to see where the market is coming back now after COVID and to see make sure that we get the market to the 5% CAGR where we have shown today. Of course, no one knows really about the future, but that is we will make sure we push growth in some of the divisions and we will always try to outperform the market. Yes. And this question, of course, also depends how the mix develops, so how different sub segments of the market developed. We have by no means a plan to lose share anywhere where we want to operate. So clearly, the question is then, how do you define the market and how will the mix in that market change? And of course, there again, we have a systematic way with a better quality of revenue thinking to drive our offering and our channel towards better secular growth markets. We will continue to drive with that. It is really a long term thinking. And with that, of course, gradually, we will ramp up into a better market growth. I think what was said earlier today already many times, this target, you should see it as a target, which is an annual target through cycle. And of course, it takes into account that as ABB Group now, now we are more on the profitability phase. Bjorn went also through these numbers than in the growth phase. When we move towards more to the growth, of course, we'll start to then think about this and push this differently. Thank you. And with that, we're sort of coming towards the end of this Q and A session. So we take the final question from Ben at Morgan Stanley. Please go ahead, Ben. Good morning and thank you for taking the question. And I appreciate that there's already been quite a lot on this. But Bjorn, I wanted to understand your kind of thinking about this pure software layer. I get the difference between the embedded software and the pure software. But at the moment, if we think about robot studio, data analytics, ABB Ability, the things you mentioned, that's still a relatively small sort of revenue stream within ABB. Is it pure software that you actually want to emphasize and grow? Or is it sort of digital overall? Can you give us your sense of I appreciate you're not going to do acquisitions, but how do you build out subscription or license or differentiated revenue from software? Thank First, I think thank you for the question, Ben. I think going forward, yes, we of course even like to sell pure software, as we said. We talk about a number of different parts. We have just newly launched this industrial analytics, Genex, which is one that we are pushing out. So we have been developing. But what we have said, of course, that they need to be within the domain and it's about lifting the value creation for the customers. So we are not to put it this way, we are not going to buy a big software company just to have a bigger percentage of our revenues to be software. But we, of course, in both the embedded as well as software within the different business will grow all the time in the future because the products have more software, they are more connected products, and they are more pure software products that we are being put into it. And we are absolutely open, as Timo said, to buy software companies, but they have to be synergetic. That is important. They must add something they can add to some products. They add value to drive where they can help us to do predictive maintenance or whatever we need to develop. That's the type of software. So we are not just buying a vertical software company that says, now we are a soft company. We do not believe for ABB that is the route to go. Do you want to add something to that Timo? No, I think it's comprehensive. Yeah, thank you. And with that Understood, thank you. Very good, Ben. And with that, we close this Q and A session. We now give you a little bit of a breather, time for you to stretch your legs and we'll see you back here in 30 minutes. See you then. Thank you. Welcome back everybody. Hope you've had a little nice leg stretcher, Get some energy out and for the next an hour and a half or so we'll be hearing from 2 of our business areas And we're starting with Business Area Motion. Please go ahead. Thank you, Hansi. And a warm welcome back also from my side. I'm Morten Mirod, and I'm the Business Area Leader for our Motion Business in ABB. And together with me today, I brought in Micha Kuglio, our division president for our Drive Products division in ABB. And we will show you a bit more of what Motion is all about. And we say that we keep the world turning while saving energy every day. And what does that really mean? Well, we made a short video to give you a bit of flavor and introduction to that. Wherever you go, whatever you do, you are never far from ABB drives and motors. From cooling to warming a building, we help you hit the right temperature while avoiding high monthly energy bills. We also make sure you can squeeze out every gram of sugar without wasting a drop of energy. And for extracting raw materials, we are breaking new ground in safe, efficient electric mines. We provide the power to bend metal and the precision to craft paper. Our smart motion technology enables oil, gas, and chemicals to flow and brings uninterrupted water and power for millions of people around the world. ABB's traction technologies from drives and motors to battery storage systems make rail transport even more sustainable. Wherever you look, ABB Smart Motion keeps your world turning. So a lot of great examples of what we do as part of our Motion business. And what we would like to show you here today is why we are the leader in this very attractive industrial motion market and how we do derive performance and growth under the ABB way. And then also to make the commitment and also to hope to build the confidence that we will create shareholder value also in the future. And I think you already seen the statement that we are increasing our margin corridor from 15% up to 19%. So when we look at what we have here of some of the megatrends of the world, the world is really going electric. One third of the world's electricity is already consumed by motors. What is a bit of the sad side is that only 1 out of 5 out of those motors is having a variable speed drive attached to it and controlling the speed or the torque. When you have a drive controlling the motor, you can save up to 40% of energy. And the demand for electric motion will double in the next 20 years. Therefore, energy efficiency is not longer really an option. It's a must. When we look at our offering and what we do, we are number 1 in this motion market. And it comes from a huge investment in R and D and technology over many, many years, building a very comprehensive product portfolio. From the small drives and motors that are the size I could hold in my hand and you can sit in your treadmill at home or in a small mixer in a bakery, Up to those huge motors that would fill the whole stage here and controlled again by a drive and sitting part of our propulsion systems in the biggest cruise ships or icebreakers ever built. So that is the breadth of our portfolio. So whatever customer needs or customer problem, I think we have a solution to it. And what do we say in motion? It's about profitable growth. That's our mandate and what we are committed to. I've also shown that in 2020, in a tough year with COVID all around the world. And it has but still in this year, we have been able to show the really strong resilience in the business in the 3 Q1, as I think everybody is very well aware of. And it comes really from a few very important thing for us. First of all, is with the wide portfolio and the many segments we serve. We are not a single segment or a single market dependent. We have a lot of options on that side where we can use and sell our products and services. Then we're also talking about we have many markets. We are well positioned throughout the world and not a single country or geography dependent or a single channel. So with the channel partners and the channel setup we have in motion gives us also resilient in the business. But and if you look at our bottom line performance, it comes again due to this strong cost controls and the part of being the DNA of Motion is really to every year do a little bit better than before when it comes to cost and having a constant productivity over the year. That's what we have shown in the past and that is what we also will show in the future. So if you look more into the future and how it looks like, it is we expect now in the coming years, the market will come back at a higher pace than what we see over the whole cycle. But for us again, it's about finding those pockets of growth, those growth opportunities that could give us more than just what the market is expecting to recover and grow. So there is again to be positioned in the different segments across the world and addressing the customer needs and the trends that what we face today. Especially I'd like to mention around performance and reliability. We offer our equipment is often used in very critical applications. That could be in a steel mill, it could be on board a ship, as we talked about. It can also be in a food processing plant. What is also important that the cost of an unplanned downtime could be higher than the cost of the purchase price of our equipment in the 1st place. So reliability is for a big portion of our portfolio also a must. Also when we talk about digital, it's opened some new doors for us. How we can go out, get all of our products, all of our motors, our drives, connected to the cloud or to on the edge and local applications. This is also how we get more information, and we can help our customers more in their maintenance cycles and throughout the end of lifetime and then even to the next generation of products in their plants. And as we also say, energy efficiency is a must from a sustainability point of view, but also from a business point of view. We want to make sustainability and energy efficiency a business case. And we do that also with our technology because our technology leadership is one of the key parameters how we differentiate. I showed you the vast portfolio that we already have in place. But it's and it's also used there, the technology leadership, to set new standards, to set new expectations as the customer expect from us when it comes to efficiency or also how we improve the quality. But again, it's not just about products, solutions or offering. As much it is about domain expertise. And in practice, this means having application engineers, having people within our organization, but also with our partners who really understand the end customers and our customers' needs because they turn these problems and those challenges into solutions, into motion solutions. And that's what domain expertise really means. And then we are very proud of our global scale and coverage, which means the global scale being everywhere, but having the local coverage. That means that everywhere you have a motor, you will have a motion ABB Motion Expert close to you. That could be with SABB and employed by ABB with our service technicians or it could be among our channel partners, who have also been trained by us and is really our extended arm and our representative out in the field. So I have a couple of examples I would like to show you today that underlines how we use these three elements also to be successful in the market. The first one is about energy setting a new standard for energy efficiency and using it through technology leadership. We were all used to 4 different levels of energy efficiency from IE 1 up to 4. We then came up with a new technology. Synchronous reluctance motors together with the drive sets the standard now of IE5, a new level in the industry where it's really able to save way more energy than we have ever been able for before. The example here is from Campbell's or one of their food factories in Australia. In the state of Victoria, they had a plant where they have 2 problems. 1 was to reduce their energy footprint or their carbon footprint, and the other was to reduce their energy bill. This technology with a synchronous reluctance motors and drive package answered both those questions. Reducing 131 tons of CO2, but also 14% reduction in their energy build. So that is how you can use technology for really setting a new standard and solving real problems in the market. The other example I would like also to show you is from China, and it's about local domain expertise. And this is in our the water segment. In Shanxi province, in the midst of China, there were more than 10,000,000 people who did not have access to stable supply of fresh water and not enough water either for the local farming. So here they took the whole part of the Yellow River and lifting up 6 36 meters, lifting more than a 1000000000 cubic meters of water over to the New River Delta so that the rest of the province could get water. These are projects, very complex projects where we are involved, where you need to understand the complexity of these pump stations, how it's all the controls and how it's going to work. And working together there with the pump manufacturers and the local team, we have been able now to provide water into these new areas. And it's also important that it's reliable for the future. And therefore, all our ABB motion equipment in these plants are connected to our motion digital center in Beijing, where the experts are able to see what is going on in this equipment and then come up with advice before any problems may occur. This is, again, a great example how we are being a global expertise, but also having the local know how where it really solves problems. And the last example I would like to show today is a bit of a mix between our digital services with technology where we're using the smart sensor. What is you can place on the motor, it's and it will feel if there is something wrong or maybe a problem in the future. And it doesn't work just for ABB motors. It also works for every other brand of induction motor. And then it's the cases in Poland where we're working with Ergo Hestia, which is one of the leading insurance companies in Poland. And they give now a premium, a reduction on the insurance premium to their customers who install the smart sensors on all motors in the plant. Because they have seen that when they are able to predict any failures early, they are able also to reduce the insurance payout. So it's a win for the insurance company. For the end customers, for the plant owner, it's an advantage because they have now a much better transparency on what's going on in the process in their plants. And for us, as ABB, come up with a technology is to open new opportunities together with those end users and customer plant owners when they're looking at their critical equipment. So those are three areas where our divisions is working with customers in the market, finding both new business models and using that technology to gain market share. But I see today, we also made some announcement for the business area of motion. We have our mechanical power transmission for most people known as Dodge, a leading player in the North American market in the mechanical market. And after our portfolio review, we have also seen that we believe that the best way to get the full potential out of the business is under a different ownership. When we're talking about our motors and generator division, we're going to split that into 3 separate divisions. 2 of them, when you talk about IEC Motors and the NEMA Motors, it's product business. They produce more than 3,500,000 motors every year. It's fast cycle, it's delivery time within days. It is a different type of business than our large motors and the generator business, which you could have lead time up to a year, which is big equipment always designed for the application or for the use case. They have different challenges and they also have different opportunities out in the market. That's why we have decided that they will take responsibility for their own business plans, their own people, their own costs and really to drive the performance that we believe. We have identified good opportunities to improve in all of the three areas. And we believe with the focus and the accountability, we will run this as a better sum of this as 3 than as 1 together. When we look at our other 4 divisions in our business area of Motion, they are already set up for growth. They are in a good place, and it's really about profitable growth for the future. Our traction business is the leading manufacturer and supplier of propulsion system for train and in the train business. But also they are expanding the scope, taking a bigger share, not doing just our motors, our converters and the overall propulsion system. We're now looking, say, what can we do more? We go into battery system and into the energy system that is a train which is also now embedded in many of the new trains being built as part of the movement to green transportation. And we're also now more and more a player into the field of e buses and also the truck companies when we are moving, say, into the green transportation time. System drives is one of a leading player in the field of large drives. So here we have some also an amazing portfolio of drives that is in all the large plants around the world but also in the infrastructure place. For instance, when the offshore windmills, when you find some of these very large windmills, you would also find an ABB converter from our system drives divisions. And then we have our service team, a dedicated division in motion, who is looking after the installed base of more than 50,000,000 motors and drives out in the field. This is a big responsibility to see that we can support it through ourselves, but also with our channel partners, who is our extended out in all the markets. But then also here, to being a new and the leading force when it comes to looking at new business model. How we can grow with motion as a service. So I think that is also a team we have set up that is now dedicated in our service business, also looking at the next step of some of the offering. And last but not least, also our Drive Products division, headed by Micha. And I will I know that he can do the introduction much better than me. So I will really hand it over to Micha to give us some examples here. Thanks, Mika. Thank you, Martin, and good afternoon. In dry products presentation, we have 2 parts. First, I will describe our business today and expand on