ABB Ltd (ABBN) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and a warm welcome to the ABB Marine House in this first-ever process automation Capital Markets Day on behalf of the entire Process Automation Global leadership team. We're excited to have you here. With those of us who are here in the room rather than watching by webcast, we've enjoyed the interactions last night. I hope you've enjoyed the factory tour also. And we have a rich agenda for today. Before we dive into that, though, let me direct your attention to our safe harbor notices and our use of non-GAAP statements. In terms of our presenters for the day, colleagues from the Global Process Automation leadership team will be on the stage presenting on different parts of the agenda. And in addition to that, we will not only have the interaction in the breaks with the full leadership team, but we'll also have a number of immersion sessions. So you will really get a lot of opportunity for interaction, exchange, addressing individual questions also. Here's our objectives for today. First and foremost, we'll talk about the fundamentals of process automation and how we create value for our customers and our shareholders. And we'll frame our strategy, how we drive the business towards sustainable performance. To this end, this is the agenda we've structured and rather than structuring it by the details of our organization, we've done this from the customer end with the offering. So after this process automation overview, that I will be giving, and for a part of it joined by Alanna on stage, Jacques will then talk about what we do in sensing. We'll then talk about something that is maybe not a familiar expression to all of you that we internally call anchor products, and it's these first to mind, performance and reliability critical differentiated products for specific industries that basically anchor in the customers' minds and the customers' plans our offering in automation, electrical and digital for the industries that we serve. So these anchor products, together with the integrated systems we deliver around them will be this item. Then in the immersion sessions, we have 5 breakout sessions where you can deep dive typically with 2 presenters into specific topics with also time for interaction there to give you more of a flavor of what we do in the specific areas of our portfolio for a range of industries before the -- before we then talk about automation more broadly, which will be covered by Brandon and Bernhard. And finally, a session on digitalization with Juha, Brandon and myself. We'll lead always the goal to illustrate how we drive towards sustainable performance. So with that, let's not use time. We have a very compressed schedule today. We also realize some of you have got flights to catch relatively early in the afternoon. So we'll definitely -- first of all, some of us, including myself, also are in the same situation. So we'll be disciplined on the schedule and well organized on the logistics. And second, we realize that after the Motion Capital Markets Day, you've had a fair amount of download, but bear with us, we will keep it interesting, I promise. So this session, this overview session will be about our future business. So we are talking about the process automation that we will be, once the exit of turbocharging of what is now called Accelleron, has actually materialized. So that's the framing of today. And we'll cast our strategy in the context of the secular trends of the megatrends that surround us. We'll talk about, and Alanna will cover this part, our path towards sustainable performance. So you get some insight into how are we actually managing along the ABB Way, this path towards sustainable performance. And I'll then shed some light also on our customers, our offering and not the least also, how do we differentiate relative to competition. The future process automation in a nutshell, we're a $5.5 billion business if you look at 2021 actuals, we've had an 11% EBITA margin. And we've worked with a rather negative net working capital, which is obviously a positive. If you look from the perspective of execution discipline in a projects business, if you look from the perspective of cash generation, if you look from the perspective of return on capital employed here. And these numbers come from global leadership positions that we hold in process automation, in particular, in distributed control systems, we've now enjoyed more than 20 years as the #1 uninterrupted in distributed control systems. But process analytics is also another area where we have strong leadership positions, then also in a number of instrumentation and other sensing areas. Marine electrical propulsion just behind this wall, the tour yesterday, and we already checked some of the photos from last night from our official photographer, have come out really nice. So I think we all will walk away with tangible memories also in the form of photographs as anchoring our marine electrical propulsion offering. But then beyond the Azipods as an anchor product for a specific industry, we really have other anchor products, first to mind, performance critical in other industries that really differentiate us right from the start of a capital investment project. And when I say we, I mean we the process automation leadership team, but I also mean we the 20,000 employees in process automation who are very often going on a day-to-day basis into our customers' premises because 45% -- fully 45% of our business is service, which obviously gives us a lot of customer intimacy, resilience also if you look at performance over the cycle. And this customer intimacy is also mirrored in the fact that fully 70% of our business are actually direct sales, i.e. there's nobody between us and the customer in 70% of the business we do, but it's directly ourselves with the customer. In terms of how we're organized. With the ABB Way, we clearly have, as the highest operational level our divisions, and our 4 going forward fully accountable divisions are energy industries, process industries and marine and ports as industry vertical divisions that are looking after a number of industry subsectors, as well as then measurement and analytics, which basically is serving across a number of industries. And each of these obviously have plans for further driving the performance of those divisions. I won't go through all the industries we're serving in each. But if you take energy industries, for instance, it's both the traditional hydrocarbon value chain and conventional power generation, but with a growing share also of the low and no carbon energy side as well as water in their process industries, the mining, minerals, metals, pulp and paper. And for instance, in the new energy space, a growing share of battery manufacturing in there. And marine and ports, you saw it already, our Azipods are a great segue into basically flexibility on some of the sources of energy for marine propulsion. You can run a big diesel engine to make the electricity for the Azipods you saw, but you can also actually add fuel cells, you can add batteries, you can add other sources of energy, that is adding flexibility here. And then, of course, we also have ports in there. And as you see, also graphically, measurement and analytics, we basically serve with the instrumentation or analytics or specialty sensors. We serve a broad range of industries. So this one really cuts across those relations. And underpinning all of that, we've got a process control platform, we've got a digital center of excellence, underpinning this, not diluting the performance but giving us advantages of scale. So in terms of what we offer to our customers and these building blocks of our offering, you'll recognize are also the building blocks of our agenda. We've got sensing, which is the interface between the physical or chemical world of the process to see what's really going on there, translating that into the digital worlds of automation of digitalization. We then have the anchor product I was referring to, which are then really the first step in discussing large integrated automation, electrical and digital solutions. And we've got the automation ingredients, we've got the digital ingredients, and we're leaning very strongly to the tune of sourcing hundreds of millions from our colleagues in electrification and motion using their great products as part of our differentiated offering. In terms of business model, I mentioned the 45% service already. And it's not just kind of financial resilience that this provides, but what this does is basically it puts us on a virtuous cycle of sales after service and service after sales. So when we make that delivery on a project for a big capital investment for a customer, that investment will be in operation for decades. And during those decades, there's modernization, there's extension, there's maintenance and basically, we're in that and often in that even with resident engineers on a daily or weekly basis. So it creates a great degree of familiarity of customer intimacy and then doing the service and performing well on the service expectations of our customers basically uniquely positions us. We're usually the first to know then about additional projects, larger extensions or modernizations or new greenfield investments also and our performance on the service does position us for performance on new builds. Let me move to strategy, and we will keep it simple here, again, bearing time in mind. There's 3 major, call them secular trends, called the megatrends that we are seeing in the world around us. Clearly, serving some of the most energy and material intensive industries in the world as we do, sustainability and the energy transition is essential for our customers across everything that we serve. Second, the pace of technology, especially in the digital technologies, the acceleration in automation and digital transformation of the journey towards autonomous operations including in parts to actually be able to address sustainability is another megatrend that's super important for us. And finally, the evolving nature of globalization is reflected in each of our divisions, strategies and in our permanent balancing of how do we best organize around the world. You won't be surprised to see that translate into the strategic priorities that you can see here. First of all, performance improvement on a very granular level, and we'll give you some more insight, what we mean by that. Then the energy transition and sustainability, and including the question of what does that do for the business that we come from, for the business that we're moving towards as well as then digital and the growth and the productization we're driving in this space, always the goal of increasing our margin, driving superior return on capital employed as well as structurally growing the business in a healthy manner. Let me start with performance improvement, and Alanna will talk more about it and the subject will be picked up more also in subsequent presentations, especially from our division presidents. When we talk about performance improvements, we're basically talking about the ABB framework of stability, profitability and growth. And you see our division strategic mandates at the bottom gray row here, so 3 of our divisions are currently in the profitability area, one is in the growth area. But how we really manage performance as a management team is then looking at the granularity that you see in the line above that. So we're managing performance in terms of stability, profitability, growth on a much more granular level. I'm afraid we won't label all these bubbles for you, but let me point out what we mean by that by saying the big black one on the stability is actually instrumentation, which has been referred to also by Björn in some of his presentations. So that's one where we're spending quality time in terms of improving this. And of course, our general appetite is to see how can we optimize this in terms of shifting things to the right. And if you look at the snapshot of where things stand today, we've got fully 45% in the profitability, so in the middle section here. And already 40% are performing on a level where we say, hey, that's a strong performance, let's drive growth from that level rather than prioritize profitability before growth as we do in the middle section. A question that I also actually got last night in a conversation was what does all this energy transition and sustainability trend do to your business since you've been exposed to the hydrocarbons industry to commercial power generation quite a bit. And we'll get back to this further, but if I just take it briefly here already, then the conventional energy side, it looks pretty clear that coal is going to be fading out over time, and our exposure to coal is relatively limited. And then oil, gas are going to be there for longer periods of time still. But more importantly, the additional capital that will be required to be invested in the low and no carbon energies in green section here, and this is International Energy Agency data for their kind of middle-of-the-road scenario there's a lot of capital that will be needed in this area. And if you think about the capital that's required in conventional, in fossil fuels, you've had an initial investment and then the cost of fuel determining, for instance, your cost of electricity. With renewables, all of that is more front loaded. It does shift to the CapEx phase because you basically work with 0 fuel costs but higher CapEx. So there is a lot of investment coming this way. We have a very relevant offering, as you will also see during the course of today. So if you look at what this does to the industries we're serving, and that's not just the energy industries, but also the process industries, if you think of trends like green steel, if you think of sustainable underground mining, if you think of sustainable transport on Capital Markets Day that we ran and the last year, then really we see an investment cycle that is quite significant there. We see a growing role of electrification as a conduit to bringing renewables into some of these industries, including some of the hard-to-abate industries here, and we see a growing premium on efficiency, which only strengthens the case for automation, for digitalization. So we're convinced that on the whole, this means a net positive impact for what we do in process automation, certainly over the cycle. I touched on digitalization as a megatrend, and we've had many discussions, including with some of you in the room where it was great to catch up and kind of revisit this. So ABB, you've decided to grow it largely organically in this space. So where do we stand? As process automation, we've built a $500 million business growing very strongly organically over recent years. And we've chosen to grow organically, and we've chosen to go with an offering structured around the 6 customer value pillars that you see here. I'll get back to each of them. We have a session where Brandon, Juha and myself, and then in one of the immersions Rajesh and Eduardo will also talk about what specifically are we doing in each of these areas. So suffice to say here, we have good confidence in the approach we've taken here. It is certainly serving us well. And our priorities here are hence to continue the double-digit growth, to continue productizing our offering, to continue driving recurring revenue and more software as a service as well as further nurturing our capabilities and culture. ABB's purpose is something that most of you have seen, and we all find that an exciting purpose. We find it is really appealing and it is a good reason to come to work to actually not just create success, but to address the world's energy challenges, to transform industries, embed sustainability and lead with technology. And you would say, yes, that's very inspiring. Great vision. For us, actually, this is not a vision. This is what we do every day. So behind each of these pictures, in terms of creating success, we are serving some of the most complex industries on the planet that underpin our everyday needs for instance: for electricity, for water, data, essentially materials, no matter whether you write a letter on a piece of paper or whether you write an e-mail on a smartphone, all of these are required to keep those systems going. When we talk about addressing the world's energy challenges, many of the things we have already today are basically substituting diesel with electricity, opening the path for renewables in the process. The transformation of industries with the digital and automation offering you see during the course of today is real for us. This is a sizable part of what we do every day for our customers. The embedding of sustainability, this drone is actually not an artistic rendering, but it's part of our commercial offering. And you'll see it in one of the immersion sessions. It does sniff methane as a potent greenhouse gas and helps eliminate emissions in this area over the hydrocarbon's value chain. And leading with technology, I think, the factory tour, the sheer size also of our marine electric propulsion offering standing in front of these Azipod units and knowing they help save our customers 15% or 20% of their fuel cost and open the pathway, again, for alternative sources of fuel we find that very powerful. It's not just inspiration, it's our job every day. With that, let me have Alanna on stage to talk about driving towards sustainable performance.

