ABB (ABB) CMD 2025 summary

Strategic direction and operating model

• The ABB Way decentralized model drives accountability and performance, with over 75 business lines and 16 divisions assigned clear mandates and tailored incentives for growth, profitability, or stability.

• Strategic mandates and KPIs are cascaded to business lines, linking performance to remuneration and fostering transparency and speed.

• M&A is a renewed focus, targeting 1–2% acquired growth through bolt-on and larger deals, evaluated via a rigorous KPI framework for value creation.

• The business structure now consolidates into three areas—Electrification, Motion, and Automation—leveraging shared technologies and sales opportunities, with the Robotics division divested.

• Collaboration and continuous improvement are prioritized, with a 5% annual internal gross profit productivity target and disciplined hiring.

Financial targets and capital allocation

• Upgraded Operational EBITA margin target to 18–22% (excluding Robotics), with business area targets: Electrification 22–26%, Motion 18–22%, Automation 14–18%.

• ROCE target raised to over 20%, including planned inorganic growth, and free cash flow conversion to net income set at over 95%.

• Long-term organic revenue growth target set at 5–7% per year, with an additional 1–2% from acquisitions, measured over a full cycle.

• Capital allocation priorities: invest in organic growth, maintain a growing dividend, pursue value-adding M&A, and conduct share buybacks as appropriate.

• R&D investment targeted at 4.5–5% of revenues, with a focus on embedded software, AI, and digital innovation.

Business area highlights and growth drivers

• Electrification: Focus on buildings, utilities, renewables, and data centers, with strong US growth and innovation in DC technology and digital solutions.

• Automation: Integration of process and machine automation, targeting 14–18% margin and ~30% ROCE, with growth in digital and AI-enabled solutions.

• Motion: Market leader in motors, drives, and generators, targeting 18–22% margin, with a focus on energy efficiency, local manufacturing, and R&D leadership.

• All business areas drive both organic and inorganic growth, with a disciplined approach to M&A and a focus on technology leadership and customer value.

• Record order backlog with higher gross margins provides revenue visibility and resilience.