information shared earlier this year. And then I will describe how we see our business in the future and how we plan to deliver on our strategic mandate. I assume all of us are not drives experts. And because of that, I want to start with a video explaining what is an AC drive and what are the benefits for our customers. So let's see the video. Electric motors play a very important role in our everyday businesses and lives. They move and run basically everything we need for business or pleasure. All these motors run on electricity. In order to do their work of providing torque and speed, they need the corresponding amount of electric energy. All these motors consume electricity to provide the torque or speed needed. If that torque or speed was too high or low, mechanical controls were used to slow down shift or control output. The result is inefficiency with a lot of wasted materials and energy. A motor speed should match exactly what is required by the process. But how do AC drives work? Our drives sit between the electrical supply and the motor. Power from the electrical supply goes into the drive, and the drive then regulates the power that is fed to the motor. This step allows the drive to adjust the frequency and voltage that is supplied to the motor based on your current process demands. This means you run your AC motors at the speed or with the torque according to the demand needed. And this is why you can save large amounts of money using our AC drives. Besides saving you energy, our drives also help you reduce maintenance costs, reduce scrap and even ambient noise emissions. They are also a great way to help meet your environmental goals and that's why we developed a wide range of drives that work with your application, no matter how small or large. We understand that when you are making decisions about using drives in your As you saw in the video, AC drives help to save lots of energy and reduce CO2 emissions. The installed base of AC drives saved more than 100 terawatt hours of energy in 2019. So we can proudly say that AC drives play an important role in enabling low carbon society and sustainable future. Then moving to our business today part. Our annual revenues were $1,300,000,000 in 2019. We are a short cycle, large volume product business. We produce about 1,500,000 units per year. We employ globally 2,500 ThryvES experts, who deliver superior customer experience. Our margin is healthy. And despite of COVID-nineteen in 2020, our business performance has been highly resilient. Our market size is approximately $10,000,000,000 We are global number 1 with 14% market share below 200 kilowatt, which is major part of our market. Our key competitors are global automation players like Rockwell, Snyder, Siemens and Danfoss, but also large local players, especially in Asia. Our strategic mandate is profitable growth. Our business is already stable and profitable. So our focus is to grow the business and continue driving profitability. Dry product business is well diversified across both segments and geographies. It helps us to minimize the volatility, demand volatility. Our traditional markets in process industries remain important. But already today, well above 50% of the business is in light industries and infrastructure. So HVAC and water being the largest segments. Our geographic mix is well balanced. We have strong presence across the globe. And we are a leader in many key markets, for example, in China. We sell more than 95% of our revenue externally to 3rd party customers. 2 third of our revenue we sell through channel partners. So we have more than 1500 channel partners in our global partner network. And our channel partner network is a key competitive advantage for us. Our channel partners are to a large extent value adding partners. They contribute with domain expertise and local knowledge. They are really an extended arm of sales for us. They sell proactively on our behalf. We call them partners because they are our long term loyal partners. Most of them are exclusive for us. So channel partners provide us with an effective way to achieve local presence and market coverage. We offer a comprehensive product portfolio in low voltage AC drives. Our portfolio consists of different product lines, which are tailored to meet the needs of different applications and end markets with the most suitable product. And within the product lines, we have multi tier product offering with differentiated value propositions and price points. In R and D, we have a global approach. Our products are built on global hardware platforms with differentiated firmware and differentiate firmware for different markets and segments. With this, we can leverage benefits of scale and still meet the requirements of different markets and segments. Large portion of our R and D investment is on hardware platforms and software development. And actually 60% of our R and D people are working in software development and the value in the products is more and more in the software and firmware. Our global R and D footprint consists of 7 units in different countries. We are close to key markets and we are able to meet the market requirements in different markets. We can say that we have global scale with local presence. I would like to share a great example of how do we deliver superior customer value through technology leadership and domain expertise. Al Naza City Center is a new giant 130,000 square meter mall in Egypt. The size is equivalent of 18 football fields. And as a solution to ensure reliable and efficient air conditioning, there are 200 ABP ACH 580 Ultra Lowharmonics drives installed at the complex. These drives offer a unique state of the art combination of complete HVAC functionality and effective harmonics mitigation solution. These drives really demonstrate our technology leadership. You can understand or see that these harmonics are like pollution in electric network. And with our technology, we have the most competitive solution to mitigate them. And our competitors can only offer the same features with multiple devices. Benefits. Easier and faster integration and commissioning, thanks to the HVAC functionalities. Energy savings by controlling fan speeds automatically. 97% less harmonics compared to the conventional models. And our most compact harmonics mitigation solution saves space, so the customer is able to have more rentable space, and the installation and maintenance work is also reduced. These drives have been sold and project implemented by our local ABB authorized channel partner, Quasi Energy Systems and Control Solution. And this demonstrates well also how our channel partners add substantial value with domain expertise and strong local presence. So the second part of the presentation explains how we plan to grow our business and drive profitability. We expect that the AC drives market continues to be an attractive growth market also in the future. Global megatrends increase demand for energy efficiency and automation. Number of electric motors is estimated to double by 2,040. And the current penetration rate of drives is less than 20%. So with all this, we expect that the AC drives market recovers from this year's contraction and grows at 4% CAGR by 2023. Dry Products aims to grow faster than the market and increase market share below 200 kilowatt from the current 14% to 15% and beyond. Despite of the fact that we are already global number 1, there are plenty of granular opportunities growth opportunities to gain share. And our aim is to improve in those segments where we are not yet the leader. And as you can see on the slide, we are not leader in all segments. And we have chosen our focused growth segments, HVAC, water, food and beverage, and machinery OEMs. These are large segments which are growing faster than the overall market. And for each focus segment, we have a granular growth initiative with investments to dedicated segment specific offerings and channel and go to market development. So all in all, we aim strengthening our leadership position and increase market share. We drive our profitability through 2 main levers. We built on our number one market position and delivering greater customer value. Our number one market position allows us to realize scale benefits in procurement, operations and in value chain through our size and global reach. We are able to invest in R and D in absolute dollars more than our competition, which supports our top line growth and cost optimization. Our number one position, combined with the comprehensive value based multi tier offering, allows us to remain the value leader in the market. We will continue to differentiate and create value by driving the market and setting new industry standards. You saw the example about Almasa Mall. On this slide, there are 2 more examples of value creation. In Germany, in water utility, we have our ACQ 580 water dedicated ultra low harmonics drives installed. We have 94% reduction in harmonics, so less disturbances. And the customer is able to save the money by not paying penalties to the electric utility company. Another example is a sawmill in Finland, where we have our regenerative industrial drives installed. These drives feed energy back into the production system and reduce stress on mechanical components. This saves 200 hours per year downtime. And customer has reported that the payback time for this investment is less than 2 years. So technology leadership and domain expertise combined with an excellent customer service is our recipe for delivering greater customer value. We call our digital strategy in Drive Products Customer Value Beyond Products. It enables our growth ambition and protects profitability. It has 2 dimensions: connected products and digital customer experience. For the connected products, our aim is plug and play low cost connectivity to the Internet of Things to enable new service revenue streams and smart customer support. We are first in the market with the built in cellular cloud connection in Drive. We have launched this year Drive connectivity panel, which brings plug and play cellular narrowband IoT connectivity from Drive to ABP Ability Cloud without additional gateways. Secondly, We want to digitalize the different touch points when our customers and partners are interacting with us. And as an example on the slide, so that with the help of a unique QR code, customers have an easy access to product related digital value elements. This cover digital documentation, including smart guides, reports, certificates, data sheets, but also digital support services. So all in all, connected products and digitalized customer interaction creates customer value beyond products, which enables our growth ambition and protects profitability. So, to summarize, most of mission, we keep the world turning while saving energy every day, describes well what we do. In line with ABP purpose, Tri Products division enables low carbon society and sustainable future. Dry products is a market leading APP division. We are fully empowered and accountable to deliver our performance in line with our strategic mandate of profitable growth. So that ends my part. I hand over back to Morten. Thank you. Thank you, Mika. It's really a great business in our It's really a great business in our business area that we are very proud of and that we also we know that we can do even much more than what we do today. So where is the ambitions for the future when we're talking about also our profitability? We already announced that we are going to increase the margin corridor from going moving up to 15% to 19%. And we also have a commitment today that we are going to, by 2023, also be in the upper end of the margin corridor. And how will we do that? First of all, it goes back to what I said earlier that we are constantly looking for cost improvements and continuous improvement. That comes from product technology, it comes from automation in our plants and just being more efficient end to end in our operations. And we always have a target and we always have always been able to do that. It's to deliver more savings than any cost increase as we also face in the market or any price pressure. So this is one part of it. But it's also for us, it's very much about the granular growth and how we can find new opportunities in the market when the world goes electric. So using, as I said, only 1 out of every 5th motor have a drive on it, that needs to change. And that will drive over growth and it will drive also a more sustainable future. We will also look at how we can also expand part of the portfolio and how we do it that with acquisitions. And now the divisions are also fully empowered and are expected to come up with the proposals and the plans for how we can make that happen. And we are looking for acquisitions that will be nice and really drive the growth of our core portfolio that we have in motion. So if we look at the overall picture what we do, we have a strong and resilient business. It's underlined with the performance of the last years, but also now in the year of 2020 during COVID. And for the future, we will continue there to look at the portfolio, what is the right mix and also what other bolt on acquisitions we can do, as I say, to able really to step up on the growth part in the new areas of our business area. And then overall, this is an attractive market. The world goes electric, but energy efficiency is a must. So I will end with also how we can make the low carbon society and the low carbon future happen. There we, as ABB and ABB Motion, can play a key role in that development. So I join everybody to join in to the energy efficiency movement. We are at a turning point. We need to cut CO2 emissions. And the most effective way to do this is to use less energy. However, we can't switch off everything. We need to produce food, keep water running, air flowing, trains moving, and ships sailing while continuously improving the energy efficiency. With ABB Drives and Motors, we can do just that. We can keep the world turning while saving energy every day. This is our mission. With your help, it will become a movement. Through product innovation and sharing knowledge and insights, we can improve performance, safety, and reliability and help drive the low carbon future for industries, cities and infrastructure. Together, we can progress and sustain the future of industry and humanity. We are moving forward. But with your help, we can go much further. Join us and be part of the energy efficiency movement. Thank you very much, Morten and Mika. And with that, we go into the Q and A session for you guys. And we're starting off with Andre from Credit Suisse. Your line is open, Andre. Good afternoon. Thanks very much for taking my questions. I wanted to start with maybe a slightly dumb one, but on the drives adoption, I think we talked about this for quite a long time and it has been low and moving slowly. Why do you think it has been the case? And do you see it changing in terms of that pace of adoption? And my second question is more specific on drives and this harmonics elimination. I think we saw that launch at the SPS at the end of last year. I wanted to ask what kind of ASP premium you're getting on that sort of product versus selling the drive and the harmonics illumination device separately? Right. I can start and I will also ask Mika to join in here. First of all, the adoption rate of drives, it is increasing. It was if you can remember, a few years ago, we talked about less than 10%. Today, I say 1 out of 5. So it does increase, but we would also like it to increase faster. One of the reasons is also the cost of energy. So when energy prices goes up and more that the focus around sustainability increases, that plays again in the favor. So I do believe that with the trend what we see now will continue to accelerate with the number of drives. As the when it comes to the pricing, I don't think I will leave that to Mika, but I just have one great example when I also been in the shopping mall in Cairo it will refer to. And I think the example there was what they could save in the switchgear room was a whole room where they could open a Starbucks instead. And the revenue generated in these Starbucks shops more than cover for any price difference. That's the real value on of having a very compact small drive compared to alternative technology. So that would be the value. But maybe, Mika, if you want to have add some additions. No, I think generally, our pricing is value based for all our products and offerings. And the same is valid for our ultra low harmonic strives. So we want to reflect in the pricing the value what it creates to the customer. Thank you very much. And we have a next question from Gail at Deutsche Bank. Go ahead, Dave. Good afternoon. And thanks very much for taking my questions. I think it is probably fair to say that there is more value add in the drives than in the motors and that the motor market is more fragmented and more competitive. I mean, there are probably many, many electric motor manufacturers located in Brazil, India, China, in particular, and are willing to expand their market penetration around the world. So could you just describe a bit more the pricing environment for motors specifically? And then in relation to that, since you're willing to stick to the motors business, could you perhaps describe a bit more how the drives and motors business benefit from each other? Thanks, Gael. To start with the motor question, that is we I see that as a part of the important part of our portfolio when we're talking about the complete offering towards many of our customers. So it is we have also it is price competition and in both in our field of drives and in motors. But there in the motor business it's of course even more important to look at the how we drive cost out of the end to end market, but also to find niches of kind of these growth opportunities where you can find better pricing. So it's not so you need to be very cost competitive where you're more to the mid market. And that is also where the global scale and having the really large global scales in supply chain and in your operations have an impact, as we do have. And then it's about how do you also look into the market where you find growth opportunities, where margins and the profit pools are even bigger. And we have to address both those issues and we are addressing both those issues in our motor business. But when it comes to the drives and motors, maybe Mika you