Thanks, Peter. It's really great to be here today to talk you through the changes that we have been through in the past years, but also the trajectory we are on for the future. By the end of today, I feel confident that you as a team will believe in our business and see what we actually have to deliver in regards to sustainable performance. Now sustainable performance, what exactly is that? In the past, we've had one good year, one bad year, one good year. We want to be able to deliver consistent performance into the team's operational EBITA margin, consistent positive trend going forward. We have a clear plan and a great team. As Peter already said, the number that we will be presenting today do not include the Accelleron business or the Turbocharging business. So this is the first time that we are going in a much more granular perspective into the figures without Turbo. So we are well positioned for positive structural growth. Our markets are growing above GDP. There's strong fundamentals and our strategy is tied to the secular trends. Now you might say, what do you mean Alanna, tied to the secular trends? So we have these inherent accelerators within our business that will enable us to grow greater than the market. Customers want to buy solutions of energy efficiency. They want to buy solutions of automation. They need data-driven decisions. They need to have solutions that keep their people safe. We have all of that. That is a part of our business. Now on top of that, we have been investing in our installed base. So the foundation of our revenue that is recurring is -- we have $100 billion in regards to installed base that we can leverage and is the foundation for our revenues. So with that, we are confident as a team that we have strong fundamentals and we are positioned well for growth. So when you look at this, customers will buy from us. But how can we drive strong operational performance, okay? If you look on the right-hand side here, our operational EBITA, excluding the Turbocharging business is 11%. We want to drive this business up into the teens to help support the group or to deliver or overdeliver on their operational EBITA targets. Now how will we do that? In the past years, we have been taking out a significant amount of cost and reinvesting that in digital and software productization. Also in selling, we need to transform our revenue mix. Software and digital is at a much higher gross margin than our normal business. So we are really looking at how do we have a different revenue mix than what we've actually had in the past. In the middle box there, you see something saying accountability and profitability focus. And you've probably heard Björn and Timo comment on it many times about this transformation that we have been on at ABB, this ABB Way. So what exactly is this ABB Way. It's really about pushing accountability and responsibility to the lower levels. It's about having a performance management system where people understand what they are supposed to deliver, they don't have 10 KPIs. They have 1 or 2 KPIs, and they know exactly what they need to do. We believe with all of these different aspects that we are focused on, we will be able to drive towards consistent margin improvement. Now the journey we have been on has not been easy. On the left-hand side, you can see what we have been completed. And you say, ABB Way, is that really complete? Björn said that there's still some work to do. Yes, the ABB Way is complete at the corporate and the business area level. But you will hear later from Brandon, Jo and Jacques, what they are doing in their divisions to even drive it further down into the organization. Now some of you last night, we had discussions about what have we gone through in the last years. We inherited a lot of legacy projects or problems, which we have fixed. One in particularly was Kusile. It was really critical that we were able to deliver power to the people of South Africa and deliver on our customer commitments. But we needed to protect ourselves at ABB from a balance sheet and a P&L perspective. So it took a lot of hard efforts with the teams to really fix the problems. Zero net working capital. It's one of the areas I'm actually most proud of, which we will talk about in a little bit. Now in the area of implementing, we're still not perfect. We still have a lot of things to do. And Jacques will share with you a little bit later in regards to granular portfolio management. And you might say, granular portfolio management, we thought you were good at that. Well, we're not bad, but we still could be much better. And you will hear how are we driving this? How are we ensuring that the businesses that we have as a part of our portfolio fit with our purpose, fit with the way we actually want to go forward. Operations excellence and cost outs. Jo will share in a little bit what we are doing in that aspect. And digital productization and growth will be the last session of today, which Peter, Brandon, Juha, and the immersion session with Rajesh, you will see later on. Wrapping up, pricing, you know electrification is fantastic at pricing. They're really, really good, and we want to be just as good as them as pricing, but this is an area that we still have some room to improve. Mix, I just talked a little bit ago about digital. How can we transform this revenue mix and be able to have a different gross margin? Bolt-on M&A, looking at where does it make sense from a product perspective, from a return on capital per se. Now we have spent a lot of time in the last years, building a strong project organization. In order to be able to deliver, you need to have good people. You need to have the right types of people and the right processes. We spent over 100,000 hours per year just on the pretender phase. First lesson, you don't want to take on bad projects. It's much more difficult if you take on a bad project to fix it later on. You need to make sure you have the right scope, the right costing, the right execution strategy. This is what we do upfront and we invest in. We -- 35% of our staff today are engineering and project execution staff. Why do customers come to us? Why do they want to buy from us? Because we have the expertise and the people, we can enable some of the highly most complex facilities in the world. We have decades-long partnerships with these customers. Building these systems and investing in this CapEx gives us a natural ability to do the service. So like Peter actually just said, this drives this virtuous cycle of service after sales and sales after service, building this $100 billion in regards to installed base. Now we have today over 5,000 active projects. And you're saying, what is that graph that is actually up there? This is real data as of today. These are our active projects and the gross margin of our active projects as of the end of Q1. And you can see most of them are actually positive. So this is our order backlog in all of our active gross margins. And what we are very focused on is not taking on any bad projects, but also driving the gross margin up once we take on a project. So we are very focused on having margin accretion from the as-sold. Now the as-sold is the margin that we book the project at to the moment that we actually deliver the project. And you will see later on from Jo just how this is managed from a business perspective. Now how are we doing this today? We are -- the divisions are very focused in regards to modular types of deliveries and scopes, trying to reduce our engineering overruns, having the right people, investing in contract management, planning, claims management. We've been able to today to improve our margin anywhere from 150 to 200 basis points. Now talk is nice, but to see it through the order backlog. So this order backlog margin that I'm showing here today is primarily our systems business, okay? So you saw on, I think it was some pages back, that our gross margin is 31%. But here, it only says 25%. This is our long-term projects. The SG&A on these projects is very low, okay? But as you can see, we have been driving it up again and again, and that is really our focus. We want to see this order backlog margin going up. This gives us confidence that we can deliver sustainable performance. This gives us confidence that we can drive the margin up into the teens. All of our divisions today operate a double-digit operational EBITA margin. Now delivering profit is one thing, but delivering it on an asset base very light is very impressive. So in the last 18 months, we have been able to drive the margin down. So beforehand, it kind of looks like the Swiss Alps, right, up and down. You would -- at the beginning of the year, you would have low, it would go high, it would go low, it would go high, it would go low. Today, we are like the planes of Canada, flat and even going a little bit into the ocean. How have we done this? And is this actually sustainable? You might have remembered I talked about this ABB Way in this performance management system. We have embedded this into the performance management system. So this was a part for the last 3 years of people's performance management system. And what we did was we implemented 13 month rolling net working capital. So it wasn't just about having the lowest net working capital at the end of the year, it was consistently delivering on this lower working capital. Why is this so important? This tells us the health of the business. It tells us that customers are willing to pay us on time. It tells us that we are able to ship the inventory out of the door. It gives Peter and I confidence that we can stand up here in front of you and say we can deliver. That, together with this low fixed asset intensity enables us to deliver superior returns on capital. So 4 years ago, I rejoined process automation. And yes, I loved being a part of Investor Relations and serving you as a team from an investor base, but I really missed being a part of the success of a business. We are confident that we are able to drive this margin improvement. Our operational EBITA will outpass -- outpace, sorry, our revenue growth, meaning that we will have this nice margin accretion. That, together with the negative working capital, the light fixed assets will enable us to have superior return on capital. We have a great team. We cannot do this by ourselves. Our divisions, the teams locally, are all behind driving in this direction. I hope that you will enjoy the day. It's a packed day, and I'm sure you will have lots of questions in that. So we look forward to it. And with that, I hand back to Peter.

Thank you, Alanna. And look, I heard it last night again. I sometimes saw it in reports that some of you wrote. Process Automation has sometimes been perceived as a bit of a black box, if I can paraphrase it. And one of the things we want to do, not only was the [ snacks ] section, but really was this entire day, Process Automation Capital Markets Day, is to change that and maybe picture more something like an aquarium where you can quite clearly see what's going on, on the inside. And I'll start that with our customers, our offering and our differentiation. I said already that we are serving some of the most complex industries and infrastructures on this planet that reliably serve our everyday needs. In the background, you would only notice them in case they would actually not be performing. And these are often some of the more energy-intensive and material intensive industries. I won't read through them all here, but they are producing hundreds of millions of tons of solids, liquids, gases. And each of these industries, and you'll see that strongly in the session on anchor products and on integrated systems offering, each of these industries have their own particularities, their own requirements for domain competence, but they also have a lot in common. And one of the common denominators in all these industries is safety is paramount. It's part of our customers' license to operate as is reliability and its reliability, if you think, for instance, of your electric power supply, reliability matters in how well you serve your customers, but reliability also matters in a major way in your economics, if you think of the cost of an hour of downtime in many of these industries, they can be in the millions of dollars. Apart from that, the competitiveness of facilities where maybe you made this investment 15 years ago to build a world-class facility was what was world class at this time. You have to stay ahead of the curve. You have to remain competitive through permanently optimizing by means of automation, electrification and digitalization your competitiveness, is something that's ingrained in how our customers are running these facilities. So protecting your past investment by deploying new technologies, that's not an easy balance to manage, but it's one where our customers are really looking to ABB, for us to help them with this. And then, of course, I talked about sustainability as a megatrend already. For any of these industries, sustainability is a key part of staying in business, but also the other way around for the world to achieve the climate targets, there is no way of achieving them without these industries making a major move. So we feel a lot of commitment and not just directly in the energy industries, but really across the whole range of industries we're serving in terms of making progress and investing in sustainability. I talked about the left-hand side of this slide already to our offering, which is also kind of fundamentally how we've structured the agenda for today, but let me say a few more words on the right-hand side here, what you see is, again, the 70% of our business that are direct sales to end customers, which are -- which is really a key part of this customer intimacy, we are often also a helper and adviser to our customers. We are helping them against an initial investment plan actually to also take cost out of some initial design hypotheses by helping them find better ways due to our familiarity with the industry with their goals and operations. We are, especially in large greenfields and some of the industries, also working for end customers with EPCs or other integrators. And then we have a smaller part of our portfolio that is going indirect. In terms of serving the large installed base, in terms of being present at our customers, we have a rather globally balanced footprint. You will imagine this [ previous ] also was economic cycles in different parts of the world with different industries. So it's a reasonably balanced footprint. One question I got last night is, okay, we've seen these Azipods, that's kind of interesting, but what does it have to do with the rest of the business? How does process automation hang together? Again, you see parts of that covered in the agenda throughout the day. But let me give you a quick visual. Yes, at first glance these industries, and you see an underground mine with mineral processing facilities attached to it on the upper part of the picture. You see a marine vessel, you see an offshore rig. And they're all big and gray on this chart, but they don't seem to have a huge lot in common. Until you basically have ABB entering the picture, the automation, the electrical, the digital solutions we provide for this industry actually have an awful lot in common. These are some of the same building blocks from our colleagues in electrification, for instance, switch gear from motion, motors and drives our own automation systems, our instrumentation, our analyzers or digital solutions. When you add all that, suddenly, they start to look a whole more common. And when you then remove the gray background, I have to confess, and I've been in the company now close to 28 years, I have to confess that it sometimes takes me a couple of minutes to see whether this electrical or automation architecture is for this or this or this industry and division because there is so much commonality. And rather than now going more technically on this side, we've created this overview slide for you to illustrate how this hangs together. So on the vertical axis, you have our offering which is the structure of today. So after this, we'll talk about sensing, the anchor products, integrated systems, automation and digital. And then we have our fully accountable divisions where you can see what's the mix of systems versus products versus services that we have in each of these. And there are positions of strength where we draw on positive scale effects, especially on the process control platform on some of the engineering as well as then on a digital center of excellence. So that's how it hangs together, and this is where you will see as we go through the presentations over the course of today where you will see commonalities. Finally, how do we differentiate relative to competition? The seamlessly integrated proposition of automation, electrical and digital is of growing importance, especially when you reconcile the continued need for reliable industrial production with the need to integrate more renewables, which often comes with intermittency of the power supply so that within milliseconds, you will have to decide which noncritical loads, for instance, process heaters, you can shed for a couple of minutes without risking the total process to come down. We have these leading anchor products that we will hear more from Jo and Juha about, we have this continued global #1 position in distributed control systems and the continued technology investment we make there in the automation systems, we make in the sensing. We have this industry domain expertise and customer intimacy that I was talking about earlier. And we have this unique ability of helping our customers make long-term investments that we then support over a life cycle and help them protect their original investment backed up by the very strong systems and project delivery capabilities Alanna was already referring to and Jo is going to get back to. So on the whole, wrapping up the session, we're confident, confident of the fundamentals of process automation and the markets we are serving where we feel well aligned to serving the secular growth trends in this market with automation, electrification and digitalization. You've seen a first glance, and it will come back through the course of today. We have a systematic improvement of our profitability going on, on a very granular level, which also adds to our confidence to continue delivering superior return on capital employed in an asset-light model as part of our sustainable performance journey. And with that, let me conclude this session and ask Ann-Sofie on stage for the Q&A.

