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Automation outfit ABB sees supply chain woes easing

How can you have these worries as a software business? Just ask Cisco

Machine automation specialist ABB is hoping supply chain disruption may have peaked and is forecasting a smoother ride from hereon in.

The Swiss-based multinational said it had seen strong order growth of 20 percent during calendar Q2 2022 despite inflation pushing up costs for enterprises globally.

However, revenues declined by 3 percent year-on-year to $7.25 billion, which it blamed on a resurgent US dollar exchange rate and lingering supply chain difficulties that meant it was unable to meet demand.

CEO Björn Rosengren said he was pleased with ABB's performance, and foresaw an easing of the supply chain problems it was experiencing.

"Overall, the supply chain constraints slightly eased compared with the previous quarter," he said, despite China lockdowns slowing logistics more than expected. "We anticipate further easing of component supply in the coming quarters," he added.

Last month Cisco talked of a $2.4 billion backlog in its software business. "How can you have a backlog if there's no supply chain issue? Well, there is, right? Because a lot of our software is attached to hardware, both in the security business and in our Meraki and our core networking businesses," said CFO Scott Heren.

In addition to industrial software, ABB also makes low voltage products and systems, measurement and analytics, drives, robotics, power converters and inverters and more.

According to ABB, revenues increased in all business areas except for Robotics & Discrete Automation, which along with the Distribution Solutions division in Electrification, saw customer deliveries affected by component shortages.

The overall positive outlook from ABB contrasts with forecasts from others that supply chain issues are ongoing. This week, analyst IDC warned that the global shortage of semiconductors remains an issue, and that a slowdown in the market is coming as demand falls in response to inflationary pressures.

Rosengren said ABB's income from operations had taken a hit during the quarter for approximately $250 million, some of which was due to the financial impact of its decision to exit the Russian market because of the war in Ukraine.

ABB has about 750 employees in Russia and two production sites in the country, as well as several service centers. Most of the Russian workforce has been on leave since March and the company said it will do its best to support them as it "realigns its operations."

Operating income was down 46 percent year-on-year to $587 million.

For the calendar Q3, Rosengren said the company expects to see double-digit revenue growth, while for the full year 2022, it aims to deliver a steady margin improvement towards a 2023 target of at least 15 percent.

Earlier this month, ABB announced a global partnership with Red Hat to combine ABB's process automation and industrial software with the open-source outfit's enterprise platforms and application services.

The move will see Red Hat's OpenShift platform adopted by ABB as a means of containerizing its automation software and aims to simplify development and management for ABB's customers. This will provide a single consistent application platform, from single node systems in edge deployments to scale-out hyperconverged clusters, the pair said. ®

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