can give also a bit of insight, the combination. Yes. And I think it varies quite a lot for large motors and drives and the smaller ones. And but especially for large drives and motors, there is a lots of benefit of packaging drives and motors together. That is clear. And just one example is the synchronous reluctance motor, which was a more tense example. Actually to drive those motors you always need to drive. So it is always a package. Very good. Thank you. Will Mackie from Kepler Cheuvreux. I think your line should be open now. So please go ahead. Yes. Good afternoon. Thank you. I have two questions in 2 specific areas. Firstly, could you talk a little about the level of autonomy that each of the divisions have now within your business area with respect to the element of ring fencing around their P and Ls, balance sheets and levels of capital employed in each of the segments, particularly within the motors businesses that you have now just split out. I'm interested in the IEC versus the NEMA Motors. And specifically also with regard to M and A, can you talk a little bit given that the corporate ABB has changed the way in which M and A targets will be identified and then executed and then docked within the group. Talk a little bit about the level of identification you have reached in terms of identifying targets and how prepared you are at the business area level or the divisional level to execute transactions? Thanks. First of all, the autonomy thanks for the question, Will. The autonomy of the P and L in the different divisions, it is really set up division by division. They own their own balance sheets. They own their P and L. They own their performance. That means also all the costs, all the people, all their also their go to market strategy and how we they set up their self in the daily life. So that is the and that goes also in the motor business. You asked about the IEC versus NEMA, both are product business, but they are very the NEMA business, the north is very much focused on the North American market. And that is why we also kept it as 2 separate divisions. We also say in ABB that smart leaders collaborate. And that is also an example. There are still seeing studies being done together, for instance, on the technology side. But then it's about, as I say, with 2 smart people find out it's better that we do it in one place instead of 2. That is really how we also drive this performance. So it's not me instructing the divisions how they should collaborate. I also have as clear expectation to the division leaders that they find out how can they save costs, how can they optimize the resources here. And then to so it's more about asking questions, challenging, but they also need to come up with a solution and owning their own P and L as a division. When it comes to identification of targets, there every division has now a dedicated as part of the new divisional structure, they also have dedicated business development managers and team and members who are now looking at this actively from their perspective. So it's not the business area giving out targets to when it comes to or potentials out to the divisions. It's really the divisions looking at the areas. What we as a business area help is more on framework on the way to do it together also with our corporate M and A team and we later on come to the execution. That is very important that we work together under a common framework. But when it comes to the identification and the order, it's very much now down to the business areas looking into the different areas of geographic expansions about the new areas, new product offering that we could do adjacencies to what we do today or just other bolt on acquisitions that would also increase or speed up the growth rate of that division. Thank you. And time flies when you're having fun. So Martin Milki from Citi will open up your line if you make it a fairly short question. Thank you. Yeah, I'll make it short. In terms of the end markets, you highlighted buildings as being in line with GDP and I know HVAC is a big market for you there. We are hearing a lot about internal air quality, obviously buildings related stimulus, particularly in Europe that could obviously drive renovation in buildings. I mean, just to get some sort of sense as to why you think that market couldn't grow faster than how you're going on Slide 6? Thank you. You want to take that, Mika? We believe that the building markets and the penetration of thrives in these applications continue to grow. So that is And the question was more, if you believe it grows could grow even faster. Is that what you And there is I think also the stimulus packages by different governments probably will be targeting these energy efficiencies and so on. So it could even further boost it, but it is to be seen. Yeah. And the market and what we show you here in the deck today is based on the, again, most available industrial standards or and market service, public market service that we use. So we'll see. We believe, you say, the need for fresh air, clean air in buildings, it's increasing. So we also believe it could be more, but this is the official statistics and data that we have been showing today. Thank you very much, Martin and Mika. Very good. We appreciate that. And with that, we end this Q and A session. And we're going to move on to our next business area, which is robotics and discrete automation, where we have the business area head, Sami Atiya, presenting. Please go ahead. In just one short second, Sam is ready. Very good. Thank you very much, Anne Sophie, and welcome everybody to the exciting world of robotics and discrete automation. 80,000. 80,000 is the number of corona tests that are possible in Singapore today because of ABB technology. We use 40 cells and equipped into 2 robots per cell, able to do these tests. Using our most advanced robot studio that has shown you before, we're able to simulate and provide that support to the Singapore authorities. Together with the Institute of Science and Technology, we collaborate to do that and we do a 100% test of the incoming and outgoing patients into Singapore. Three things I would like you to remember today. First, this is a great business with growth potential and profitability coming. The underlying megatrends are here to stay. Some of them have been even accelerated through the COVID crisis. 2nd, we built on a strong strategy that I have presented to you just in February this year with strong momentum. And we have used this crisis, we did not waste it, to reposition ourselves to even do more on the competitiveness and we increased our R and D spend to be ready when the market comes back. And third, I am confident that we will improve our profitability by 500 basis points and reach the mid of our target range of 13% to 17% by 2023. We have a great range of product portfolio in ABB Robotics and Machinery Automation from small robots to large robots, 4 kilogram and 1,000 kilogram are able to carry a whole Sashi car in this case. These are the articulated robots. But we also have a broad portfolio of SCARA robots that basically are used in the high growth electronics business. And pickers, delta robots that are used in the also growth area of food and beverage and also logistics, last but not least, our collaborative robot suite of 2 Army Yumi and 1 Army Yumi and expect more as we go in the near future on the cobot side. Due to the acquisition of B and R, we have enhanced our automation portfolio with a great product portfolio from servo motion to controls, HMIs, but also we have developed now over the last 2 years a great set of new devices like the transport system I'm going to show you later, really exciting and adding vision. And at the core of both is a simulation and digital software tool, the robot studio and the automation studio, to make our customers easier to install these products and to use them. At the core of who we are as ABB, Robotics and Discrete Automation, We have a great portfolio that we use to support our customers and our domain expertise. We bring these 2 together with our software and digital engineering tools, which in this case, the robot studio and automation studio. And we are able, through that, to serve multiple industries, which is really important because we want to put the foot of our business on different grounds, so we reduce the dependency, for example, on the pure automotive business where we started. We don't want to get out of that business, but we want to grow in other businesses that are really great. So, these markets are automotive, the suppliers of automotive Tier 1 electronics, really growth and nice business general industry is the broadest of all Service robotics includes logistics, healthcare and retail and then last but not least, the machine building business. We serve these markets with 2 distinct divisions, the robotics business and the machinery automation, but we have synergies between these two, and I'm very excited to show you the latest progress we're making on these synergies between the 2. The robotics business targets mostly end customers, but we also a quarter of our business go through partners. And the machinery automation business is purely targeted to the machine builder business. And these 2 have distinct also competitors, as you can see. I would like to go through in my presentation too the attractiveness of this market, how we win and last but not least, how we're going to drive the profitability as we go. There are key megatrends driving the demand for robotization automation. Most of you know them. Individualization of consumers, a quarter of Americans already have bought product that are individualized, and the trend is increasing across the world. And this is putting pressure on the whole logistic and manufacturing change. That's why you see on the right side, flexibility is going to be key in the future. Digitalization is key for our customers. And during this crisis, the digitalization efforts of our customers and also our own have really skyrocketed. We were able to sell a complete solution for our customers on the robotics side, commission it and even get it up and running, all virtually. So, the trend you will see there more and more, and that means more productivity for our customers and ourselves, Shortage of labor is there to stay. And last but not least, we all know that uncertainty will not go away. We will face a more volatile world ahead of us. And our customers are asking more for flexibility and simplicity. When I go out to customers, they say, yes, productivity and quality is key when you automate, but give me flexibility and simple solutions, and then you'll be my friend. And we are driving with R and D all of these 4 pockets. We serve a market of $70,000,000,000 in 20 19 with a healthy growth over the last decades with some dips as we go. 2020, no surprise for all of us. COVID hit us. And we have been also hit by the automotive business already in 2019. About the market, we see that the market will continue to grow from now on to in the next 3 years by 10%. This is according also to what IFR, the Institute of Federal Robotics. So, we anticipate this level of growth. As you can see, our businesses are either number 1 or number 2, depending on the market we're in. The machinery automation business is the number 5. But in the specific segment of high performance machines, they are number 2. What we will do is we will grow our high growth segments, electronics, consumer goods, logistics and healthcare. We will innovate our portfolio and expand it with multiple new products. We will de risk the system business and I'll show you what we're going to do there. And we will enhance our portfolio with more softer solutions and service, as both are really key as a stand alone, but to enhance the product value for our customers. And our goal is to increase our profitability by 500 basis points. Now, how will we win? I've shown you in March February that we have set our strategy built on these 5 market segments, Blythe, Machinery Automation. And I can tell you, we are already seeing big successes there by focusing on these industries because they need different solutions. At the core of who we are, we are a technology company where we seek the leadership of the application that we provide to our customers and last but not least, high performance operations. We have set many initiatives in this year to improve the quality, to improve our professionalism in pricing with a Chief Pricing Officer and tools and processes in place. And our goal is to also improve the mix of our products towards more products, services and less turnkey business. And that all on the foundation of people and performance. Now, how are both of the divisions working? And here, I wanted to show you a little bit more detail. So we show also the business lines. As you can see, the auto and auto Tier 1 need to go up on the profitability side to the level that we reached the 15%. Auto in itself, we will de risk the business, reduce the turnkey but sharpen the portfolio. And we will improve even more innovations into that industry, but we will do less of large turnkey businesses. Tier 1 has less of an automation level than the auto OEM. So, this is really an exciting business for us. And electronics, general industry and consumer segments are all growth areas that we will drive to push even further. And last but not least, machinery automation with new technologies and productivity improvement, we will bring it up to the right level of profitability and continue then the path of growth. Now this is at the core of our robotics product and application strategy. This is the value stack, as we call it, for our customers. The fundamentals are our wonderful products, robots, the peripherals and the software. But the robot in itself without adjacencies like a vision system or a gripper, cannot do much. So the next level will be functional packs where we add components to the robots, including AI and software that create more value for our customers. The next level value creation for our customers are the application sales. And this is really great business for us because this is at the center of who we are. It embeds the domain expertise and the software in an application cell, for example, a polishing cell for smartphones. We sell 100 of them to our customers, highly profitable. The customer gets repetitive business, proven quality and for us, it's a scalable business. We provide sales to the largest e commerce companies out there, more than 50 sales that we just sold this year, who do the fulfillment and the shipment preparation of parcels, for example. Last but not least, we call it smart systems. So, the smart systems are built only on our core technology. And that is the pyramid we want to bring out more and more to the market. Service business has always been the key pillar of robotics. We are the leader in this 50,000 robots under contract and 9,500 robots are connected. And this number has been growing by 30% over the last 2 years. So here, we see great potential not only for service, but also on the softer side. Now we are very proud to be the 1st on the robot studio to bring that out to the market and it enhances our product portfolio. But we are seeing interest from our customers to buy the robot studio on its own. And then last but not least, you see the stack of common platform that we built. We use the ABB Ability platform. And on top of that, we provide our customers with application that are able to improve the quality, control the quality and then improve the operations on the highest level of that. We give these applications and the platform to our customers, but also to our partners who are wanting to partner with us and provide solutions to our customers. To improve our quality of revenue, it is important for us to derisk the business. So, we looked at the system business and we said we want to get out of all the business that is purely turnkey with no or low value add from ABB. Why we're going to do that? Because we want to improve our profitability and reduce the risk and lower the volatility of the business and focus on what we are good at, at its best, products plus software plus service. And you can see that the automotive business, although we will see an uptick as we go, lower than the others, but our intention is to stay flat. And in that, we change the mix for more product and services and less system business and free up resources to grow in the other segments and to boost that area of profitable growth. When we do our innovation strategy, we look at it holistically. At the core of it is we innovate internally. That's what we what you see in the slide, that's what we call the R and D. AI, we have a center in San Francisco that's pure AI research for us. Digital Twin, I talked about the application cells. But what we also do over the years, what we have learned is, if you want to be fast, we have this concept of incubators. An example here is the logistics. We started by 0 revenue 3 years ago. We are now more than 100,000,000 business. The same, we kicked off last year a health care incubator at the largest medical center on this planet. It's the Texas Medical Center. And you see already innovations coming out there, for example, the Singapore COVID testing that I've just mentioned at the beginning. And then on the products, we invest in track systems, in hygienic designs and so on. But we also have a good track record in our M and A. And as you heard from Timo and Bjorn, we will look at going forward also to accelerate that. We invested in a company called Look3d. That's a vision system that really helps us enhance the product quality and value, machine tending. And we bought a company in Brussels, logistics company that helps us to support our customers in the e commerce area in Trion. And I can tell you that, that company is already oversold, and we need even more capacity there. Last but not least, we announced 2 weeks ago a great enhancement to our product portfolio, which is Codian Robotics. It has the best portfolio out there for hygiene delta robots that will enable us to even get even further into the food and beverage market. And we partner with the best universities on this planet. On the machinery automation side, at the core, we are a motion control and a PSC business. But we were able to bring out really cutting edge innovations. At the center of it is the ACOPOS track. This is really a great example where when I talk with