Yes. And it will be the same procedure as yesterday. There will be, for the audience here in the room, microphones available, of course, and also for all of you either here in the room or virtual, please feel free to use the Chat tool in the CMD -- on the CMD on the link on the website to put questions through, and I will receive them here. So we start. There are hands up in the air. I like it. Please go ahead on the -- yes, Alex.

First one up. I'll try to make it not too difficult. Alex at BofA. Peter, I wonder if you could just address the pricing point, I think we'd all acknowledge that you've got some great products. You do some great things. But the -- is it a fair statement to say customers come to you because your pricing is actually at the wrong point?

No, no, I would not consider that a fair statement, Alex. But what you heard Alanna say when we talk especially about product pricing, that's an area since for us, it's very much service. It's projects. On the product pricing side, clearly, we have a lot to learn, and we look to our colleagues in electrification who are way more sophisticated than ourselves, and we get lots of really good learning. At the same time, you'll hear, for instance, from Jo, in terms of project selectivity, understanding the integration value we are creating for our customers and translating that into the right projects we book at the right margin there, I would say we've actually come pretty far on the maturity curve over the last couple of years, it's really been an effort over multiple years. And you saw it in the data Alanna showed already, our gross margin doesn't come up by itself, but it's developed the way it has developed because actually in projects, in services, I think we've managed this pretty well. So it's a differentiated picture. And no, I don't think customers come to us because we can't get our calculations right. Thanks.

We have Joe here also in the front-ish, please?

Joe from Cowen. You mentioned negative net working capital a few times. It seems like it's a fairly recent phenomenon. How much of that is a byproduct of the world we're in now where maybe you can't get inventory, you can't get products, you're fulfilling contracts that were already in place, maybe a little bit more service mix now because you can't bring in certain things, maybe extend payables a little bit. And as things kind of ramp back up in the world and supply chains loosen, that flips back the other way and kind of goes back to where it was.

I'll start and then I hand over to you, Alanna. From -- if you look over a multiyear perspective, we've actually, over the years, worked down our net working capital over quite a number of years. And from my perspective, the key part of this is actually in the project, are you in a commercially strong position where you can get advance payments before you actually have to pay suppliers. Are you in a position to hold the money in your hand? And are you managing the execution of projects without actually building up sales in excess of invoicing to any excessive degree. So from my perspective, it's a health indicator for how we're running, especially our project business and how we're getting paid, but Alanna.

And inventory is only one piece of it. A lot of it is also trade receivables, and we had significant overdues partially because customers were unhappy with the delivery. So like Peter said, it's really about the health of the business. And this has been going on for at least 18 months. Now we had negative net working capital beforehand, but it was only for 1 month. And what we said is, how is it possible that it can only be for 1 month. It should be sustainable. And if people actually have a focus on it, then they actually drive it in that way. And that is what has completely transformed.

Very good. We'll pass the microphone to Ben, please.

Ben at Morgan Stanley. So 2 questions. First of all, on the industrial software and digital services, the $500 million, which is now becoming quite a slug of your overall revenue. How exactly have you calculated that? How do you define that? Is it truly a recurring revenue stream? Is this a subscription? Is it a license? And if we were to see a downturn on the original equipment side, would that go down or would it remain constant? So that's number one. Number two, on project selectivity, could you just give us 1 or 2 concrete examples of what you've done as a manager to actually change that profile because legacy projects have been a long-term issue. What we don't want, if heaven forbid, we were to go into another downturn, is to find that there are still some legacy issues out there.

Yes. Let me be brief on the first question since we have a full session on digital, exactly to these questions. So indeed, we've characterized that. We'll talk about how, and we'll give you some more insight also what that does to a gross margin level and what parts are recurring and what parts are not. So we'll get back to that. When we talk about projects, the projects Alanna was referring to, in particular, came from organizational changes, heaviest legacies were out of the power generation legacy that came to us, I believe, in 2016. So it took some time to work through those issues, but we've progressed there well, and you've seen it in the health of our backlog as well as in the health of our net working capital. I think those combined indicators give us good reason for optimism? Would you...

I would agree. And I think the best people to actually ask us to how they're managing it are the division managers because they are the first ones that actually say no to certain projects because of the way -- where it's located, the project scope, does it make sense? Now we, as a management team, are the last kind of reviewers of it. But it all starts with this team here in regards to driving the project selectivity and looking at the type of scope that we are willing to take on with the risk profile. The other area I would say that is really critical is also driving the planning, the contract management and the claims management, because that is actually how we need to make sure that the customers do not necessarily take advantage of us. And we have a clear scope documentation that everyone knows what is to be delivered.

And I mean, to give you a concrete example, since you were asking for that, Ben. If you take large electrification only jobs of, say, big size but medium or low complexity, in the past, we would take these things because there would be lots of transformers, high-voltage, medium-voltage, low-voltage, switchgear, all sorts of things from the ABB store, but the value of the integration would not be particularly high. So the margins, we as PA could make on that would not be all that healthy while perhaps for the factories in other parts of ABB, this made sense. Today with the accountability, with the transparency we have in place, we can simply say, this makes no sense for us in process automation, so find some other way of selling those parts by an another channel. This is not an area where we are adding sufficient value. So we screen it out in our project selectivity. And ABB has other channels, and you saw motion, you've heard electrification on an earlier occasion, how they are then also going multichannel, and that's working well for all parts of ABB because we are today free to choose.

Yes, and you can just pass it next door to Martin.

It's Martin from Citi. Just a couple of questions. The first one is on cost out and margin improvement. With the Turbo business exiting, is there a stranded cost element that is an opportunity for the overhead to be reduced as part of that? And the second question is then on the systems gross margin in the backlog where we can see kind of the conversion time of orders to sales for the division overall. But for systems, how long does it take for that gross margin to come through the P&L? And is that getting shorter? Is your project selectivity, meaning that you're taking on contracts that are, on average, shorter duration than they perhaps were in the past?

So I answer you the last one. It's the easiest one. It's usually about an 18-month conversion. It can go all the way up to 36 months depending on the type of scope, but it's usually on average about 18 months. And that has been getting slightly shorter. Depending on -- during COVID, it actually got a little bit longer, but now it's actually, I would say, more shorter in nature that it is actually going. In regards to cost out and specifically on the tornado -- or sorry, the Accelleron divestiture, there's always room to take cost out. And we're looking at what makes sense from an efficiency perspective, from an organizational perspective, we have a little bit of stranded cost, but we have the run rate to look forward, right? So it's not like it's a huge surprise, and then we actually have it sitting with us. So we know exactly now from a timing perspective, what do we need to do when and how do we actually go about it.

And then if we have Gael.

It's Gael de-Bray from Deutsche Bank. Two questions, please. The first one perhaps for you, Alanna, on Slide #24, I think you showed the gross margin pattern by contracts. So can you shed some light on the few projects that were really on the right side that come with the...

My favorite project, still because even though we have clear plans in place and actions around Kusile. Kusile is definitely still on the right-hand side because we still need to execute it, and we still have another probably 24 months of operational execution we have there. Now it's in a much better shape. We have taken the [ loss ] order provisions against it. So there will not be a hit on the P&L. It's already taken through the income statement. But it is one of those ones on the far right. As well as we had -- you might remember a couple of years ago, we had some legacy projects in India that also we had inherited from the power gen business. Those are also on the right-hand side. But I would say the majority of the ones that we have now that have been taken in probably the last 24 to 36 months are more on the left-hand side. So the majority of the ones on the right are the legacy issues that we're still executing.

Okay. And the second question I have is, since you automate and electrify some of the very big assets on the planet, so could you give us an indication of how much of your business of your revenue is CapEx-driven and OpEx driven? And in relation to this, have you started to see some push outs of some of the projects out there simply because costs are going up too much either because of inflationary pressures or interest rates going up?

If you look, I mean, we showed you that service is 45%. So the service is more OpEx driven. There are some large extensions, modernizations that would still have a CapEx nature. But my best guess between CapEx and OpEx is probably 60 CapEx, 40 OpEx, roughly speaking. And in terms of discussions with our customers about their plans, their opportunities. I think we've really seen an acceleration of project pipelines and no slowdown especially around the 2 trends, I mentioned as megatrends. So sustainability and the energy transition individually for each industry and each customer is a major driver just to stay current in the race as well as then automation as well as digital transformation, getting better data, getting it cleaned, getting it contextualized and using it for better decisions. Clearly, I don't not see at this point in Process Automation a slowdown in those activities. Rather in the contrary, if I look at the medium to longer-term pipeline, I see it strengthening.

And we've even seen on the risk review process. So our pretendering activities, that it's actually increased.

