We Expect ABB to Maintain Current Record Profitability, but Further Margin Expansion Will Be Limited

ABB enjoys a number one or two market position in two thirds of its product segments, which is largely derived from centuries of deep-domain expertise in supplying mission-critical equipment with a high cost of failure for a variety of end markets. Its wide range of product categories and operating businesses have led to several costly restructuring programs and underperformance versus its European capital goods peers, due to the complexity of the organization. The divestment of its capital-intensive Power Grids business and the appointment to CEO of turnaround specialist Björn Rosengren have helped simplify the group through decentralization and active portfolio management, and subsequently improved the profitability of the business, comfortably exceeding its initial EBITA margin target of at least 15%. The departure of Rosengren as CEO in 2024 is a likely indication that the major components of the restructuring have been executed, reducing the magnitude of future margin expansion.