customers, they are so excited about it. It is shuttles that are able to move in high speed and are medically detached, so you can really singulate. Singulate means that you can really build the ultimate adaptive machine, which creates batch size 1. So at the end of the day, you can really have every single product single light. And that is the trend in the industry. But we enhanced that with a solid vision portfolio. And what is really great is the machine centric robotics. This is where both divisions work together to bring a robot on a machine to make the machine ultimately adaptive and flexible for the needs of our customers. And the company that we bought, Codian, you see in the right that the Delta robots are used both by the robotics team and the B and R team to bring in these innovations into the market. Now you heard at the beginning that we innovate for a purpose. We innovate not only to make our customers and society more productive but for a sustainable future. And this is important for us as ABB and it's motivating for me, it is motivating for our teams. We have high performance bottling automation in B and R, for example, where we can reduce 50% of use of plastics. And this is really tremendous by this automation that we provide, micro fulfillment centers in logistics that really reduce transport and less waste. And what is really great is that we have announced a couple of weeks ago our newest technology, to show how advanced paint solutions can reduce 33% in energy consumption and 30% paint loss. And you'll see it's really also a very cool application. Car buyers today expect greater levels of customization for their vehicles than ever before. ABB's new Pixel Paint technology gives manufacturers a simple, fast, and cost effective solution to meet this demand. Pixel ABB's system reduces costs. ABB Pixel Paint's inkjet head ABB's new Pixel Paint technology offers greater levels of customization for vehicles than ever before. This is a great innovation. And I can tell you the customers that I talked to after they saw, our newest innovation here are so excited. And the fantasies are big, what you can do with it, what you can paint on the car. So here, it's a great example of robots, software, robots to do, how we can bring value to our customers. So digitalization and software is core to our strategy. And we look at it at multiple angles. We start with the life cycle of the design. You heard many times now the example of RobotStudio, where we're really able to model not only a small cell, but a whole manufacturing line upfront and reduce the time of implementation by more than 50% because the software that is built in the simulation tool is already the runtime software. So, when you download it into robot, it already can work. So it's really a great enhancement to productivity and simplicity for our customers. And at the core, in the middle, you see an example of a welding cell that, in this case, we use for a Tier 1 supplier. In there is the domain expertise and the software. And on the right side, you see now more and more applications that we are providing to our customers that you can actually have on your mobile device or the iPad and you can monitor the progress of the controls. You can even improve the operational efficiency of that specific cell. And these are applications that you will see more and more from us coming to our customers, really exciting, supporting the core of the business, but it's also a business of its own. With our strategy, we are uniquely positioned in the market. We produce our robots, the products and the machinery automation. We service them with the software and we build cells. What we are reducing, as I mentioned in the beginning, is the dependency on the system business and the turnkey business. And as you can see, we are really unique in that in compared to our competitors. And our ability to provide value based on the product itself. And I can tell you, our customers really appreciate this position and that we can support them in the way that they are driving. 2 distinct divisions, but they collaborate when there is value to be created. On the one side, we have a team that works on a digital factory automation solutions, which is the layer above. We use BNR technology and robotic technology to improve the operation efficiency of cells and lines. And I have a great example for you how the machine centric robotics really is a game changer when you bring the automation technology of B and R and robotics together. Here you see an example from a customer in the food and beverage industry who asked us to create a pilot. And the pilot was about, can you help us in the COVID times? Now we have customers who want to actually click on a button, customize their specific chips and drinks in a box and ship it directly to me at home. So the food and beverage company ships directly to you at home. So in this case, we modeled it with our software. And you can see here the incoming chips, in this case, with our newest technology, the PicMaster, using AI vision system to basically sort them in a way that at the end, you can put them on a trail and then ship them out. This is a combination of Apropos track and the picker. And then at the end, you see the Acopos track, which is the part in the back and the robot working hand in hand to make sure that we can accommodate any type of size of that chip, which is important because obviously, the requirement was not to break the chips when we ship them. They are put in sequence. And at the end, when you see on the left side, you see a box that is customized to your needs. So and it takes seconds from the moment you click on your special box until it gets into the production system. So this is really the most advanced out there in the industry. By combining 2 technologies, many times you see an inflection going. Now, I ask myself, is this really a machine? Is this a robot? Is it a logistics center? It's actually a hybrid of all. And ultimately, we are making all the machines more adaptable and more flexible. And this is real value for our customers. And you know what? Most of it is run through software, software and intelligence that we bring. Now, let me close on the important topic of driving profitability. You remember maybe some of you who visited us in Germany at our robotics center when we presented in February our strategy. I had already talked about the most severe crisis in the automotive industry. And at that time, we had a dependency of almost 50% on that business. And you know what? COVID came afterwards. So we had a double hit in this year. But I must tell you, I'm so proud of our team, how they managed to fast react, first, keep our employees safe, keep production up and running, but also to make sure that we take as much cost out as possible to show the resilience during this time. So despite a significant decline of in 1 quarter, more than 25% decline, we hold the lines on keeping our profitability at the right level. This is not the level that we want. But I can tell you, it was important for me and my team not to waste this crisis. And we managed to improve and to do multiple things that, when the market comes back, that we will be in a wonderful place. Our goal is to be well in the margin corridor, 13% to 17%. We, I'll use the term that Timo used, self support with 200 basis points, things that we can do on our own. I talked about the quality improvement, the pricing efficiencies and the change in mix and less of system business, more product and more service business. All of that will help improve by 200 basis points. But yes, the markets will come back. Yes, we will see a COVID recovery coming. But also with our newest technology, we will see an increase that supports also our profitability. And last but not least, we will invest in growth. And we increased the intensity of R and D this year. We will continue to increase the intensity because we want to be the winners of this market as it comes. So let me close with the 3 key points I mentioned at the beginning. First, this is a highly attractive and exciting business to be in. 2nd, we know how to win. It's built on a solid strategy that we enhanced in this crisis with the addition of derisking the business and improving many of our operations. And last but not least, I'm confident that we will gain more than 500 basis points by 2023. Thank you for listening, and we'll open up for questions. Thank you, Sami. Painting the car in all sorts of fashions, I think, could be the Christmas gift of the year. We'll open up for question. And I think we have Ben from Morgan Stanley on the line. Please go ahead, Ben. Yes. Good afternoon. Hello, Sami. I hope you're well. My quite two questions. I want to make sure I understood a couple of things. Did you say that you were going to reduce your systems exposure within auto? And if so, how are you going to go about that? What is the thinking there? And then secondly, in your introduction, you sort of hinted, and I know we've talked about this before, about collaborative robots. And I guess what I wanted to know was based on the YuMi experience, are you proposing to go down a similar route? Or if we see more collaborative robots from ABB, are they going to be sort of fundamentally different in nature? Thank you very much, Ben, for the questions. So first, on the reducing the system exposure, yes, we will reduce the exposure on the system business. We have certain criterias. One of them is pure turnkey, where we don't have value add of ABB. And second is it needs to be more obviously, more than 60% of content that is coming from us. And yes, we will reduce the exposure there, which will mean that in the Automotive business, we will have a reduction of that business going forward. There is some slight system business that we were taking out in the general industry, but the majority of that business actually is going to be reduced in the automotive. Does that mean we are going to get out of automotive? No, not at all. I can tell you I had meetings even last week with large automotive, and they love our technology. But it's based on the core technology that we have. For example, the flex production system that we have, the paint system that you saw, quality inspection using AI and our robots. All of these are cool technologies that our customers really value and are higher margin and makes fun to do business. The other business is volatile, higher risk, obviously, and we don't want to do that going forward. On the UMI side, I can tell you that, first of all, I'm very happy with the development of UMI. We brought out a single arm UMI. And interestingly, now in this crisis, we see a lot of demand coming from the healthcare area and the laboratories because Yumi is the most safest product out there for lab technicians to work together with. And yes, we are coming out with a suite of portfolio. On the one side, on the Yumi side, that is a great portfolio, but we also have our technology, what we call SafeMove 2, which is basically when you come closer to a robot, the robot starts slowing down. When you go away, it moves faster. Why is that important? Because the customers want to keep the high life the cycle. So, if you reduce the cycle and you reduce the weight, ultimately, there is no value for the customer. And with that technology, we can make all our robots safe. And we have some also other cool things coming, most likely at the beginning of Q1. Thank you. Shane McKenna from Barclays. Please go ahead with your question. Hi, good afternoon, and thanks for taking my question. I guess you've laid out quite a number of exciting new product offerings and trends within, obviously, your Machine Automation business. But maybe you can explain a bit more what was driving the decision to take the €290,000,000 goodwill write down with the Q3 results for that segment? Maybe I didn't and I it's not really working. What is the question again? The goodwill write down in Q3 for that. The goodwill write down is not really working. Yes. Thanks, Shane, for the question. Now we decided that the goodwill allocation in Q3, we will take away from the business area level down to the division level. And then based on the market situation and all the evaluation that we need to do, that we need to write off the amount that we have done in Q3. So there is no change in the strategy. We will continue to grow the business. This is a technical evaluation that, that had to be done. Okay, understood. Thank you. Thank you. Joe Giordano from Cowen and Co. Please go ahead. Your line should be open. Hi, thanks. Sami, you mentioned $100,000,000 in robotics in logistics now from 0 not long ago. Can you kind of go into what specifically you're doing in logistics? And what are your ambitions there? That's a really fast growing market with a big private robotics environment. So how much are you looking at M and A there? Are you looking at mobile robots? Are you looking at gripping? If can just kind of expand on that a little bit. Thanks. Thanks, Joe. So this is a very exciting business for us, logistics. And when we talk logistics, we mean the end part of manufacturing, that is logistics, but also all the e commerce is really changing the whole game. And the example that I gave you on the food and beverage side is basically also consumer products are also changing their way they think about logistics, cutting away the intermediate. So, there's a lot of change going out there. And we have probably one of the best teams in this industry who really looks at the challenges there. And with the domain expertise that we have gained over the years from automotive and others, we bring that into that market. But what we do is all based on the robots, on the software and the simulation tools that we have. For example, building a fulfillment center is really at the core of what we do. We have bought a company 2 years ago, the Intrion company in Belgium. As I mentioned, we already sold out there. We are seeing double digit growth in this industry. We had some tempering in the first the second quarter due to COVID, but this industry is really growing massively. I mean, you see what is going on in the e commerce world. So we will continue to invest in our own capabilities, including robots and moving parts, but we also will continue to look outside for enhancement. Obviously, I cannot say more about that. And we will take the next question from James Moore at Redburn. Please, James, go ahead. Thanks, Nancy. Hi there, Sami. Hope you're all well. I have a question on B and R. Both Siemens and Beckhoff are making more than a 20% EBIT margin in IPC and Advanced FX making 16%. I've really got sort of 3 parts to this question. Why is the B and R margin still low double digit when I think 3.5 years ago when you acquired you presented it would move from 12% to 20% with 800 bps of synergy. And I think we're still pretty close to the acquisition profitability. Secondly, is it PLC or IPC, HMI or Servo Motion that's dragging the return? And thirdly, could you talk about the profitability outlook for B and R, please? Profitability outlook is not working. So thanks, James, for the question. So when we compare Siemens or Rockwell, we compare and B and R, we compare 2 different worlds. The portfolio does not really match completely because also we don't have any drives business in the B and R portfolio in that percent, for example, as Siemens has or others. And we will drive to improve the profitability of B and R as we go. We have a great product portfolio that will add a gross profit to the business. That will enable us to bring it up to a much higher level. In the aggregate, as I said and I am committed to, is to bring the business area to the 15% level. And in that mix, we will bring also B and R up to that level that in the summer between robotics and B and R, we will get up to that. And I think we will bring it up to the level that it really deserves to be in. And I'm quite confident that we have the things in place to bring it up. Thank you very much. Are you able to say which part of B and R is dragging on the possibility? No, no, no. There is no specific part that is dragging. And we don't have any areas where we have restructuring needs or anything. But at the whole, we can bring it up. And for example, take the ACOPOS track where we will as this is more of an end market business, we see higher profitability than, for example, others adding the vision system, the robotics that has been now added to it, all of that will bring the margin up of B and R constantly over the next few years. I'm confident that we will get it up. Thank you. And we'll take the last question for this Q and A session from Wasey at RBC. Please go ahead, Wasey. Yes. Hi. Thanks for taking my question. I just want to delve in a bit more into the selectivity on auto OEMs and the margin impact. I mean, looking at the bridge, is that most of the pricing and mix portion of the bridge? Or are you expecting meaningful pricing? And then in terms of understanding a bit more what you're doing on that, do you think there will still be an opportunity to sell into some of those projects through partners within the turnkey bit and you're selling specific products? Will you end up losing most of that project most of those projects to competitors who are willing to take on the turnkey and the lower content, but then also you're then giving up the kind of future service and maintenance revenues from those projects? We had a little bit of a technical issue here. So Sami couldn't actually hear the beginning of your Would you mind repeat it again, see if we can get it to work? Did you hear it? Maybe let's try again, Ozi. Sure. So the first part of the question was understanding what level of margin impact you're expecting from that selectivity on auto OEM. So if I look at the bridge, is that most of the pricing and mix element? Or are you expecting other mix or pricing components, too? And then the second element was just understanding, in practical terms, what that means in walking away from those turnkey projects. Will you still have an opportunity to sell into those projects through your partners who are doing the wider project? Or will you end up losing out on those projects to competitors who are willing to take on those projects and then therefore, you don't get the future service and maintenance opportunities either? Good. Now I heard it. So first, on the bridge. The bridge in the middle part, as we've seen, the 200 basis points is a mix between