Good morning. It is my pleasure to introduce the sensing business of Process Automation to you today. Before we dive into the details, allow me to position this business within the constellation of Process Automation. Sensors are the interface between the physical process and the automation and digital system, it is a key element of the control loop. The sensing business is addressing the same market, the same segments, the same customer and to a large extent, the same projects as all the other businesses of Process Automation that will be presented to you today. So we believe it's a great advantage to have everything together. My name is Jacques Mulbert. I took the responsibility for the measurement & analytics division a year ago. And what I proposed to you during this short session is to first introduce this sensing business and its market to you, then to move towards the transformation we have ongoing for our instrumentation business and then talk about our growth strategy for our analytical business. And we'll conclude talking about sustainability and digital. So what's sensing and why is it becoming increasingly important? Sensors detect changes in the environment or in a given source. The source can be a gas, a liquid or a solid. And then sensors send signals to the automation and digital systems. If you take a process plant as the one you have in this slide, we have thousands of measuring points and using many different measuring principles. So ultimately, sensors contribute to safer, smarter and more sustainable industries. The evolution of the sensing technologies is very fast, and it really opens a new set of opportunity on how to create and capture value. So let me take 2 examples starting from this plant that you have on this slide. So you want to measure the methane emission of this plant. Today, we can do it from a satellite, and we can do it from a satellite because the accuracy of our sensors is extremely precise. If I take the second example, you take one of those pipes with gas inside and you want to locate a leak. Today, we can locate this leak from a car at 50 kilometers an hour extremely precisely or from a drone at 40 kilometers an hour, and that's the evolution of the sensing business. And then we understand that it does create some new business opportunities for us and for our customers because we can sell this data. Finally, the all-digital transformation with its constant need for more data and more precise data has also a huge impact on sensing because we need more measuring points. So this is a business which is fundamentally important and which is evolving fast. We, at ABB have a combination of a number of sensing technologies, it is wide, and it is unique. And basically, we can rank them in 3 categories. The first one is analytical, an analytical sensor measures the chemical composition of gas and liquids. We have in our analytical business revenue in the range of $500 million. We address a market of $4 billion, and we have a leading position. We're leading with technology. We're also leading with the width and the depth of our offer. Whichever segment you address in this market, we have a position of #1 on #2. This business is profitable. The second business we have is instrumentation. Instrumentation sensors measure the physical characteristics of fluid. That is temperature, pressure, flow and we address a market of $9 billion to $10 billion, a bigger market. Our revenue is about the same, around $500 million. According to the segment we talk about our competitive position ranges from #1 to #5. And as a whole, we're #4 in this market. We have a quite specific positioning because we are highly recognized technically, as very often with ABB. We have some key differentiators, and I will come back to that in a minute. And we can leverage the leading position of our analytical business as we target the same segments and the same customers. As it was already expressed earlier this morning, this business is not profitable enough, and we're very committed to transforming it. The third business that we have is the specialized sensing. So specialized sensing is basically addressing critical niche applications of the pulp and paper and the metal markets. This is a market of roughly $1 billion, and we enjoy a revenue in the range of $200 million. We are a leader in those different niches, always #1 or #2. Part of the specialized sensing business is not part of the measurement and analytics division, but it's more of an anchor product. And my colleague, Jo will talk to you about that later today. This all specialized sensing business enjoys a good profitability. So our market, as I just said, is roughly $15 billion. And what I would like to talk to you about is the market dynamic. Basically, there is a strong market dynamic under the influence of 4 drivers. The first 1 is the production effectiveness. It requires a lot of sensing. The second 1 is the energy transition. And here, we're talking about all the aspects of the energy transition. So on the 1 hand, a very important one, which is energy savings. And then if you look at all the different segments that have been creating are still being creating it over time with energy transition. Sensing is everywhere. It's everywhere in the biomass, in the waste to energy, in the hydrogen, in the battery manufacturing, in the carbon capture and so on and so forth. The third driver, which is a very strong 1 is the environmental requirements. And here, what we see happening is that everywhere in the world, the regulations are tightening in order to have a better control on emissions and water quality. Here, we're talking about mostly disposable water quality. And this has a huge impact on our business, both on what we need to develop and of the volume of the market. And finally, and I already alluded to that, the fourth driver is the digital growth. Digital transformation, more data, more precise data, more measuring points. So those 4 very powerful drivers make it so that we see this market growing over the next year above GDP in the range of 4% to 5%. The different segments we address in this market are the same as those that Peter described earlier this morning. What I now propose to you is to go through our 3 businesses or business lines, and I will spend a bit more time on our instrumentation transformation. In order to understand instrumentation, it's important to remember how this business was created. This business was created through a series of acquisitions of small, highly technical companies. And to a large extent, the history of instrumentation is the history of the integration of all those companies. So a lot has been done already. And we have integrated those highly specialized legacy brand in a global range that we now have. We've worked extensively on the integration of our industry. And over the last 4 to 5 years, we reduced our industrial footprint by 30%. And we've been working hard on rightsizing our workforce wherever in the manufacturing plants, in the SG&A, in the other operational teams. And I have to say that at the end of last year, we completed a significant restructuring project, which positions us in a much better situation from a cost standpoint now. We are -- we have been extensively working on a couple of key plans over the last year. First of all, operational improvement. So here, we're talking on the 1 hand of the manufacturing side, addressing some of the specific issues we could have here and there in our plant. But beyond that, establishing the proper standards so we could make sure that we have the right quality level and the right productivity everywhere. If we go beyond manufacturing in the operations, we're also completing the end-to-end automation of our back-end process. In January 2022, we changed our organization along the line of the ABB Way. And we discontinued our matrix organization and implemented an organization around our 3 business lines: analytical, instrumentation and force measurement, which is the measurement analytics part of the specialized sensing. Those business line are fully accountable and end-to-end responsible for their businesses. It's been now 4 to 5 months, and we already see a number of interesting moves. Much more transparency, and I'll come back to that in the next slide. Implementation of very dedicated plants to the need of the specific businesses and we gain some speed. So we have some traction. The 2 other plants that we've implemented are linked to the integration of those companies I talked about. And basically, if a lot of work has been done on the industrial side, we needed to do some work on the product ranges. And what we're currently doing is we were in a position to address some market segments with more than 1 offer due to the legacy offers of our acquired company, we're now integrating those product ranges. And we're making sure that we have a clear positioning in the market that we are modular ranges and that we reduce the number of SKUs. So we're having a clearer positioning. And also, we are easing our operational burden reducing the number of SKUs and being more modular. Finally, over the last year, I would say, 1.5 years, we've gained a lot of financial transparency at a very granular level of our offer, of our product portfolio. And we've noticed that some of our product lines were either not profitable or not profitable enough. And obviously, we're addressing that. We're addressing that either pruning them or outsourcing. Now we're ramping up a number of other [ plants ]. One is close to my heart and was addressed as a question this morning, and that's pricing. I come from the electrification business. And in the Electrification business, pricing is absolutely key to the profitability. So we're now working extensively in establishing a different pricing discipline in moving towards value-based pricing and even introducing some artificial intelligence in order to become more effective. I will come back to the next point within 2 slides. During this transformation, we want to focus on some given industries where we have key differentiators and where we can leverage the analytical business. Innovation is important. I told you we have a very high technical recognition. We know where we stand. So within the budget, the R&D budget that we're allowing ourselves, we want to be able to develop our core technology together with our digital offer. And a sizable part of this business is service, and we dedicated to. Growing and committed to, sorry -- growing the service business, and that goes hand-in-hand with the digital growth. In this slide, I just want to show explain the dynamic of our transformation. So what you see here is our portfolio at a rather granular level. Under the 3 categories of ABB stability, profitability and growth. So on the left-hand side, you see a situation at the end of 2021, okay? In the middle, you see the situation we will reach at the end of 2022. And we're confident that we'll finish this transformation by the end of 2023. And then we will be aiming at growing this business. I was talking about focusing on some market segments. So we have 4 of them, water, wastewater, power generation, chemical and oil and gas and whatever is related to energy transition. And let me take 2 examples of our key differentiators. So the first 1 would be in water, wastewater. AquaMaster4. AquaMaster4 is a flow meter and it has an unparalleled accuracy follow flow, which positions it ideally for [ billing ] and for leak detection. Just to give you a feel for the criticality of flow metering. Flow meters are the cash registers of water utilities. And what we see happening is that the water utilities are losing a lot of money through leaks. If we think about some of the U.K., for instance, water utility, they lose through leaks up to 15% of the water. So the ability to detect the leaks fast is critical. And the accuracy is critical. So that's the first example. The second example I wanted to take was in the chemical and oil and gas, the temperature measurement. Traditionally, when you want to measure temperature in process industry, you drill a hole in a pipe. You put a thermowell inside the thermowell, you put a temperature sensor. The solution we launched 1.5 years ago is a [indiscernible] solution. So you save all those installation, maintenance and costs and as all OpEx. So it's a very significant advantage. So a lot of our customers are testing with pioneering the market with this solution, and we're confident it will bring a lot of benefits to us. So these 4 markets together are roughly half the market. It Doesn't mean that we don't sell at all in the other segment, but that's just by opportunity. Last slide about instrumentation, 1 of our projects. I think it's also a good illustration of the advantage of being PA together. So this project is the battery manufacturing plant in Northvolt in Sweden. And basically, under the leadership of our PA colleagues, I mean, almost all the solutions of PA and, to a large extent, ABB was sold to North one. So as far as sensing is concerned, we sold the instrumentation, we sold the water analyzers. And we sold all the digital solutions that go it. And by so doing, we're basically helping our customers becoming the greener battery manufacturing -- manufacturer in the world and optimizing these processes. Let's now move to the analytical business. And here, it's a different matter. We need to grow this business. Basically, the analytical business is positioned in an ideal location, where growth comes from the fact that industry and society are willing to involve because of the drivers of the analytical business. And you see those drivers here. So we can name 3 of them. The effectiveness, the production effectiveness for the industry, the emission monitoring and the regulatory compliance and the greenhouse gas reduction and the climate change impact reduction. I'm not going to spend more time this morning on this slide because each of these categories will be illustrated to you in the immersion session a little bit later this morning. We are recognized as a leader in this market, as I said, technology and range. What we illustrate here is the granular picture of our analytical portfolio. And it becomes obvious that the name of the game is growth. So we have a clear growth strategy. We want to grow organically. We also want to grow inorganically. We want to go on innovating on our core technologies, but also on the digital side of it. And service is a very sizable part of the analytical business. So we really aim at growing it. And as I said earlier, it goes hand-in-hand with the digital offer. Just an example of an analytical project. So we're now in the cement industry, and we -- it's a typical continuous emission monitoring project. So in this specific case, on top of the hardware that we have, we sold the full digital suite that goes together with it. That is the ABB Ability Genix Datalyzer, which is a cloud-based solution, which gives a fleet-wide overview of the installed base. And that has a lot of benefits for the customers, linear operation, more effectiveness through fleet remote solution that we're proposing, moving from preventive to predictive and basically -- and making sure that in all their sites, the customers meet the requirements, while they are being more effective. Last is the specialized sensing business. So here, we're talking about critical niche application in the pulp and paper and metal markets. So on the left-hand side, you have the pulp and paper. On the right-hand side, you have the metal. So 1 product I will not insist on, and I already alluded to, is the quality control system. Joa will do that in the next session. In terms of paper, we measure the tension of the paper [indiscernible]. In terms of metal, we measure all the critical data of hot and cold rolling mills, and that is flatness, that is thickness, that is positioning, that is the force that are applied on the different part of the metal strip. And together with that, we propose a software, which optimizes the functioning of the rolling mills. So this specialized sensing business are also enjoying a sizable service business. So our strategy is pretty clear. We need to go on increasing our installed base and making sure that we take advantage of the installed base with our service business. My last slide before we wrap up is about what we're doing is more that [ grain ] sensors. And I want to try to explain to you how we bring more value to our customers. We have developed a digital service offer, which basically we could categorize in 3 buckets, okay? So the first 1 is looking after the process and the service. So basically, the optimization of the OpEx. And here, we have whatever is linked to the fee management information, the remote verification of our sensors, the remote visual support, all the remote support we can bring to our customers. So that's a really first bucket. The second bucket target some very specific applications in some specific markets. So we already alluded this morning twice on 1 application, which is the leak detection, but there are others. And we can think of special application, digital application we developed for the electrical transformers. And we can also think about a piece of software we developed in order to go for predictive emission monitoring. And then we have a third bucket. And the third bucket is more on the export system. It's basically the Genix Datalyzer working with data analytics and predictive analytics where we optimize the fleet. And thanks to the 3 categories of digital services, we basically bring different values to our customers. And they range from monitoring to Software as a Service. And you can see them here from asset monitoring management, et cetera, to the fleet optimization. So in a nutshell, we are in a good market with powerful drivers, ensuring growth over a longer period, and we are positioned at the intersection of sustainability and digital. We are very committed to the transformation of our instrumentation business, and we are very confident that we'll finish this transformation by the end of 2023. And then our aim will be to grow the business. And we're implementing a growth strategy for analytical business, both organically and through M&A. By doing so, I am -- we are, as a team, very confident that we are driving the sensing business to a sustainable performance.