pricing, quality improvement and change of mix. And in the aggregate, it will be the 200 basis points. And in the total, if you add the growth coming back from COVID, new product coming into the market, the 200 and the investment in R and D in the aggregate will get more than 500 basis points out. And then to the second question, where we are very, very careful is when I say turnkey business, that doesn't have value add. Value add also includes service. For example, and also if there is a business that comes along with it with the robots, then it's a healthy business. But if it's really a stand alone system business that we bring in robots from a competitor and build it as if we were a standalone system integrator. This is not the business that we want. So, we are not losing out. We are actually strengthening our business presence there. So, if there's an opportunity for service or product, we do the business. If there is not, others can happily do that business because it's anyhow a lower margin, a really volatile and higher risk business. Thank you very much. And with that, we close this session. Hello and welcome back to the last session of our Capital Markets Day. We're going to hear from another 2 business areas. And we're starting off with Industrial Automation, where we have Peter Tewish and we also will have Brandon Spencer with us online from the U. S. And without further ado, I will hand over to Peter. Please go ahead. Thank you, industries in their quest for ever safer, smarter and more sustainable operations with automation, digitalization and electrification. I'll walk you through our portfolio and plans, and then we'll take a closer look at Energy Industries, which isn't only our largest division, but which is also an industry that in particular is going through a transformation globally. And then we'll find time for your questions. As a leader in process automation and in process electrification with growing momentum in digitalization, our mission clearly is value creation. We serve our customers with leading solutions that we support over the lifecycle of their investment. That value for customers translates into value for shareholders. We target 14% as the middle of our profitability corridor by 2023 while continuing to deliver robust returns on capital in the upper twenties by focusing on quality of revenues and business that makes sense for both our customers and ABB. Let's take a look at the industries that we serve. Safety, productivity, and sustainability are common goals across these industries. And integrated automation solutions, often combining process and power management together, with a growing share of digitalization, are essential to realize these goals. This is the business context for our 5 divisions, and all 5 hold leading positions. 3 of them, energy industries, process industries, and marine and ports, combine an integrated automation and electrical system offering that is differentiated by industry specific products and complemented by services over the long life of these assets, which is typically measured in decades. In turbocharging and in measurement and analytics, we deliver products, again supported by services over a long lifecycle that enhance and extend the value of these investments for customers. Bjorn already mentioned the turbocharging business is earmarked for exiting at the right time and in the right way for ABB, for our customers, our employees, so we will have work to do there going forward. Let's take a look at the markets that we serve. Several sectors that we serve are quite cyclical. So on this chart, when we look at growth rates, we look at through cycle growth rates. The sectors in the lower part are likely to grow slightly below GDP over the cycle. And at the same time, our offering fits well with their focus on safety, productivity, and sustainability. So still, there is an opportunity to capture an increasing part of their spend. Sectors in the upper part are likely to grow more. Across all the industries we serve, we meet fairly consistent expectations. There is a capital investment phase where customers, for their capital investment for their project, look for reducing cost, schedule, and risk. And once then the asset goes into operation, customers look for continuously improving. And that is basically the safety, the productivity, the asset life and the environmental impact that are then key. Here's a recipe for success in serving these industries and customers. We continue to invest in our leading technology positions. We use our strong domain knowledge we hold in many of these industry verticals that we serve. And we combine that into integrated solutions for customers where we take physical and digital building blocks, our domain expertise, and the engineering and service competence that we have around the world, in person and digitally, remotely, in a virtuous cycle where sales comes after service and service comes after sales. At the heart of process automation is the process control system, the distributed control system in serving the process and hybrid industries. It's really the heart and brain of our customers' operations. Our customers have helped us to not only remain the global number 1 in distributed control systems for now over 20 years but to even increase our share over the past decade, honoring our concept of evolution without obsolescence that protects their investment that they make in ABB technology. We have the largest scale in DCS and we match that with strong industry specific offerings. Plus, we're excited about DCS as the nucleus for our growing digital offering. Let's look at a typical integrated systems offering as we would deliver it in energy industries, process industries or marine and ports. We internally source for more than 500,000,000 electrification and motion equipment. We then use our control system as an integration platform. We add industry specific anchor products like our Azzipod propulsion that Bjorn already mentioned in his introduction, Gilles Mill Drives or Paper Quality Control expertise and engineering competence to deliver successful projects. Executing these projects professionally translates into an asset light high return on capital business for industrial automation with significant value generated also for ABB's motion and electrification businesses who have the margin on the product. By 2023, we aim to increase our margin to 14 percent, the middle of our corridor and even further increase our already strong return on capital employed to around 29%. We are confident to get there by prioritizing quality of revenues before growth, which means focusing on high own value added business and being able to say no to projects that have too low an ABB content to make sense for us. To calibrate where we are going to, let's look at where we have come from And let's look first at 2013 to 2015, where interestingly in 2014 the oil price collapsed from $110 down to $40 a barrel. And you can see we held our margin. 2016 to 2018 then, we started to really intensify the focus on execution, on the quality of revenues, the same levers I mentioned now and we exited the EPC business that we had, we increased service and we professionally executed our projects all contributing to higher margin realization. Then unfortunately came the setback in 2019 around conventional power generation and the market and conventional power generation went down faster than most people and I include myself in that we're seeing it coming. So we felt that twice. We felt that in turbocharging where stationary power generation is actually a 2nd largest market sector and we felt that strongly in power plant automation which we had internally taken over in 2016. And that all was worsened by the Kusile power plant project in South Africa, a project that ABB took an order for in 2015 on which ABB then self reported suspicious payments to the authorities in 2017. We haven't previously published it, but here's a number that we are quite proud on because through all these years, through all those ups and downs of the markets we are serving, we have produced a consistent return on capital employed in the upper 20s. Now this year 2020 unfortunately puts us into a perfect storm. We're still working on overcoming some of the 2019 challenges while the coronavirus disease is the first crisis in my lifetime that disproportionately affects service, which normally is the most resilient in this portfolio. But because of mobility constraints related to lockdowns, we've also suffered disproportionately on service. And in addition, the combination of the coronavirus disease and its consequences for our customers, together with the lower oil price have really also cut into our customers' operations to different degrees. I won't go into all the details, but if you look at this concept slide where you see on the horizontal axis the impact that the coronavirus disease had, you see most pronounced that for instance cruise vessel operators in marine and ports business, they of course hardly operate any parts of their fleet in this period of time. Hence also their service need has declined significantly. While at the same time, if you take the oil and gas price impact, of course, our energy industries business, but also other parts would strongly feel that. We are navigating this storm. We are keeping our people safe. We're staying close to customers. Now a lot more through digital meetings, than physical meetings in this period. We're trimming our organization with a combination of permanent and temporary adjustments and we're increasingly interacting digitally with customers. And I'm confident that we will not only weather the storm but we will ultimately come out stronger as the crisis is also a catalyst for increasing the speed of digitalization in industry. Here's in quite some more detail how we work our way back into and then towards the middle of our margin corridor. The first part is overcoming the Kusile and COVID headwinds. You just take out Kusile of the last 12 months data that already puts us back above 10 percentage points margin. But the bigger part here then follows to get us towards the middle, which is really a focus on quality of revenues and further strengthening our execution, including our productivity and continuing to grow our services, including digital, while continuing to invest in technology and again their digitalization is a key part of it. In going this path, not everybody is going exactly at the same pace and with the same priorities. In line with the framework of stability, profitability and growth Our different divisions have different mandates, and 3 of them are out to improve performance, which means margin is the first priority before volume and 2 of them on the growth trajectory, I. E. Start from a margin basis that is already reasonably strong but are growing their volume as the first priority. But that's a simplified of course because even below the division level, we clearly manage our offering portfolio as a continuous process. So our portfolio is not cast in stone. This is something we work and rework on with differentiated priorities as a function of the attractiveness of a business and our ability to perform. Now, there's one area across all our divisions that is really a priority. So let me talk a moment about our digital portfolio where within the category of purely digital, so the software and software as a service, we look at 3 different categories. The first one is digital services around equipment that we have delivered where often, we basically differentiate the hardware that we've delivered through a software offering that comes on top. A second is the digital system solutions, where we take a more holistic approach very often on the basis of installed base of distributed control systems based on operations data and know how that we have about the domain in 5 value driver families. And this summer, we started into a third category, a push beyond the operational technologies, combining, contextualizing and analyzing data across operations technologies, engineering technologies and information technologies. And of course, across all that, we support our customers with cybersecurity services and we help them with remote expertise in what we call collaborative operations. Let's look at examples and financial numbers behind digitalization. Here, the underlying challenge is that natural gas leakages are both a safety hazard because of the risk of explosion and an environmental hazard because methane is a potent greenhouse gas that translates to a need for customers to localize leakages for oil and gas companies and gas utilities. And we have a hardware product that is a gas analyzer, but rather than installing it in a fixed way, we now mounted on cars or even drones. And we add location information, capture wind speed, take digital maps and through all that localize leakages exactly and we call that ABB Ability Mobile Guard and offer the customers the choice of either sourcing the information as a service or buying our equipment and licensing of our software. When I talked about collaborative operations as a means of digitally providing expertise to people who are out on a marine vessel, a rig in a remote mine or mill through a combination of people and algorithms. Let's have a quick look at this video. The world is changing. There has never been a greater need for remote and native expertise than right now. What if we could connect people, our experts and customers in different places? No matter where they are, through a suite of digitally enabled solutions and services supported by a network of centers operating 20 fourseven around the globe. ABB experts interact with customers using analytics and algorithms to monitor assets, processes and risks, jointly derive insights and recommend actions to optimize operations From energy production on the seabed to the most remote mines to vessels in any waterway, ABB Ability Collaborative Operations, transforming the way we work with customers. I mentioned a 3rd category in the pure digital area, and this is exemplified by the recent launches this summer of ABB Ability, Edgenius and Genex offerings. Analysts estimate that in our industries at best 20% of the data are being used and that there's up to 40% productivity potential through industrial analytics and artificial intelligence in this area. So this summer we launched this offering and edgenius is really our operations data manager that makes the data from the real time control system available for such analytics. And then Genex Industrial Analytics and AI Suite integrates our domain, digital and automation expertise with analytics and AI. So it combines contextualizes and analyzes data from operations, engineering and commercial IT systems for actionable insights and faster decisions. We zoom back out. Here's the overview of what we do in digitalization. Our digital strategy starts with customers and their needs. We manage the 3 categories that I mentioned based on the inner workings of our offering on the cloud and edge level, including the ABB Ability platform we manage on behalf of the other business areas also. So we do this collectively. And the new launch, as I mentioned, all ingesting and contextualizing data from products and systems installed in the field. I realized digitalization to many of you at times risks to sound a bit virtual but the business is real. So I'm proud to share some numbers here on top of the several $1,000,000,000 that we have in digitally enabled business, which quite naturally comes if you're in the automation business, we have built a $400,000,000 business in selling software and software based services organically, which means we've doubled this in just the last 3 years. And simply because we saw a better payback in taking that organic investment relative to spending that money externally. We won't rest on this obviously, but we have a double digit a double digit growth ambition also going forward, again, mainly organic, but potentially including some bolt on acquisitions for competence or acceleration. Finally, together with safety, sustainability is an important part not only of ABBs purpose but also of the license to operate of our customers. Our automation, electrification and digital technology solutions help our customers successfully manage the energy transition, increase energy efficiency and reduce the environmental impact by more sustainably using resources including by low carbon mobility. Bjorn mentioned our electric and hybrid propulsion and marine. I already mentioned the gas leakage detection. You have several other examples here on this slide and we could do a whole presentation just on that. So to conclude, we're committed to create value to deliver consistent upper 20 percentage return on capital deployed, employed despite the cyclical industries that we serve target a 14% profit margin by 2023. Let me now hand over to Brandon Spencer, President of Energy Industries Division to share both his excitement and his plan regarding how we can help our customers to make their operations safer, smarter and more sustainable in an industry that is transforming while creating value for ABB. Over to you, Brandon. Thank you, Peter. I'm really pleased to be here today to talk on behalf of Energy Industries, to share a little bit about where we're going as a division and how we drive value internally and also for our customers. What you see on the right hand side of the screen here is where we're going as a division. We're going to drive our profitability up between now and 2023. We're going to continue to drive our impressive return on capital up between now 2023. And you've heard Peter talk about it. You've heard and Timo talk about it, some of the other leaders, profitable and stable before growth. We're not going to give up on growth in Energy Industries because there's absolutely opportunity for us. But we are going to focus on making sure that we're profitable and stable. So how do we do that? If you look at the left hand side of the screen, it's about being a leader in automation. It's about driving innovation forward. We're a technology company. What can we do in order to continue to drive a carbon free society? Even in our traditional businesses, where can we help with that along with other parts of our technology? It's around innovation and digital. So digitalization, you heard Peter talk about the $400 plus 1,000,000 as part of industrial automation, dollars 200 