Thank you, Ansi. Good morning, everyone. Great to be with you here and talk to you and walk you through our anchor products and integrated systems offering. Just as an orientation, you already saw that slide quite intensively. So where are we now? We're with the anchor products. And what you get on top of that is the integrated systems, and you will see in a minute how these 2 hang together. So you get a session where you get basically 2 and 1. So that's pretty fantastic. And my name is Joa Braun. I'm the Division President of Process Industries since about 2 years, and I will be joined later by Juha Koskela, who is running our Marine business and who is also all of our host. So what are we going to cover? First of all, these mission-critical anchor products, you already heard so many good things about. So I will go a little bit more detail on those. And then talking about this bonus session you get today, I mean, why is this so clearly connected with our integrated systems. And as we're talking about systems, and you already heard about the importance of our installed base, I will then give you a little bit more color on how this is driving a very attractive service opportunity. And then finally, how all of this together is leading to a very privileged relationship with our customers. Now what is an anchor product. So there had been various attempts to explain that. And you heard already, it's a mission-critical product for our customers' process. Maybe making it a bit more practical, let's say, you operate an underground mine. One of such product would be your mine hoist because this is the thing which is hauling everything you extract up. But this is also the thing, which is basically bringing your workers, your equipment down. And it is mission-critical simply because if this thing fails, you're out of production. There is no plan B. That's the only way up and down you have. It is also critical in a sense that it pretty much determines the capacity of your mine. If it's dimensioned too small, well, guess what, you don't get that much up. If it's too large, it might be even a bit inefficient because there's, of course, a cost to operate it. So this might illustrate a bit what we mean with mission critical. It means you can't run your operation without it. And the characteristics of your operations are pretty much determined by this product. The other thing about it is it has a long lead time. So if you want to build your mind, if you want to build your paper machine or whatever you have in mind, you better start thinking early about these things. These things are custom made. This is not an off-the-shelf product. This is -- and again, coming back to my mine hoist example, the mine is pretty much determined by the geological characteristics. So some mines are deeper than others. Some mine shafts have wider diameters than others. But sometimes you can operate with 2 with wider diameters. Sometimes you prefer to have 4 with maybe smaller ones. So all of this is custom made, and it takes some time to build it. And of course, like I said, it has a major impact on your value creation, the dimensioning, the power rating of these things, this is of utmost important how much you can produce in the end. And again, without it, you can't produce anything. Now what is the great thing about having these products in your portfolio? Well, first of all, it's the early involvement. Like I said, long lead time, very crucial for your operation. So if you want to build something which has an anchor product like that in it, that's the first thing you have to think about. And this also means we are the first, you need to talk about your plans. So we would know before anyone else, what the customer has in mind, what he's building, we can influence the specifications also for the other scope of what they're intending to do. So this is what we call to be at the heart of the broader solution. It's not just the anchor product, but of course, eventually, they will also buy all of the rest. Products, which maybe has less of a differentiation. But nonetheless, they're in ABB's portfolio and being early in the game, we know what's coming. We can influence the customer. And with this, we basically then build the installed base, which will future-proof our revenues because, as you already heard from Peter and are going to dive into a bit more detail, this is then really the lifeline for our business going forward because this is then easily a multiple of the initial investment, which the customer will spend on services over the lifetime of such an asset. Now the great news is we look at this. We have lots of these products. It's not just the hoist dimension. It's not even just in my own division of mining methods and pulp and paper. It's also in energy. It's a marine. For those of you who are -- who have been with us yesterday already and who took the factory tour, I mean you saw these fantastic products here in our facility already. So they're everywhere. And even better, we are mostly #1, at least #2 for all of these offerings. So we're really the first ones to talk to. Some of these products are very specific to a particular industry. Other products like what you see here, our high power rectifier they even go across industries. You could use these things for aluminum smelters, but you can also use it for hydrogen production. So some of the products are very versatile. Other products, and Jacques already mentioned this, I mean, like the quality control system and paper, it's actually a sensing product. So anchor products come in a lot of different shapes and forms. And I would really love to talk you through all of them, but then you would definitely miss your flight. So we're not going to do that. But we will have merchant sessions, for example, on pulp and paper, where you can learn a little bit more about those. But these are really things to watch. Now what are exactly the customer needs related to the anchor product, but then also going beyond. I mean, first of all, the anchor product as such. This is not where you want to cut any corners. I mean you have to go for the best product. Peter already mentioned a loss of production is so costly to our customers that there's absolutely no trade-off in making economies on these products. This might easily exceed ours, let alone days or weeks of loss of production easily seeds the investment, which is required to make into these products. So you definitely want to have the best equipment there. The next thing is you get even more out of your equipment. If you make this part of an integrated system because then you can be sure that all of this equipment is playing together with the other scope you're buying. So if you have a seamless integration of your anchor product in your electrification system, because most of these products are basically fed by electrical energy if these products are controlled by a control system of the same vendor, you can be sure you have seamless interfaces and painless operation. That's what customers are looking for. We have been talking about project execution. But now I would like to offer you a different angle on this topic. This is also extremely important to our customers that we can reliably execute their projects in time, in quality. Every time again and again, I'm going to say this, every day, they're losing because you're late in delivering your project. It's a loss of production. It will extend basically the time it takes for them to recuperate their investments. So customers definitely want us to be on time and on budget. They are looking for someone who just doesn't have great products but who also knows how to basically get them installed and commissioned in the field. Peter mentioned already, these are long-life assets. They easily spend decades in operation. And while they do this, first of all, you need to keep them running. But then you also want to make sure that you get the latest and greatest in the technological advancements, which will inevitably happen over this lifetime of that asset. You don't want to be stuck with a technically obsolete asset, which, unfortunately, you still have to operate. So ABB basically can do this for you. There's a migration path, there's upgrade strategies for all of these products. But the great thing for us is, of course, a constant additional revenue stream around this. So basically, this then also helps our customers to future-proof their equipment. There's always a path for upgrade compatibility of our products with the next-generation product. This is an additional effort, as you would imagine, for us from an engineering point of view because if we develop a new product, we always need to think about the existing ones out in the field, making sure that whatever new stuff we're offering, you can upgrade to this new, but customers really appreciate that a lot. So they're not stuck with an outdated product because what does it mean for them? It means that they fall behind their own competition. And we are basically here to make our customers competitive. And with this one, they basically get the future proofing they're looking for. Now how does this then look like, maybe again in a practical example from the anchor product to the integrated system. So here, you see our fabulous gearless mill drive in action. This is operating a large grinder. So the gearless mill drive is in this wide casing. And this is basically driving pretty heavy equipment, and there's even heavier iron ore inside that thing. So pretty powerful engine basically turning this thing around. Now as I already mentioned, these things easily consume power of like 40 megawatts. So naturally, if you look at the total mine, you already need to think about how you power all of this equipment because it's not just these in this case, to gearless mill drives, which are operating your grinders, again, mission-critical equipment without doing this, you can't process the ore you have been extracting. You see the mine hoist here which is built in this what looks like a tower. Again, this is an electrical motor at heart, and it needs to be powered by electrical energy. You need -- you see fans here, and you see conveyor belts. So all of this is required to operate your mine. So in the end, it's a bit what Peter showed you before. All of that is basically, first of all, it needs to be threat with electrical energy. So there's a lot of equipment, which is very similar to the equipment and other applications. This is transformers, switch gears, the whole electrical system. But of course, and you see the little control room here in the front. You also want to be in control of your process. And 1 of our strengths is then to also have combined control both of the electrical system and basically of your process equipment. So this is how you're building around these anchor products, an even larger system with all of the seamless integration I was talking about. Now what does that look like? And how is this, for example, different because we get that question a lot from a typical EPC business model. Well, it's quite simple. I mean our scope is pretty much determined by putting ABB content there. So here you see the dark red dots. This is our process automation content we put in these projects. This is then complemented by further ABB scope from some of the other ABB divisions and only to a limited extent, we would put third-party agreement just to basically complement the scope we're doing so that it makes sense for the customer. But our intent is clearly that whatever we bring to the customer and that comes a bit also back to the project selectivity topic you already discussed, we are very much focused on bringing our ABB components and solutions to the customer in such an integrated system. The customer benefits in a lot of different ways for this. First of all, this often comes at a lower CapEx. You would wonder, okay, how is that possible if you lock in the customer like that. But you have to consider it's a superior technological solution and the holistic view on the solution often helps to identify savings potential in bits and pieces of what you really require. And we have lots of cases, particularly on the electrification side, so how this really brought down the investment cost. But it's also cheaper than to operate it once it is in operation. So that's what we call the cost of ownership. Again, simply because you have better interfaces, but more importantly, from the customer perspective, you have 1 person to talk to. So if anything fails, and the whole integrated system was delivered by ABB. Well, guess who is at fault. Guess who you call. I mean if you have multiple suppliers, you could imagine you're calling one, and he's telling you, well, this is -- I mean, the problem is not with us, it must be something else. And then you're calling the 9 other ones, and they're all telling you the same stories and pointing fingers at each other. So for our customers, there's a huge benefit having the single speaking partner and we can basically fix in the very unlikely case that something needed to be fixed. This is also great from a sustainability perspective because the ABB integrated system, as we are in electrical engineering, this is typically by electrifying your process and electrification of the process is basically opening the door to renewable energies. And you can see how a lot of our customers are doing this. You saw Jacques example of Northvolt, well, they built this in Northern Sweden, not because they like the climate that much, but simply because there's an abundance of hydropower available. So to the extent you can electrify your process, it typically helps also with your sustainability performance. Safety. You already heard this before. It is much safer to operate your equipment, which has been delivered to you out of 1 hand. The interfaces are clear. All of this equipment plays together very well. There's a holistic view. And this typically keeps your own operator safe. And ultimately, it's a massive reduction of downtime for pretty much the reasons I mentioned, there's a single responsible person. All of the interfaces are optimized. So there's simply less which can go wrong. Now how does this now play into our service activities. And this is really the nice part about these integrated systems because the integrated systems represent a large chunk of installed base, which we then can service for decades. So the service potential is clear. First of all, because it is mission-critical, you want to conclude a long-term service agreement. You don't want to be at the mercy of the availability of our people if something goes wrong. You need someone who can be on site very fast, even better if you have a resident engineer on site who is always there to help you basically keep these wheels turning. So most customers would conclude such an agreement straight away. Then there's, of course, wear and tear, so there's a nice spare part business with this. But even better, I was talking about upgrades, life cycle management, keeping this equipment up to date, but then there's advanced services, digital offerings on top of that, getting to know better the different operating conditions. How can you really optimize it? You can compare this to other sites. So there's a lot of value-added services we can then offer on top of that. And just in practical terms, just over the past 5 years, the share of service has increased by 4 percentage points in PA. So we're driving slowly but surely for higher service content, which comes with superior margins. And this is then, of course, mirrored by the growth of the installed base because we're so successful typically building a broader scope around these anchor products that the installed base in the same time frame has grown 15%. And this represents a fantastic business opportunity to us. So you can see that the fundamentals are there. So we see a gradual shift towards service business, towards higher profitability. And ultimately, this also benefits our digital business. You heard about the virtuous cycle service after sales, sales after service. So let me explain to you a little bit how this works in detail and why this is such a virtuous cycle. Once you are called in for service, and let's really consider probably the best model if you really have a resident engineer, who is more or less who's still an ABB employee, but more or less becoming a part of the customers' team. A person who goes to the customer site every day who sees the equipment in operation every day. So this is fantastic in terms of them really driving for this customer intimacy, understanding how does the equipment do in the field, but then also being the first again to know if the customer is planning an extension, if the customer is basically looking for some alternative technical solution, you can engage into co-creation joint R&D projects. But of course, when the customer sees you at work and how you're basically keeping this equipment up to date, how you keep it running, how you keep the customer out of trouble, how committed you are to keep making your customer competitive and keep him in operation. This is building trust. This is almost building gratitude. And the relationship which comes from this is something which makes a lot of customers who have been working with us like that almost impenetrable to competition. And this is a huge added benefit on top of just all of the service -- of all of these business opportunities which are coming from that. This helps us, and you will see more of that also, again, in the merchant session on pulp and paper, how we have been working for decades with the same customers who really feel that they are in the best hands working with us rather than changing suppliers all the time. This is a bit the nature of our business. This is all about relationship and trust. Now we had been a lot -- in a lot of these businesses for many, many years. And you might say, is that an advantage? Or is that rather a disadvantage? In my view, it's a huge advantage as you might have guessed. So you see here on the left-hand side, this is a 130-year-old installation, the first mine hoist we ever installed. So you might say, but doesn't that mean that you're becoming a bit complacent or that you really are not the most innovative when it comes to your technology. As you would have guessed, I would disagree because if you look at today's offering, we are pushing the boundaries every day. I mean, we are clearly ahead of the curve. This is the first and the only SIL3 safety-certified mine hoist in the market, the highest level of safety you can look for. And then we're pushing it even further. What you see here on the other side of this slide is the digital twin of a mine. So the operator can basically see a true image of what's happening in the mine in real time, talking to people down there. So it's going basically 1 after another. I think it's, in fact, reinforcing our technological position and our #1 position that on the 1 hand, we know this industry since 130 years. We know how it has evolved, how it has changed, but we also understand what the challenges are and how we can best address this by applying fresh technology to it. You heard about this already, our performance improvement journey. So the project execution capabilities, we have upgraded almost prominently. And I think we have now reached a nice level of maturity for that. We know how to execute the projects. This brings that sustainable performance Alanna was talking about, because you couldn't rely our customers can rely on our capabilities to execute projects on time and on budget. This is as important for our customers as it is for our investors. This is also driving this net working capital performance. Project selectivity, I show you an example in a minute how this works. And this all has been supported a lot by building up operation centers in typically high-value countries, which help us, first of all, to put the operations where you can operate efficiently, but also helps that we have bigger repeat factors that the people who are dealing with certain engineering challenges deal with this on a regular basis. This helps us to reliably execute. We are in the process of implementing the ABB Way. So also inside the divisions, as you heard, we're basically pushing down responsibility and accountability to the lowest level. We're looking at, for example, anchor products as a global business, so they are responsible people to really run this as it was their own global business. Operations footprint cost out. This is, of course, a permanent challenge. I mean just to give you an idea, we have just decided to open another operation center in Mexico, surveying North America because the existing ones were a bit far away in different time zones wasn't very convenient to say, let's open another one. And now we know how to build up these centers, how to operate them successfully at very attractive hourly rates. Portfolio management, also a topic for us. Now with this delegation of responsibility, looking at very granular P&L, we know exactly where are the good parts and the bad parts of the portfolio. Service, I mentioned, and digital basically comes on top of that. We have seen similar growth rates as for the complete business area. So pretty happy with that. So what's next? Pricing. Very clearly, digital and service pricing will be in focus. Channel business. You saw 70% end customer, customer intimacy. That's all great. But hey, let's face it. We also have to make a segmentation of customers. We cannot serve every customer in this way. We don't have reach into every industry into every geography. So we want to work more also with partners in order to bring broader coverage of our portfolio. Standardization. Like I said, our products are not off the shelf. But that doesn't mean you have to start from scratch every time. So better if you have a certain level of standardization, which helps us bring the cost down. Sustainability, this is a huge business opportunity for us, and we will basically pump out new offerings which help customers facing these challenges. Our customers are very much in the focus of that. Some of them have a pretty high CO2 footprint, and we are basically there to help them to meet their sustainability targets. And of course, bolt-on M&A, if we find suitable targets, which are nicely complementing what we have, we will certainly be interested. Finally, to give you an idea on what does that project selectivity means. Well, in a simple way, you can say looking at this slide and looking at the gray stuff, which is showing you the margin, as you calculated it before you offered, I mean just cut away this long tail. This is stuff where the customer doesn't appreciate that much what we can bring to the table. And maybe our value-added is not as high, and this has been reflected in the prices. I don't think there's anything wrong with our cost base or with our calculation. It is simply that there are probably others who are better suited to do this, and we have to realize it. We have to be selective. We have to understand where our sweet spots and where is it basically better to buy from others. I guess in the past, we were sometimes maybe a bit too greedy jumping on too many things. What is also very interesting is the red and the green ones because this is the difference between what you initially calculated and how you then actually execute it. And of course, I have no objections against the green ones because it means that in the end, you executed better than what you calculated and that money goes straight into our pocket. What I don't like are the red ones because this is where it worked the other way around. So either we didn't fully understand the scope we were selling, so we basically had extra costs or we simply didn't execute well enough. So again, we were incurring extra costs. Getting that under better control is a huge contributor. Right now, it already contributes 2 to 3 percentage points on top of what has been calculated. There's another 2 to 3 percentage points, which you can get out of a nice selectivity of your projects. Maybe that much to illustrate what this means. And now over to Juha, who will then show you in even more detail how an anchor product is then embedded into a larger offering really leading to unbeatable competitive advantage. Over to you.