plus 1,000,000 of that comes from Energy Industries. And those are pure digital plays, not our DCS offerings and other things, but pure digital business. And lastly, we're going to live to the ABB way. We're fully empowered to deliver the results. We're fully accountable to deliver those results. And I'm going to step you through a little bit in this the next few minutes about how we intend to do that. Really excited to talk about this slide. This is not yesterday's news. This is today's news. These are winds that we've had since COVID, since the perfect storm that Peter talked about. We talk about oil price volatility. We talk about demand shock. We talk about COVID, kind of the perfect storm in our business. These are wins that our teams around the world have done where we're driving value for our customers. And as you work around the chart, you see pure automation business, where we're providing the intelligence and brains to run these kind of facilities. You see electrification projects where we're working together with our brothers and sisters from EL and from Motion in order to deliver a superior value to the customers. You see our digital solutions, again, pure digital solutions where we're taking data, driving connectivity and driving value together with our customers. And last but certainly not least, the environmentally friendly offerings. So yes, we have the conventional parts of our business in Power Gen and in Oil and Gas, but we also have other avenues and other markets that are opening up and are growing in a way that certainly offsets what we see in the downside of our conventional businesses. Really proud of the team, really excited to show the highlights of what we're doing around the world. As I said a little bit, we've got diversity in our markets. And so on the right hand side, you see we've combined power generation, water, oil and gas, chem and refining, the midstream portions of our business, all of those together, which allows us to have pushes and takes against what's happening in the market. You see where there's some growth rates that are happening that are higher than others, And we certainly are confident that the growth rates in some of the emerging segments outweighs the downside that we see in some of our conventional businesses. When we talk with customers, when I talk with trade media, I'm constantly talking about oil price cyclicality, about the demand for sustainable energy. What does it mean for the customer as they transform and transition their businesses as part of the energy evolution that we're going through? And certainly around digitalization, our customers are going through it internally, which is really important. ABB is doing it internally, which is really important. But how do we work together, bring in other parties from the ecosystem that play in this space in order to truly drive value for both organizations? And we'll touch on that a little bit as we continue forward. We've talked a little bit about the industries and really my takeaway for this slide is what Peter talked about in his presentation. We serve all these industries, the conventional power, the oil and gas, what we see in alternative energy and where those markets are going. Water, a really important market for us where we're seeing double digit growth in 2020, and we expect to continue to see that as we go forward. And what are we doing for those industries? We're all about making them safer, smarter and more sustainable. So whether that's the way we deploy our technology, whether it's the solutions that we bring, the services that we wrap around it or the digital connectivity that bolts it all together, it's about making our customers' operations safer, smarter and more sustainable. What you see here is our portfolio. It's a little bit of a complicated slide, but we want to be transparent with everybody that's watching today. So I'll step through a little bit of detail in terms of hoping to explain it better. What you see at the top is the markets that we serve. And important to note is that we go to market with a multi channel approach. We believe in EPCs, the engineering companies, end users, OEMs, channels, all of these ways to get to market because we want to sell to customers the way they want to buy from ABB. What are we selling? We're selling automation. We're selling electrification. We're selling digital connectivity and we're wrapping service around all of those. Service is over 50% of our revenue. So it's a critically important part of our business and certainly a growth engine for us as we go forward. The nation is our core business in the middle of the chart. That's our anchor product. All of our platforms, our current platforms, as well as our legacy platforms. And then we have the specialty portfolios at the bottom of the chart. These are areas where we're market leaders and these businesses sit within energy industries. So we have responsibility for the product development, the roadmaps, the marketing, the go to market, all of these elements we have responsibility for. The bottom right hand side of the chart, also important. We do a lot of pull through volume with our brothers and sisters in EL and in motion. It's critically important for us because we're delivering solutions to the customer. And so we want to make sure that we provide best in class technology, domain expertise, project execution, all these things. And where it's not part of ABB, we work with 3rd parties in order to make sure that we can deliver that turnkey solution that drives value for our customers. So let's talk a little bit specifically about Winning in Greenfield and in Brownfield, very important for us. And there's 3 pillars that I want to focus on. The first is technology. We want to be innovative and continue to lead in technology. So whether that's new product offerings, whether that's Edgegenius and GenX and the digital connectivity elements that we talked about, all of those things complement our strategy and the strategic pillar for being a leader in technology. Technology feeds into execution. Execution in our markets is critically important, whether it relates to safety, the environmental impact, costs, schedule, risk. I'm very excited to share with you all that we launched a few weeks ago ABB Adaptive Execution. We're going to play a short video for you here in a second. And in that video, it shows what are some of the elements that wrap in to adaptive execution. Peter? I get absolutely charged up every time I see that video, and it's really exciting what we're doing there. It wraps around people, around process, around technology, and around infrastructure in order to deliver cost, quality and schedule to our customers. There's a benefit inside ABB as we modularize things and streamline and standardize what we do in order to affect quality and drive profitability, there's a benefit for our customers around the CapEx side into the operating side and certainly around the quality that they receive. Really excited about the launch of this program globally for us. Last but not least is services, being the lifecycle partner. Peter talked about the duration of these projects. The capital side of the project can go 2, 3, 4, 5 years until the technology is deployed. Then it runs for the next 20, 30, 40, 50 years. Service is our intimacy with the customer. That's how we connect. COVID has certainly been a catalyst for some of this connection and digital connectivity, as Peter touched on with the collaborative operation centers. We will continue to drive value and find strategic offerings that we have, which really help ABB and our customers to be more productive as we go forward. We talked about environmentally friendly solutions and I want to dive a little bit deeper on that. As Peter said, we could give a full presentation on this topic. But I want to show some real examples of where we're doing it. Again, when I'm talking to customers, we're talking about resource efficiency. We're talking about new energy models, renewables, hydrogen, carbon capture, all these different types of potential energy sources. And we're talking about a responsible use of resources like we talk in water all the time. So what's ABB doing about it? And specifically, what are we doing in IAEN, in Energy Industries, about it? On the right hand side, you see a couple of examples and they range from electrifying the sea floor. So you're taking off a gas turbine from the top side of the facility, emitting carbon and you're electrifying the sea floor, driving up reliability, availability and reducing the environmental footprint. The first green hydrogen facility in Europe, ABB is providing the intelligence around this facility. In Bangladesh, a solar facility where we're providing intelligence and digital solutions as they diversify their power generation sources. And last but not least, and really important here is that we don't just talk about it externally, we are about it internally. This is a collaboration story between ourselves and EL, where we make an ABB facility carbon neutral. And this is done together with products from our brothers and sisters. My division is providing some of the intelligence and digital applications. And so I think it's really important that we focus on that we're delivering these solutions to ourselves. And so there's clearly value in there that we can deliver to the customers. I touched on digital, want to give a feel for where we are and where we're going. 200,000,000 plus in terms of the revenue portion of Energy Industries, an impressive CAGR, so an impressive growth rate that we've had in this organically along with some partnerships that we continue to use to drive and serve value to the customer. Where are we going? We're going to double this business. So I mentioned profitable and stable before growth. This is an area of growth for us and it's an area that helps also drive profitability for ABB and value for our customers. And so whether it's our own niche solutions, whether it's wider enterprise offerings where we're connecting different customer sites or whether we're just driving efficiency, all of our solutions with ABB Ability, with GenX, with Edgegenius and with our homegrown solutions that are part of Ability in IAEN, we are focused on delivering value through our digital growth. Quality of revenues is a theme that you've heard today, and stable and profitable before growth is a theme that you've heard today. This is what it means in IEN. We manage our portfolio annually, which you see on the left hand side of the slide, and we'll continue to do that of are we the best fit, is this product, is this market where we want to play and where we can add value. What are we doing about it? We'll target growth, whether it's in service, whether it's in channels, whether it's in digital, some niche places where we play in specific markets, we'll target that growth. We're going to work on some of the hygiene elements of our business as well. So whether that's units that are underperforming, for example, we're going to fix them. Products where we aren't at exactly at the margin quarter that we want to be at, we're going to address it and we're going to get it to where it needs to be. Our operational footprint, all of these kind of things go into that hygiene category that I just mentioned. And lastly, some bid selectivity. We want to make sure that we're focused on winning in markets where we can deliver value to the customers and we can get paid for that value back to ABB and thus to our shareholders. We'll do all of this by leaning into the ABB way. What you hear, Bjoern, Timo, the rest of the executive committee talk about externally is exactly the messaging that comes internally, and we fully support it. We're adopting it, we're implementing it, and we're going to help use it to drive results. The decentralization that you hear is real. The connectivity to performance, whether it's through the scorecards, whether it's through the annual incentive plan, all of these things to truly drive ownership. We have a motto in IAEN called TEAM, which is transparent, empowered, accountable and made simple. All of these fit perfectly within the ABB way. So as I close here, what you see on the left, that's my commitment to you. It's the commitment of my leadership team to you and it's the commitment of our 8,000 loyal employees that are serving our customers every day to go deliver those results as we lean forward. With that, I hand it back to Anssi to start the question and answer period. Thank you, Peter and Brandon. We now go into the Q and A session. And as promised earlier on today, we'll tune in Guillermo for his question to Peter. Please go ahead, Guillermo. Thank you. Thank you again, Anssi. And question to again to regards to process automation and I guess portfolio management and going back to the issues of low growth and low market positioning, I was wondering if apart from turbochargers, you can actually do more portfolio optimization with, for example, instrumentation or OGC? Or is it the case that the synergies from doing that portfolio optimization are greater than the potential uplift that the group will do by doing some actions over there? Thank you. Question, Guillermo. And I think it's important to emphasize how we understand and how we live portfolio management. There's always a question and the framework was shared earlier by Bjorn and Timo, that's a framework we use consistently across ABB. There's always the strategic attractiveness of a business and our ability to win. And we then look at how can we make not only how can we deliver consistent margin and consistent volume, but what is the delta we can make? And the delta we can make in 2 ways. Of course, we can make a delta by buying and selling businesses. And in this case, the exit in turbocharging is a delta was a business that is performing at a very high level of performance, very consistently over many years, but where we're basically not seeing under our ownership the ability to make a major on top delta, on top of that high performance that we have already, whereas in some of the other areas, clearly by focusing on the delta we can still make. By example, adaptive execution as mentioned by Brandon further strengthening our execution and serving some of the markets that we are serving by deploying technology innovation, by improving our operations and our factory footprint, by a whole range of such measures tailored to the specific part of the business we're looking at, we see us making a delta. And then also our portfolio evaluation isn't cast in stone. So we take that assumption, we make our plan and then, we see are we able to make it materialize? And of course, in case we wouldn't be able to make the delta ourselves, then we would get back to your question in a year's time and see what if we can't do things organically. But with what we have, we see the opportunity to make a delta. Thank you. And we have the next question from Andreas at JPMorgan. Please, Andreas, your line should be open. Yes, Andreas, your line should be open. Yes, good afternoon. Thanks for the time. I have a question on the margin target, if you clarify that. This morning, I think it was mentioned that the 14% would also need or include some M and A where you basically buy some higher margin businesses. We have talked about adding more devices to that Process Automation business for maybe the last 20 years in terms of, I think, past management called it having more products to hang on the kind of DCS Christmas tree. What has happened here on M and A? And is that still a focus? And why have you not been able or willing or didn't it didn't happen in terms of all these add on acquisitions maybe that we talked about over time? Thank you, Andreas. And indeed, there's always with portfolio management, not just the what will we stop doing, but what will we start doing question. So what can we create synergies with? For the time being, I think a big delta that we are in the process of making and where I disclosed some numbers is in digitalization. And there we basically looked at the odds of doing it organically, investing a part of our margin in that organic growth that I was able to show you for this area, rather than actually spend a lot of money outside and then having to find a payback for that acquisition. So for the time being, I don't think it would be the right thing to go further into what exactly would we be buying. But clearly, as we're talking about an exit from a high margin business, we are wrapping our minds around what could come in its place and not only be a great addition, but an addition that would help us make a further delta on. Is the 14% margin target organic or including an acquisition that replaces the high margin turbo business? You already heard Timo's answer this morning, which was basically saying, without turbocharging, the margin ambition clearly gets a lot steeper if we look at continuous improvement actions only. So that likely we would be looking at an acquisition to at least partly cover the gap that our most profitable division would be leaving. But I mean, we don't have the timing and the modalities on that. So at this point in time, we also don't know when this event will actually happen. Thank you for that. We'll take the next question from Martin at Citi. Please go ahead. Yeah, thanks. It's Martin from Citi. Just a couple of questions, if I can. The first one is just following on from the margin question. You do target a good increase in return on capital as well. I mean, again, would that include any goodwill and so forth that you would need to spend on acquisitions? And the second question was we've talked about this in past Investor Days. Some of your peers have talked about AB losing market share. But obviously, there's many, many parts to the division and some of those like conventional power, as you say, have been weaker than expected. Has that growth differential simply been a mix effect? Or have you seen any sort of end market share changes over the last 2 or 3 years? Thank you. Thanks, Martin. These are two great questions. And yes, let me emphasize on the first one that our return on capital employed is including goodwill. So we always look including goodwill. And that's the result of a track record of project execution and basically running our project businesses around 0 net working capital. So the balance of what we're getting from customers, what we're spending, the discipline in our execution is what