Thank you very much. So in my part, I will build on what Joa very well already presented and give you a more specific example how we leverage our key anchor products, which is Azipod and to be able to sell the integrated [ electrification ] automation and digital solutions and how that drives the value to our customers as well as for ABB and how that also builds the service for themselves to our division. So now bear with me, this audience here, you have heard our story of Azipod already yesterday during the factory tour and some of you even try to navigate with Azipod powered vessel. But since we have also audience through the webcast, so let me recap. So Azipod combines the functionality of the conventional shift propeller and rather into 1 360 degrees steerable [indiscernible] unit. It's indeed 1 of the most significant innovation in all times in marine industry. And of course, we are very proud that it's an ABB innovation. So it delivers a significant customer value. It provides 10% energy and emission savings. Only in the cruise ships alone Azipod helps to reduce carbon emission by 1 million tonne per year. And that is equivalent to the emission from 200,000 cars annually. And that adds up while we deliver more Azipod units. Secondly, Azipod enables excellent maneuverability for the large vessels. If you look at the year when we first introduced Azipod to the cruise vessels in 25 years ago, cruised ship size has more than tripled -- it will be totally impossible to operate these large vessels safely and efficiently without Azipod. Azipod has several other benefits also space savings. You can omit to many of the components inside the vessel like a long shaft line going through the vessel. And that space can be utilized for more payload, passenger cabins or extra cargo, low noise and vibration, which is particularly important in the passenger vessels and many others. So with these values, Azipod has become a default solution in many of the ship segments. Today, we have already delivered Azipod units for more than 25 vessel segments, including cruise vessels, ferries, offshore constructs of vessels and specialized cargo vessels to mention a few. Today, we have sold 700 Azipod units for more than 300 vessels already. And it's a clear differentiator when we sell the full [ scope of ] supply. So Azipod is a key component, what we call as an integrated electric propulsion system. So in contrast to the mechanical propulsion where you have 1 or 2 engines shaft line gearbox and propeller [ inert ] propulsion, there are 4 to 6 engines and generators supplying electricity to the ships network. And that is then drawn also to the proper electrical -- propulsion motors and that system provides significant 20% energy and emission savings. And it's also a huge proof. In many cases, we already delivered the batteries, fuel cells that are running parallel with these engines. And in some cases, we've been able even to substitute the engines with the batteries and short [ charging ] system. But that is applicable for more smaller vessels with a low operational range. But indeed, this solution is 1 of the key solutions to drive the decarbonization in the marine industry. So how do we then integrate Azipod with the other ABB products? So we -- very often, even though we don't need to, but we utilize the products from the motion electrification like drives, motors, generators, switchgear, some of the products that you have seen yesterday already when you visited our motion factory. So first of all, this is a project business. So we do the electrical integration of these products. It's not just that we send them to the ship and the customer takes care of the rest. So we provide the full integration of this electrical system. Then we had our automation and control platform on top of it to take care of the functional integration. We have a power management system, propulsion control, steering control as well as the full automation for the vessel. And already, when we deliver these new products and subsystems, we make them digitally enabled to be able to connect them to our digital platform -- and then we can provide remote asset performance services. I will talk about more of those in our digital system in this afternoon. And then finally, on the services by having ABB as a single vendor with in-house products, our customers can rely on 1 service supplier throughout the vessel life cycle. Then moving on. We are serving $4 billion market, so that is a respective market for the electrical propulsion system, and we expect that to grow 5%. This is driven by the growth in the sea transportation, but also recovery of some cyclical shipbuilding segments. But even more than that, new emission regulations, energy transition in shipping that really accelerates the demand of such solutions. So we leverage our Azipod as our anchor product to be able to pull through the full scope of supply, including electrical automation and digital. And that this includes 90% of ABB products. So we are not only increasing the sales volume by 40% to 50% compared to if we will sell Azipod as a product, but we also delivered significant additional profit for ABB Group. That is reported in electrification and motion divisions who are supplying this product as a part of our solution. Then on the other hand, as you may imagine, our solution is definitely mission-critical for the vessels. If you take a cruise versus carrying 6,000 passengers and 3,000 crew members, our customers don't want to compromise anything when it comes to the safety and reliability. They want to maintain the system and ourselves as an OEM, of course, we have a natural choice providing these services. And that builds a strong foundation for our recurring service business. And this is a key lever for our division to drive our profitable growth mandate. Then if I summarize our presentation. So as [ Joa ] already presented, we have a number of market-leading anchor products for various industrial applications. So we can utilize that to get an early seat on the table, be able to influence the design of the whole project. And that helps us to sell integrated [ electrification ], automation and digital solutions. It's not only at the high value to our customers, but it also delivers the additional profit across the ABB division. And then by that, we're also growing our installed base, which is the foundation for the profitable service business. So by that, thank you, and I will ask Ansi and Jacques back to the stage that we take the second round of the Q&A.

Yes. Let's do so. And we have questions here in the front row if we -- microphone is on its way, so just bear with us.

Alessandro from Octavian. I have a question for Mr. -- sorry forgot your name. You mentioned that you oftentimes in the same projects as your colleagues and you have the same customer [ exciter ]. So I wonder 2 things. How do you coordinate in the project execution who manages it and so on? And also, how do you coordinate in the acquisition of new projects among the 3 of you?

Maybe, Joa, I can start and you take over, right? So basically, when we go for common projects, very usually, the other divisions are taking the lead because we're basically talking about the full control loop. And then the -- either the work with the integrated system is prevailing. So that's what we're doing. Then in terms of execution, it's quite split, right? So we do the execution of our work, and they do that. I mean there is no obvious synergies in terms of execution. The synergies are more on the sales side. Anything you would like to add?

Yes. I mean, first of all, we're using the same sales to suit system, Salesforce.com. So we basically have full transparency on what the others are pursuing. I guess that helps a lot. What is important and what probably also illustrates how each of us is really accountable for their own business. I can only help Jacques, if his guys have made their homework with the customers. So I'm not going to help Jacques, for example, to have this product certified as an approved vendor. If these products are not approved, there isn't much I can do once I'm basically pursuing the sales. That has to happen before. So that is, I think, bit testimony to how we're really accountable for our own things. But once Jacques and his team are certified. I mean, then, of course, I'm running through open doors. And then what I have showed before, I mean, then we go for the broadest possible ABB scope because that is really maximizing all of our joint business and all of them the subsequent service business. But I think it illustrates a bit that, yes, the synergies are on the sales side. And basically, everyone needs to do his part. The same, by the way, goes for every other product. If drives and motors wouldn't be certified with a certain customers, there isn't really much I can do because I'm a system provider. I need to rely on my product colleagues to make sure that they are well regarded with these customers.

And then if you just pass the microphone to -- yes. Thanks.

Will Mackie, Kepler. Jacques, another question for you. Can you just talk a little bit about your routes to market? And what proportion of your sales are made either through the projects businesses across PA or into historical or legacy ABB automation? And how much are you able to sell into alternative DCS supplier systems and alternative customers?

So we basically have -- as you rightly exported in different routes to market, we go through channel partners, okay, depending on which part of our business as we have a product business in some instances, we go through another channel which are our sister divisions. So we can talk about the 3 sister divisions that we have here, right? And for the time being, it represents less than 10% of our business, but this is clearly an area of opportunity for us. And once we fix our businesses, it will be a priority. And then we go directly to the end users and have our own proceeds.

And the follow-up is about profitability. Your CFO described that the divisions are running with fewer KPIs. Perhaps you could share the KPIs that you need to hit to be into the growth mode and where your profitability sits relative, for example, to your Swiss instrumentation competitor?

Right. I'm going to answer your question a bit differently. Okay? So basically, if we look at our profitability as a division, I mean -- or basically, the relative profitability of our business lines, we clearly have 2 business lines, which are analytical and specialized sensing the force measurement, which are clearly above the profitability of the business area, and we have in instrumentation, which is under. Basically, our target improving the profitability will be to help the group and the division and the business area to reach this [ teens ] area. That's about what I can say.