actually allows these ROCE values to be as strong as they are. And I'm so happy to be able to disclose them here for the first time also. On your second question, yeah, we've heard one particular competitor very often state that they would be gaining share from ABB at the same time. They of course look at the same market share reports as us. And I just included that in the presentation for the fun of it. In the last 10 years, there's no signs of us losing market share in distributed control systems. Several people have gained market share, including ourselves, basically 3 companies have. One has been losing market share in a major way. So I'm not concerned about that. But of course, was the journey that I shared in a bit more detail where we exited EPC, where we did a few other moves, where we focused on higher ABB content in the portfolio, which was part of what I was talking you through was part of a margin uplift trajectory. In those measures. Yes, our volumes reported in this business area have actually not developed in line with some of the others, but that's because we made a conscious choice to actually deprioritize certain business. So when it comes to the DCS proper, there's fairly good market research available there and there's no evidence of this frequently made claim. So I would like to see some numbers next time I hear that where that will be coming from. Thank you very much. That's a challenge for you, Will. We'll take the next question, please. No, that's from Will at Kepler Cheuvreux. Sorry. Two questions. The first one is, when we think about your strategy to grow in digital solutions and digital business over the coming years, how do you anticipate the success there? Is it mainly building on instrumentation and digital offerings to your existing systems like 800 or Symphony? Or do you also have a strategy to be able to attack or cannibalize some not rather than cannibalize, attack some of your competitor systems such as Delta V or the Foxborough system. So where does the growth come from in digital? And do you have a strategy to attack the existing incumbent competitor systems? The second question is about measurement and analytics. When we look at the competitors in measurement and analytics, their returns are much higher than the ones that you are suggesting here. Are we just looking at the returns today being impacted by the cyclical downturn in a number of your end markets like oil and gas? Or is there a structural difference in the returns you achieve in measurement and analytics compared to your competitors? Thank you. Thanks, Will. These are 2 great questions. And if we look into the first one first, in terms of the success in digitalization, I deliberately painted the picture of these 3 categories we are pursuing. The first being around the equipment that we've delivered differentiated by software. The second then the system solutions around very typically the control attacking anybody's installed base. I'd rather describe it as adding value for customers who have a mixed installed base of different things, but they don't want to buy into digitalization in a captive way with this control system vendor or that one, but they rather look for proper digitalization that serves their need. So we think it from the customer and not from, the point of what has been installed, but connectivity of course is important there. And then I described also the going beyond the operations technology space, which is really rather than saying yes in digitalization, there's OT, there's ET, there's IT and they're all different fields. How can we pull relevant data for customer decisions together and contextualize it and make that into insights and decisions for customers. So that's our strategy in digitalization. We have that by division, by each of these areas in numbers, but of course not prepared to share those at this point in time. When we then look at measurement and analytics, your question there, yes, I think it's clear that especially on the instrumentation side of measurement and analytics, we're currently behind some of our competitors. And that's why we showed it, in the transform category. Our portfolio management has shown the alarm light and basically said, let's do something here to get that into a better trajectory. And yes, the trigger for that has been partly cyclical. We've had some parts that were very successful in serving onshore unconventional oil and gas. So when that went down, we saw also our overall KPIs going down. But at the same time, yes, there is a Thank you. And with that, we're going to have to close this Q and A session. We're going to listen to another business area. We're going to listen to Tarek Mehta, who is President of Business Area Electrification. Please go ahead, Tarek. Thank you, NC. Good afternoon, good morning, good evening. Ladies and gentlemen, thank you for joining us. My name is Tarek Mehta and on behalf of the 50,000 colleagues of the electrification business, I take unique pleasure in giving you an update as part of the ABB Capital Markets Day on where electrification business is headed. So today, I would like to cover what do we do? What do our products, solutions and service do for our customers? How do we see the market? Both in terms of current challenges, but also future opportunities. Where are we headed as a team and where are the divisions mandated to perform? How are we executing? Some details on execution along with how do we generate value together, both as a team but also working with the customers. So as part of the electrification business, I would like to make sure that you have a better appreciation for how we create differentiation. We create differentiation through innovative technologies. Core technologies combined with innovative solutions, driving digital solutions, creating value for customers. We also have a performance management process. Each division knows their mandate is. And I'm very happy today to give you an update on the great progress the team has made with our GIS colleagues in terms of improving its performance and the kind of delivery service that the customers and what we see as the future of that particular acquisition. As well as a quick update on the great also driving the performance and profitability of the installation products business. We also look at portfolio the same way we look at the individual divisions. A structured process, we will give you a good view on how we drive the portfolio process going to give you an idea that we're about 30% into the building space. But half of our turnover goes to distributors. And thanks to the acquisitions and the investments made over the years, we're very well balanced geographically. And that certainly in the year of COVID has really helped us. The recovery of China was visible in the performance of the Q3. As you can see, we have 4 strong divisions, leading positions in the scope and the area of their responsibility. We will also take a look at the business slightly differently. You can imagine this panel in every single large high rise building or a small industrial location. Dollars 10,000,000,000 worth of our products wind up in such an electrical panel. So the job of the sales organization is to get as many of our wonderful smart products into these panels as possible. These are engineered. Every single component is selected by people and our customers who put these panels together. We also have 30% of the business which is outside of the electrical panel. These are items like plugs, sockets, switches. It's also the EV chargers that you might see in the shopping centers. These are making up about 30% of the turnover and about 30 product lines that we have that drive the overall business when it comes to the $3,000,000,000 of revenue that I just articulated. We also have, and we deliver on a daily basis, 1,700,000 products. It's literally a river of products. Our teams make 30,000 pricing decisions per day. And thanks to those pricing decisions, we've had a very positive impact to the bottom line, even in a year like we had in 2020, a COVID affected year. From the market perspective, I'd like to walk you through how do we see the market. It's a $160,000,000,000 market. You can cut it up into 4 sectors. The electrification business is well balanced. As the market is from a weight and a percentage perspective, so is our portfolio. When you look at the macro trends, we see 2 which are really driving and creating an exciting future for our business. The shift to electricity, as mentioned earlier today, we see twice as much shift into electricity as the energy source for the world as any other source of energy. So this is exciting for us in the electrification business. We also see, thanks to the acceleration brought about by the COVID situation, the fact that we are digital together here today, so are our customers. So we see the expansion of e commerce. We see the expansion of digitalization providing us opportunities. We also see 4 high growth segments. We mentioned before that data centers has been a good growth driver for the electrification business in the last years. I'm happy to report that we see not only good business in 2020, but in the last 2 months, we've seen a very strong acceleration in the data center business. These are all segments where all the divisions are focused from their portfolio perspective, from the way we go to market, from the tools and processes so that we participate in a disproportionately positive manner into these high growth segments. Now that you looked at the we have looked at the business from a sector perspective, from a segment point of view, there's also another way to look at Please excuse the challenges we have today. We can also look at the business from the geographic dimension. So as you can see here, the top 10 multinationals do not occupy any more than 50% of the geographic market segments. And in the biggest market, which is Asia, Middle East and Africa, it's 75%. Our scale position as number 2, what does that mean? That means we have the market volumes and we have the manufacturing leverage. Combine that with the innovation and the R and D potential of our business, You put scale, R and D innovation on a digital platform like ABB Ability, what does that mean? We can take an application, a solution from China for the hospitals to make sure their reliability is better, thanks to the application and installation of an ABB over to Australia. And from Australia, we can take it to the Albert Einstein Hospital in Sao Paulo. All of this gives us the opportunity to take market share from the local competitors. When it comes to the direction of the business, you heard about the ABB Way and the purpose. For us, as a team, we stand for safe, smart, and sustainable electrification, for our customers and our partners. All of which is only possible thanks to the great team that we have. Electrification is a business. We want to be first. We want to be first for our customers. We want to be easy to do business with. We want to make sure, and we will make sure, that we have the shortest lead time and the best delivery performance. In a business with 500,000 SKUs, we need to ensure we have the best fill rates. And because our products are so critical, the fact that we can deliver, and we're easy to do business with, does provide us with a significant competitive advantage. Innovation is the lifeblood of ABB. This is who we are. This is what we bring as value in terms of new solutions, new ideas. I'm very happy to report to all of you that our teams, our colleagues have won 18 awards, our first nine months. We were able to drive and get recognized for the value that we provide. Some of our award winning solutions and products were ease of doing business, ease of navigation, ease of installation. So the customer focus in innovation is driving value. When we think about digital, think about the entire buying experience. From the time you look for a problem, to the time you actually implement a solution. So all of these are areas where we have specific KPIs and we are driving the business. Along with this, we have identified 6 growth drivers for the electrification business. We talked about innovation. We take an architectural control point, like a breaker, and we make sure that not only do we do the basic function, but we add features, we add embedded software, we add capability that creates a higher value than simply protecting the assets and the people, which is the primary purpose of the device. So these are 6 areas of growth. Moving into how do the businesses and the divisions think about performance. So we look at each of our divisions along the following parameters. What do we want them to do from a performance point of view? What capabilities do they need to succeed? What kind of portfolio moves are needed to make these divisions successful not only today, but also into the future? And where should they invest? As an example, we made the GEIS acquisition So for Alessandro, for Jean Pierre O and for Oliver, who's here with us today, the number one priority for them and their teams is to execute. Continue the good work done on the GIS acquisition, drive the execution, get more value out of it, lift the performance of the business. That's mission number 1. And then depending on the business, there are different priorities. If you take a look at the installation products business, now that the performance has improved, what is next for Matthias and his team? To actually look at what makes sense to keep in the portfolio. To actually think through what could be the win win combinations when it comes to execution. So this is the specific mandates for each of the divisions. But the at the end, we are 1 team. A team that focuses on agility. A team with common core values within the group. A team that cares about not only each other, not only the customers, but what kind of values do we drive in the communities that we belong. It's an engaged team with a common purpose of driving performance, increasing the effectiveness of our solutions, but also making a difference in the world. So let me give you a perspective from the digital. How do we drive value on the digital part of our portfolio? How do we create new revenue streams? We first start with smart products. It's the fact that we've been in the industry. It's the intelligence we gather from our process automation colleagues. We incorporate it into the products. We embed the intelligence so that close to the process, while connected to ABB Ability, we're able to provide the customer a fast interaction, the ability to affect their costs, their effectiveness, their productivity. On top of the ABB Ability, our teams have developed 4 discrete 4 to 5 business segments that you see here, all of which is part of a marketplace where we are partners. We create the smart Lego blocks. They create the integrated solution. All of which means the ease of doing business, the focus on e commerce provides this team with a very clear objective: drive $1,000,000,000 worth of e Commerce in the next years, either through the distributors' websites or through the way the customers might want to purchase from us. We want more than $3,000,000,000 worth of our portfolio to be searchable online. In the world today, everybody's looking for both the questions, but also the answers to their problems online. And with the product set of 500,000 SKUs, it's not a small task for us to make sure that customers can easily find what they need. Here are a few examples of how we deliver value. A very famous iconic building, Burj Khalifa. What did we do? We helped the maintenance department go away from preventive maintenance. Every 2 weeks, go down to the basement, look at the electrical panel, write down the features, write down the performance, make sure that things are going okay. Instead, we have retrofitted an ABB Ability connected solution. So we monitor the performance 24 hours a day, 7 days a week. And the maintenance department only needs to go down there when there is an actual need. So we go from preventive maintenance to needs based maintenance. And the amount of time and effort we save translates into many 100 of 1,000 of dollars worth of savings a year for the Burj Khalifa electrical maintenance team. Another example, which speaks to the spirit of the electrification business. Here is a giga co located in North Carolina, a customer of ours. Typically, infrastructure is put in on 10 megawatt increments. So 10 megawatts worth of infrastructure now. 1 year later, 2 years later, another 10 megawatts of construction capabilities and the product portfolio, we're able to design a system and a setup for customers so that they can increase their capacity in 2 megawatt segments. What does that mean? All the cash that they conserve and they preserve, they can use that to fuel a faster growth for their business. Along with the capital savings, we were also able to save them 25% on a typical data center operating cost, thanks to the technology and the solutions from us. The last example for today is, we want to contribute to a better society, lower emissions. What you will see is a short video of how, in the e mobility space, through the electrical vehicle charging system and setup, the electrification business team was able to make an impact in Netherlands. So here's a video showcasing what are we doing. So really exciting to see the kind of impact we can make and support the society in terms of carbon emissions reductions. So moving on from examples to creating value. For those of you who were with us in November of last year, we had a investor event where we highlighted 3 areas that we needed to focus on to improve the performance of the business: solar inverters, installation products, and GE Industrial Solutions. So how has the team executed in the last year? Very happy to report that the solar inverter business we exited in Q1 of 2020. The Installation Products business is doing just fine. I'll give you a quick update on how that business is performing. The GE Industrial Solutions business, we've handed it over to the 3 divisions, Distribution Solutions, Smart Power and Smart Building. And thanks to the very good execution, despite the challenges of COVID in 2020, the electrification team was able to hit the margin corridor in the Q3 of this year. I'm very proud of the achievement of the team. It wasn't easy. Lots of personal sacrifices, lots of hard work, but nevertheless, the determination towards achieving the objectives and the commitments we made, at least for me, was a very personally satisfying moment of my career so far in ABB. So well done to the team. From the execution perspective, let me give you a little bit of a preview into how not only are we doing on GIS, but what does the future look like. So 5 year plan for GIS. Remember, this was an underinvested business. We focused on product conversion, cost outs, optimizing the footprint, and investing in an under invested business in order to improve its performance from where it was to where we think it should be. So very happy to report that out of the $260,000,000 of product conversion, the team has already achieved on $130,000,000 And we expect to reach 260,000,000 dollars worth of product conversion from the GE product to the better and more profitable part of the portfolio, which is the ABB product for the customer, we will get that even 1 year ahead of schedule. When it comes to the cost synergies, we're already 140,000,000 by the end of this year. That's our projection. We will be more than 200,000,000 1 year earlier than originally planned, thanks to the effort and the speed of the execution of the team. When it comes to investments, we needed to invest a lot of money to improve the performance of this business. We have already invested 330,000,000 and we will finish the program of investment with 410,000,000. That's our current estimate of the business. In the meantime, during a difficult 2019, we got $97,000,000 back from GE as a combined team effort with our M and A organization and our finance team. The proudest achievement for us has been the 52 new products introduced into the U. S. And the global market in 2020. The customers accepted them. We have sold them, and the team has done a great job of getting 52 new products out into the market. The second business from a turnaround is installation products. Less than 1 year, more than 250 basis points improvement. This business now is operating at low teens. They have done a great job. The future, look for win win with the distributors. Focus on the strong product brands, which our customers love. Drive the business profitability through not only cost, but also through growth. This is a business which is poised for growth given the performance improvements that we've seen so far. So now we looked at the business, the 2 specific year, the entire team has reduced our SG and A costs by 8%, certainly contributing to the better performance that you have seen versus expectation and in some cases even versus our own expectations. We have a continuous improvement philosophy in electrification. 100 of projects, maybe even 1,000 of projects. The biggest one might be $1,000,000 Most of them are probably $10,000 or less. All of those projects contribute to a $200,000,000 improvement on an annual basis. And despite COVID, the team was able to hit that particular target, and we will hit the target of over $200,000,000 in operational improvements. And pricing has become more of a religion inside of electrification than just a process. The reason I say that is even in a COVID year, we expect to get $71,000,000 of benefit from price and commodity execution when it comes to the product side of the business. So this is what we do with on a continuous basis. We also look at our product portfolio on a continuous basis. What you see in front of you and we just announced this morning the decision on power conversion as part of the portfolio assessment process, But each and every one of those dots is some product line that a particular division needs to take a close look at. We run it on a structured way every quarter. We take a look and see the performance, make an assessment on the strategic fit, and then we make a decision. The best is for an organic improvement of this business, this particular business line or that particular business line inside of a division. You also see 2 acquisitions that we have made, which have been run by the divisions. So in one case, it was Oliver, and the other case, it was Jean Pierre. So they made strategic acquisitions run by the divisions, selected by the divisions, supported by the business area. So it's a structured process to drive performance and improvement. So when you look and put everything together, so how do we take this business from where it is to be solidly? And we aim to be very solidly in the margin corridor by 2023. Key action items: high segment high growth segment focus to drive the top line continuous improvement, more than $200,000,000 a year, thousands of projects continue the pricing discipline find opportunities to segment the market and get the value not only of the existing portfolio but of the margin accretive digital part of the portfolio. Then we also look at the overall portfolio, continue the execution, and we will continue the good momentum on the GIS business and also the continued improvement in the installation products business to drive the portfolio contributions. And at the end, this business does need, in some specific areas more R and D, for example, in digital, more investments in sales incentives so that we can sell the digital portfolio. So when you put the whole picture together, what you see is a business with exciting prospects in terms of positioning itself to high growth segments, a business where innovation in core technologies combined with the digital solutions based on ABB Ability provide us with profitable growth opportunities. A business where we look at not only continuous improvement, we don't only look at GIS turnaround, but we also look at increasing the profitability through selectivity, focus, and segmentations. You combine that with a portfolio management concept, which includes turnarounds, and for the divisions who have the performance where it needs to be, bolt on acquisitions to drive both the technology portfolio, the revenue portfolio, and even in some cases adjacencies that make sense for them. So when you put it all together, I feel we are in a fantastic business, great market potential. The team has proven a track record of improving business sequentially quarter on quarter over the last 6 quarters. So we feel very strongly that barring unforeseen economic circumstances, we are on a good trajectory to be well within our margin corridor by 2023. So thank you very much. Hansi, over to you for Q and A. What a good note to end. We'll now go into the Q and A session, And we'll have the first question from Gail at Deutsche Bank. Please, Gail, go ahead with your question. Thanks very much and good afternoon again. I have two questions actually. The first one is about the commercial buildings market that you identified as a high growth segment for the division. So could you describe a bit more what you assumed in your guidance for the non residential construction market outlook over the next couple of years in the context of the pandemic and the development of work from home? And the second question is about the sort of digital investments you may or may not do in the future. I mean, some of your competitors have just started to accelerate the digitalization of the electrification business by, for example, making some inroads in areas like the design and simulation of electrical networks. So I'd just like to get your thoughts on this. If it is a pass, you could embark at some point in time as well. Thank you, Gael, for your questions. So let me try to answer them. 1st, On the commercial building side, we are focused more on the smaller buildings where the innovation portfolio that we have developed, Oliver and his team have developed, allows us to automate buildings that were not possible for us to automate in the future. We're reaching price points and performance on smaller buildings and providing a much better environment in those buildings, thanks to the innovation potential and the innovation innovative solutions which are more open architecture rather than typically the dedicated networks that the buildings have. In terms of the economic outlook, we see more in the building automation space the opportunity to grow rather than just pure commercial building construction. So it's really on the automation side of the commercial buildings where we see bigger opportunity than per se the commercial building sector, which everybody has an opinion in terms of what's going to happen. So far, in terms of the actual performance, in terms of the actual construction and the needs on our portfolio, we don't see commercial buildings at this point in the economic cycle as being soft. Don't know what's going to happen 6 months from now, but at this point, we do not see the softness. When it comes to the digital investments, we are more interested in digital investments, including M and A. Each division leader knows that they have a green light to both look at, but also evaluate and then make acquisitions if it makes sense, focused on the application. Does it add value? Does it help us pull through more of the product? Does it make a difference to the customer? So instead of a platform approach on digital, we're taking a more focused based on vertical segment approach on digital. So if there are solutions for food and beverage, there are solutions for grid, as you mentioned, complexity and grid automation, those are the areas where we are absolutely looking for as well as our competitors into those spaces for M and A and acquisitions. Thank you. Ben Huglow at Morgan Stanley is next in line. Will you please put through your question? Are you there? No, we don't. I think no, we haven't got him. We're going to see if Will is on the line. Again, thank you. I have a couple of questions, please. The first, could we start just to discuss Distribution Solutions? The segment that Distribution Solutions competes within is notoriously competitive and often deals with large projects with demanding customers. When I look at your peer group performance, it is often below the level of the division or your business area target margin. I just wonder, do you realistically think you can get that Distribution Solutions division into or comfortably into the middle of your business area target margin range? Or would it just be good enough to be on par with your competitors? The second is regarding the SG and A. Congratulations on getting the costs down on the indirect level. How sustainable is that given that a lot of it will have been linked to the pandemic effects which will probably unwind through 2021 2022 onwards? I'll stop there. Thank you. Thank you, Will. On the Distribution Solutions side, our business is a little bit unique in Distribution Solutions in the sense that we are perhaps the biggest industrial exposure plus we have a significant utility part of the business which keeps us sharp, which keeps Alessandro and his team quite competitive. So we like the exposure in utilities, which is, as you said, very cost competitive. But that cost competitiveness translates itself into good value for the customers and good margins for us on the industrial side. 2nd, we also have a significant amount of component business in the distribution solution. So not everything we do is projects which are complex. Yes, we do have demanding customers, but we watch very carefully both the commercial terms but more importantly the technical terms for the execution and the requirements. So we take the right quantity of value added ABB scope projects and we push as hard as we can with Alessandro and the team, Mike and our Global Markets Organization to sell as many of the very good margin components that are quite critical for all suppliers of switchgear and projects. When it comes to the SG and A question, absolutely right. Some of the SG and A is specifically associated with travel. We do want our salespeople to go see customers when the customers are willing to see them. Some might never be willing to see them. So there is a structural element of cost that is permanently reduced even in travel. But we also see that there will be some bounce back up on the SG and A side. The 2020 levels are probably not sustainable if you want to profitably grow, invest in digital solutions. So yes, we do see some element of that savings will need to be put back into the business in order for it to grow profitably into the future. Thank you. Let's see if we have another question from James Moore perhaps at Redburn. Are you there, James? Hopefully you can hear me. Thanks, Anssi. Tarek, I wonder if I could ask you 2, 1 on GEIS and one on Thomas and Betts or installation products. Just on GEIS, just can I clarify, did you say that the margin went up 2.50 bps to hit a double digit margin expected for 2020? And if so, could you help me a little bit on the progression because I thought the GIS margin had gone from 3% in 2018 to 4.5% in 2019, which would suggest a big dump. Maybe you could correct me on the progression if I did hear correctly. And my question on Thomas and Betts is, I was partly expecting Thomas and Betts to be on the non core list because I've always felt that you bought it for a distribution channel. It wasn't the right channel. You bought GEIS to get the right channel. And maybe I could think about Thomas and Betts as becoming less core further down the line, 2, 3, 4, 5 years' time when you've got the margin to the desired level, because there were no electrons flowing through it, no digital, no peak shaving, less environmental potential. Is that a fair characterization of installation products or not at all? Thanks, James. Let me try to clarify the GEIS question and the Installation Products very clearly. So the GEIS business is on a 200,000,000 bottom line improvement trajectory as we had committed. When it comes to the installation products, for some reason, don't know why, even though it's mathematically easy to calculate in November, we never said that that business was single digits. So it has been a double digits business. It has improved under new management and the new efforts of selectivity and focus to be in the low teens. So Installation Products business is in the low teens, is executing well. So in terms of the Thomas and Betts portfolio Installation Products, there are some product lines in that portfolio that we will, working with the divisions, take a look at, with Matthias and his team to take a look at. Do they belong in the long term future of that business? However, it's one of the more under is not as well understood businesses in our portfolio. There's significant amount of good margin, high value add utility exposure. And then we have also some very good margin industrial components of the Thomas and Betts business. It does go on the same truck as our rest of our portfolio to the same site installed by the same individual. So there is a supply synergy, there is a sales synergy, and there is a distribution synergy of installation products portfolio. But we will take a look at all elements and all product lines inside of installation products to make a decision in terms of do all of them belong as part of the electrification portfolio going forward. Thank you. Thank you, James. And we would take the last question for this Q and A session from Jane McKenna at Barclays. Hi there. Shane rather than Jane, I use Jane at the weekends only. Final question really on product introductions from GEIS. In the presentation, you've highlighted, obviously, 52 new products introduced as the sort of best of both. If we go back to sort of pricing and the bridge, I presume that's been one of the key drivers. But when we look back at the Capital Markets Day, you talked about 100 new products to be introduced. Have some been held back because of the current environment? Can we expect the rest of those products to be introduced in the earlier part of 2021 and obviously a similar impact in terms of pricing as we look into next year? And then just one final follow-up question on your data center exposure. Are you able to give us a feel for how you're exposed across the 3 different segments in terms of hyperscale, colocation and sort of edge or local? And how you're feeling about the outlook for that market specifically for next year? Given the acceleration of growth that we've seen this year, there's a lot of concern about a further air pocket in data center for next year. So anything regarding the outlook for that vertical for next year would be useful. Thanks a lot. Thanks, Shane. No, you're right. Our plan was to introduce more products in 2020 than we were able to. The main reason for that was COVID and the challenges of coordinating product introduction plans with customers. So we decided not to go with the entire portfolio all at once. We're happy with the conversion, so we've had a very good hit rates on the products that we have brought into the market, but we didn't want to overload the sales organization and and also our customers' organization with too many product changes and specific changes that they would have to make in their own drawings. So most of that was held back because of, the challenges of getting to the customers and getting the product specified, in terms of the introduction. So yes, we will plan, and we are planning to continue with the product introduction into 2021 and beyond. And in terms of the data centers, we all thought the data center market would be softer than it is. The acceleration of the last 6 to 8 weeks has been quite impressive, to say the least. So it's difficult to say whether the momentum will continue to be at that level. That would be a breathtaking growth in the data center market. I don't think it will be that high. But I do believe or we do believe that between the hyper colo and the edge, we believe the colo would probably be a little bit surprising in terms of its growth. Hyper is dependent on 5 players in the market, as you know, and they all are reaching the capacity to execute more than the desire to add capacity. So it's a little bit on their capability to execute the projects. I think the demand is there. On the Edge, it's a mixed picture. It depends on the geography and depends on your market access visavis the customers. So we believe data centers will be strong. Would it be as strong as it has been in the 3rd Q4 of 2020? Probably not as strong. But even then, it will be a good growth trajectory if it continues to be even a little bit lower than what we see in the last 2 to 3 months. Thank you. Thank you very much. And with that, we're going to close this afternoon.

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