Okay. And I think we'll just go row by row basically here on the right.

It's Calvin from Credit Suisse. So I just got 1 question on your service business. So it's very important part of your business. And could you share a little bit color on how is your ability to raise price in service over time given you have monopoly status in serving your own equipment. And also, how is the customer feedback on that? Is there any kind of risk of customer wanting to diversify the service partners? And how do you cope with the wage inflation over time so?

I mean, first of all, you're fully right. It's a captive business to a large degree. And this is why I mentioned pricing on what we would have to do next. I think that we have headroom in terms of pricing and basically making sure that we get more out of this captive business. In all fairness, I have to say that we are subject to pretty stiff competition when we're going for a new project, despite the early seed despite the fact that we might have oftentimes a much more comprehensive offering. So customers are doing their part to keep prices down. So I think our chance to basically realize better pricing in the captive side of the market could still be developed. That, in my view, is pretty obvious and hence, also the hint on pricing.

Yes. Maybe to add that list. When it comes to our industry, many times our customer, they calculate the full sort of life cycle cost of the unit and only the capital but also the OpEx. So although we may say that we are probably the only service provider to our products. But on the other hand, so we want to also to sell new, new system, you do [indiscernible] all over again. So I think there is a delicate balance that we have to keep when it comes to the service price.

Yes. And then finally, your question on wage inflation. This is, of course, becoming more relevant now. I mean, because even the projects might easily take 2, 3 years, sometimes even longer than that. We're pretty experienced building price escalation clauses into all of these long-term offerings. So we -- and this goes beyond just wage. So I think we're pretty well protected. We have never really experienced any serious trouble out of those issues.

And we'll squeeze in the final one, and we continue down this -- I'm pleased with the final question from Martin there.

It's Martin again from Citi. The first question is on instrumentation. And just to clarify some of the history, how did it end up being in the transformation bucket. I mean it looks like you've got some great products inside there. Was it a sort of legacy pricing strategy? Or how does that end up being the business that needed sort of repaired, if you like? And the second question was just on the anchor products. Obviously, you've got some great pieces here, but we're thinking to the future and thinking about where your next anchor product comes from, is that an R&D effort? Is it an M&A effort just to think about where those could come from in the future?

Maybe I can start with the instrumentation. So why is it in the transformation bucket because the profitability as a whole needs to be really improved. And even though the situation differs when we look at our portfolio from a very granular standpoint, and you noticed in the graph I showed that 30% of our product lines are already very profitable and on the growth, but we still have 2/3 we're working on. So we will -- and then we should not make mistake. Our priority is to improve the profitability. There is no question, okay? So we will do so. And then we'll gladly move towards a growth mode when the business is transformed.

Yes. Coming to your question on the anchors, I think I would probably have misconstrued this thing if you got the idea, okay, there's an anchor for every industry or for every process. In fact, these things tend to be a bit elusive almost. So there are industries and we look pretty hard where we couldn't identify an anchor. I mean this is a lot of ABB score not really something which would live up to this definition. Nonetheless, as you see with U.S. business, I mean, sometimes it is the innovator who comes up with an anchor, which really nothing like that existed before. And there would be quite optimistic, and we have a few ideas, but it could certainly also come through acquisitions. Our focus where we look now is for some of the fast-growing nascent industries that we can really establish an even stronger presence preferably with such an anchor in those particular industries.

Good afternoon. We fully appreciate that this might be the most difficult slot of your 2 days on the back of a full 2-day agenda after getting up very early this morning and after having lunch. We try to keep you awake with process automation. Now in this session, mainly in the sense of what we do in terms of our offering to automate the plans of our customers, not in the sense of the name of our business area like usual. My name is Bernhard Eschermann. I'm the CTO of Process Automation. And also for the process automation products that come to the various divisions that do a business with that. And I'm joined here by Brandon Spencer, Division President for Energy Industries, who is actually using that in his markets. Now but before I give over to Brandon to lead you more into the market environment, I want to bring you back a bit into the immersion session that you were in with [ Jorg ] and Fabian before lunch. You probably remember this one wall with the Hammerfest LNG with lots of red points and the operator station on the other side. Now plants didn't always look like that. Let me bring you back a bit in time to appreciate what the changes were. Put yourself into the year say, 1930 in a power plant. You had an operator there. This operator had a couple of gauges and a couple of levers that was it. Processes and plants became more complex. So you added mortgages, more levers, more people. Obviously, they had to communicate with each other for streaming at each other, then technology actually made a big step. They introduced walkie-talkies. Now imagine you wanted to handle a plant like you've seen it there with the 70,000 points like that, it would just be impossible. So that's what automation has made possible that today with the complexity of all of these facilities that we have, you're still able to handle that with just a few people. And these few people are not concentrating on all of the mundane stuff that is taken care of by the automation system. They are dealing with special situation, problem solving. And obviously, that creates the need for having much more a collaborative system. It also creates the need for having remote assistance. We can today even run plants remotely. You can run many plants from an operator station like you've seen there. And you can bring in topics like AI to help operators to deal with these special situations that they might not see every day all towards this future vision of a fully autonomous plant that always does the perfect thing for the owner of that plant. Now with that, capability brand, you're doing business based on that. What are the markets for that?

Yes. Thanks, Bernhard. Really enjoyed last night, by the way, so I appreciate the conversation and the engagement. Some of you who sat at the table with me may hear some of the same messages a little bit here. So stay with us through it. As we look first at the evolving market, let's start with kind of some of the big trends that we see and what changes we see. Changes in automations in the end markets. So the complexity level of some of these facilities, the need for automation for tying things together for integrating the digital environment into it in order for them to operate these assets. Technology and digital evolution and revolution. And so you've gotten to see a lot of that today through the immersion sections of what's going on in these markets. What we see in the automation space, you got to see in the immersion section with Jorg and with Fabian, some of the AI machine learning, things that are being integrated, going from walkie-talkies like Bernhard just talked about to what you saw there where it's diagnosing and then recommending corrective actions and integrating all that on the back of process automation from ABB. And then workforce changes. And whenever we talk about this, I have 2 kids, I have 1 that's 14 and a daughter that's 12. I think back to when my daughter was younger, I had my laptop sitting on my lap, doing e-mails, and she walks up and swipes her finger across the screen. It wasn't that kind of technology, but that's her interface. And so if you think about that generation as being the next round of operators for plants and for these assets, the expectations that they have of how they'll interface with the systems, what that looks like, how it works. You can imagine that, that's going to help us push this industry forward. And so a big impact if you talk about the workforce. You saw this slide or part of the slide when Peter presented, and I just wanted to go into a little bit more detail and then kind of step you through how does that relate to our business? What's the impact directly on ABB. And so what you see here, let's just look at 2030. If you look at the gray and the black growth until 2030. The first transition that happens in terms of the energy transition is that oil is replaced by gas as the #1 energy source. That's kind of in the late 2020s. So if you think from now until then, oil is still driving, gas takes over. For decades, that remains the picture. And then these emerging markets come up and kind of develop. And so while there's differences across all these things, and I'll step through some of these markets, there are certainly common elements to this as well. Reducing emissions, addressing the hard debate industry sectors that are in my business, in Jo's business and Juha's business, all of those elements reducing the imprint there. The scaling of these low-carbon technologies. So how do we make it scalable? How do we get there to where we know the technology or at least where we think it can go? And then lastly, and I think really important, how do we make sure that these facilities can adapt? So the way it worked previously is that one kind of feedstock came in a certain process ran, one kind of feeds -- or one kind of end product goes out. Well, the facilities of tomorrow and the discussions that we're having with customers are maybe multiple different types of feedstock coming in, flexibility in processes and in what kind of product you're producing and then multiple products that can address or adjust to market demands, regional supplies different things that go on. That can't happen without automation and the solutions offered by ABB. And so I think those are important things to focus on as we look ahead. Certainly, even if you look out to 2050, and you take these as certainly a generous look at what the energy mix may be. Our conventional business, our stronghold, still 50-plus percent of the Energy value stream. And so if we say what does that mean? Coal, Peter talked about in his session about some decline in coal, a little bit of a renaissance now, certainly because of energy security, but certainly, that will decline. Oil climbing up towards the peak, important for our business offshore, onshore, what we're doing in subsea all these kind of things. But what you see there from today to 2030, the illustrative picture is really not a huge change in terms of the business impact for us. Then if we look at our strongholds, what we do in water and chemicals and mining, in marine, pulp and paper with gas, those coming up, we certainly see a net positive in terms of growth opportunity for ABB and for process automation. And so if you look out to 2030, and that's kind of the horizon that we've picked here, we see that as a net positive and Alanna mentioned as a GDP plus. And then you talk about the exciting emerging industries. So battery manufacturing, which you've heard about several times, carbon capture, synfuels, hydrogen, all these sort of things. Absolutely, they play a key role in the transition. They play a key role over time. And so Peter talked in his section about 30% of his business comes from green offerings, green industries kind of low carbon footprint. So for my division, for Energy Industries, everything we do in power, water, oil and gas, chem and refining, energy transition, our goal is 30% of our revenues at the division level by 2030. When we're successful doing that, we will be leading in the energy transition space. And so because 30% of the energy mix won't be coming from those sources. And so we really, really feel that we're in the driver seat here to help our current customers and our new customers on the back of our offerings, the integrated solutions, the anchor offerings, automation, control, digital, which we'll talk about next, to really drive that transformation with the customer base. And so let's look at a couple of specific examples. And let's start with kind of at the top of that S curve that we just looked at. If you start with oil, unmanned platform, emissions per barrel. How can we do things and get things out of the ground more efficiently, most efficiently. So this is unmanned and remote service, all on the back of ABB. If you look in the middle, this is a project in the U.S., a biofuels project. They have battery energy storage system. They have multiple types of power sources. They're integrating carbon capture into it. You can imagine the complexity in the electrical infrastructure that's needed for that facility. So the complexity of the facility, but then also multiple feedstocks, different types of output. And so how do we bolt all that together, make sure that it works seamlessly. And then lastly, and one of the big differentiators for us in ABB, and I believe this is my core, is the automation and electrical convergence. So being able to control these facilities, run them in a safe, secure way to people, to asset and doing it in the most efficient way, most reliable way, most available way is by the automation and the electrification control system sitting in the same technology, in the same screen. So the screen that you saw in the immersion room, the workplace that you saw in the trailer and operator being able to sit in front of that and have full control across the plant and the integration of these systems. And as you look at the technology or you look at the solutions that are being deployed, these plants get more complicated. The electrical infrastructure increases. So having all that in a single view at one operator's fingertips is a differentiator for us in ABB. And so Bernhard, maybe we now talk through a little bit of the technology, kind of where we are, but also how does that play into these facilities of the future.

Happy to do so, Brandon. And if you look at technology for process automation, it's software and electronics. And I guess, Fabian already broke the secret that if you look at our R&D today, it's between 80% and 90% software development. So what you actually see physically is actually the smaller part of what we do. Now what is the special thing about process automation in these technologies? And you're all users of software and electronics. I see a lot of you with the laptops in front of you. Now think about it over the last year, how many times did you have the feeling that you were not able to work as you wanted because something didn't work properly, the network didn't connect properly or whatever. Now we've got facilities with hundreds of these computers running 24 hours a day, 365 days a year, uninterrupted for a number of years. You want to be able to exchange any hardware, update software, do cybersecurity upgrades all while the facility is running in full steam. That's a different kind of animal. Now you might argue, well, you can always shut down the plant if something in the automation doesn't work properly. Not a good idea. A lot of risk, a lot of costs. Let me just give you some examples. You might have an exothermic reaction somewhere. If you lose control, that might lead to an explosion. You might have high-temperature equipment expensive at 1,000 degrees. You shut it down, you want to cool it down, lifetime of that equipment will go down. You might have a type of stuff liquid that if you actually don't continue to run the process, solidifies a lot of cleanup efforts, you don't want to do that. So there are lots of reasons why customers actually see a business case in going from the 99% availability to going for a few more 9s after the comma. That's what our business is. And also, if you look at the startup of processes, typically, there's a lot of energy and material costs until you are at full yield or full quality of the product. And what makes the situation worse is that in a process facility different to a typical discrete manufacturing facility, many of these processes are connected. You might have steam from one process feeding another process. So if you've got a problem somewhere, you've got actually a disruption everywhere. So all of these things have resulted in the fact that we do have -- or I should have moved forward here that we do have a solution that was evolving to meet these needs to actually control all of the critical infrastructures that are needed to, for example, supply water to cities or a more current example. If you look at gas supply, Ormen Lange, the installation supplies 20% of the U.K's. gas, you certainly don't want that to be disrupted. And if we look at ABB. ABB has been the #1 address to go to for a large number of years. Peter has talked about this more than 20-year history. And what it has resulted in is this unparalleled installed base that we now have in our facilities in the various customers. Brandon will actually talk more about the value of this installed base for our future business. One thing that I might add here is that in spite of the last few years being pretty special with oil prices tanking and going up, COVID and everything, you see on the right side that actually our installed base -- now here measured in the number of IOs, you probably remember the one small thing that Fabian showed you, has been even going up during that time. Obviously more again in 2021 than in 2020, but that shows how the breadth of the businesses that we supply with our automation has enabled us to get through that period. Now if we want to be successful, obviously, we also want to be successful with the future greenfield business. What are the needs of all of these evolving industries that Brandon has talked about in terms of the automation? One of the things that customers certainly are concerned with is that they also need to look at much more evolution in their space. So they have to be ready to do much more changes in their facilities over time than they were probably used to in the past. They might actually want to start small and then scale up. We actually want to use more of the operations data in order to optimize their overall business performance. So all of these things have to be embedded in the future automation system. And based on that, we have a clear opinion that the automation system over the next 20 years is probably changing more and it has changed over the last 20 years. So in order to be successful in that, obviously, we have to prepare our future offering to deal with that situation. Now one of the interesting things is that all of the traditional characteristics that you see in the left side are still there. We still need to have the systems being with a high uptime, high safety and all of these things. And Brandon has talked about that the electrical integration that we've been strong in will become even stronger need in the future. But of course, we also have to build additional components on top of that. We haven't done automation for battery manufacturing 20 years ago. So now we added certain vertical libraries on top of our horizontal base in order to deal with that business efficiently. One of the key differentiators of ABB on the market is that we have actually held to our promise of what is called evolution without obsolescence over the long period that we are active in this business. Now why is that important for customers? Customers operate their plants 20, 30, 40 years. During that time, there is obviously a need for technology refresh. Now you can do that in 2 ways. You shut down the plant for a couple of months, rip out everything, reinstall or you can go the ABB way to do a gradual evolution while the plant is running or while you have a shorter shutdown. And that's something that is very valued by the customers. Now obviously, that creates a big challenge for us in the R&D organization to still bring in innovation. What we actually have done now over the last years is that we've thought about a solution to that in order to fundamentally renew our technology, while still keeping this promise. And that will mean that we will not come out with a big bang that will have a completely new system but that we will change the technology step-by-step, release by release still offering our customers this minimal risk evolution path for their current installations because they need to be competitive with what is built today, while at the same time, our modularity that we now build in all of the modern technology enables us to be successful in the greenfield business as well. We've actually significantly scaled up our R&D efforts in that area. And obviously, that has worked out by redeploying some of the things that we did in the past while still increasing margins. Now if you look at the technology changes, obviously, there's one thing that we also should think about not all of these technology changes are things that are completely new to us. Everybody today talks about digitalization and IT/OT convergence. Actually, if you go back 20 years ago or more, ABB talked about that under the heading of Industrial IT and now is the time to actually make a business out of that. It's actually quite interesting that we've been able to bring this value into very old installations. I just remember one case of mine in Sweden that says, well, we've been able to increase productivity by 60%. And the CEO stands in front of an audience like you and is happy to actually show that he has full control over everything in his mind by looking at something on his tablet, which is actually the operator screen of our automation system. So that's the value that we can bring for these installations that we have in place. Now the next topic that you might ask yourself about is this really -- a good thing for ABB is open standards. Just to make you aware, I've brought just one of the standards with me. This is OPC UA. I can tell you, it's 1,809 pages. Now guess what a customer who wants to have a greenfield plant wants to do, go to ABB, where we've got the full capability of integrating all of the products and the engineering or go to a couple of product suppliers and the system integrator and say, look, do this. And at the end, everything will work perfectly. Obviously, this is important for a modular replacement once the plant is installed for changing parts for keeping them up to date. But the greenfield business, in my view, will not change significantly. You might ask yourself, what does cloud and 5G mean for automation in the future? Well, we already use cloud for our engineering because there is an obvious need to bring our engineering centers in India, in the Czech Republic, together with the people who are close to customers. But actually, in theory, all of the software that you've seen, we would be able to run that on the cloud today connected by a 5G connection to the plant. It's just that the quality of service that you would get with that system is not yet acceptable for the specific needs of process automation customers, now that might change over the next 10 or 20 years. But certainly, the technology that we have in our hands will be dealing with that technology change like it has done with other technology changes in the past. And finally, you've seen some parts about our augmented operator offering. We actually have a couple of projects in very different industries where we pilot this. There's this [indiscernible] offshore platform in the North Sea. We've got the autonomous tug in the port of Singapore. It will remain to be seen when this develops into a big business, but it's certainly technology that we will be ready with. Now with that, back to you, Brandon, to explain what's the value that we can extract from that technology.

Yes. Thank you, and thanks again for being willing to travel with that standard versus me having to bring that from Houston. So how do we create value? Let's start the way we do in process automation always, which is from the customer in. And so if we start with this, you heard in maybe one of the emergent sessions, the word FEED, which is front-end engineering and design. And so that's kind of that early engagement, anchor product offering, these kind of things that allow us to engage early. Then we go into execution and start-up. You run the plant for 10, 20, 30, 40 years. I think in the pulp and paper trailer, they may have even mentioned 50 years that we have some assets running with a customer in the U.S. Across that, you upgrade and evolve the technology, the software, the hardware. And then what do we do at the end of life. And you can kind of see down the slide that automation plays a key role across that to do things safely to do things with high availability, high reliability, the .9999, that Bernhard talked about, making sure that we design competitive facilities and help our customers with the OpEx side and the CapEx side. And so let's take a look at a few real examples. And so the first one, obviously, on the -- from the cruise industry, being able to have exactly what Juha talked about in the integrated proposal or in the integrated and anchor product section, where we have all of the things that the ship owner and operator is looking for from the electrical, from the propulsion, from the control of the digital environment, all these things under one roof, integrate them seamlessly early engagement allows us to be there and influence that. If you look at the second example, I love this one. We have something called adaptive execution, which we launched about 1.5 years ago, and that's a little bit about how do we get more predictable in our delivery of projects around people, process, technology, infrastructure, kind of integrating all these things together. Well, here's the impact of that. The customer saves 40 days and 2,700 man hours at site during commissioning. That's when risk to safety is the highest, cost is at a peak for the customer and schedule has little to no flow. And so if you can remove people and if you can remove scopes to work from that and do it in parallel as you're executing the project, you can imagine what kind of value that adds to the customer. The little stat I love on this slide is about the 3,600 clicks that the operator saved during startup. Think about how many times in the course of the day, you're clicking your mouse. Or if you didn't have to do that 3,600 times during the course of a startup. So there's little things like this that go into the execution. In the middle there, large petrochem facility in the Middle East and Saudi and you think about being able to operate all these process plants from sitting in front of one of those workplaces and to be able to do it simultaneously and to know what the control is to simulate the environment, all these things as you run that asset. An example I love, Bernhard talked about evolution without obsolescence. That's certainly a big deal for us, and we believe our life cycle policy is the differentiator for ABB compared to our peers. If you look at this 1 in 3 weeks' time, we renewed the technology at the customer site and then kind of blew oxygen into it as you look for the next 5, 10, 15, 20 years that they've been running that plant. We also take all the IP that's been embedded in the programming changes across the life of that asset and you then play it forward. So you renew it in the technology. And then the last one is a recent win competitive project that we bid in Canada and one -- and this is a great story about how the energy transition is playing out in real life. What does it really mean when people talk about circularity or they talk about the energy transition? This is a refinery in Canada, mothballed, end of life, now on the back of our technology, they're now turning into a biofuel's facility, and it gets another 30 years of life. So that's the energy transition. That's what's happening, and that's where ABB is playing. And so if you look at what does that mean for us in terms of ABB. So how did the revenues come in? What does profitability look like, some of those things that may be on your mind. If you start at that beginning phase, Peter talked about during his section about a 6-month, 12-month engagement that we do engineering design in these things, and then it led to a $35 million order. That's kind of that first peak that you see, where we get engaged. We do some consulting services and these sort of things, then you get an order for the hardware, the software, whatever we're pulling through from our brothers and sisters in motion or in electrification. Then the dark gray, we run that asset or we help the customer run that asset. So Jo talked about resident engineers, service contracts, advanced services, remote services, licensing agreements, all these kind of things. So we run that for 30 years. And then you see these kind of light gray lumps in there. And so I've always been told don't ever ask a question that you don't know an answer to. I'll take a shot. Raise your hand if you still have a flip phone, anyone with an iPhone 1? 2? All right, I'll stop there for fear someone may say, yes, right? But so that's what we're doing. We're refreshing the technology. We're doing it without obsoleting what's there. We're taking the IP. We're taking the code. We're paying that forward, but we're refreshing the technology. So think about it as changing out the cell phone, right? Your apps transfer over, your information transfer over all these sort of things and you keep going forward. And that's what we do throughout the life of that. And then at the end of the life of the facility, what happens? Can we breathe life into this facility for another 30 years? What macro trends have changed? What's happened? And so a nice look for you. Obviously, the profitability, a little bit lower margins. You saw some of that in the 25% range. I think it was that Alanna was saying on our systems business and then, obviously, higher margins as we go across service and upgrades and these sort of things. So we have to look at the full life of these projects. And then what happens at the end and gaining more installed base. You've seen this slide from my brothers and sisters here earlier. And I'll only touch on a couple that I think are really important, and you can certainly read the rest. One is consolidating the automation in the back end. In the past, in ABB, these automation technologies set in different divisions maybe even different business areas or whatever the words were that we use or abbreviations were that we used at the time. Now all of that technology sits in one place with Bernhard. Bernhard executes and delivers on quality, on cost, on speed, on innovation and all these things. And myself, Jo and Juha's businesses, determine the market requirements, determine the direction of travel, how fast do we need something, all these sort of things and we work hand-in-hand with Bernhard's team to deliver it. So I think that's certainly a big deal. Adaptive execution I talked about, the refresh of technology, not some, hey, look, here's all of our new controllers and new hardware and new software and everything. It's a drip process continuously that we bring out innovation, and we integrate it into our offerings in order to make sure that we stay current with how the markets are developing. Growing extended automation and cyber solutions, we'll touch on that in the digital section, which is next. And then channel growth, you heard about it multiple times. We talked about it at dinner, important for us to expand not only the penetration that we get through channels but also the new regions, new industries, these sort of things to grow that share. And so look, 2 slides as we wrap up. One, automation is the gateway between the physical world and the digital world. These other technologies that Bernhard talked about are enablers for automation. Automation is an enabler for digital. And so our automation, our process automation, whether it's control or whether it's automation, critically important to driving the future that we've been talking about across really all day and all of the immersion sessions. And lastly, automation is not a dinosaur, and our industries are not going extinct. We have a very strong fundamental base to stand on. We see positive -- net positive this whole energy transition and what's happening in our core businesses right now as well as our new businesses. We're well positioned to capture that growth. I think you've seen that across the day. And I think we've given -- tried to give real tangible examples of what that looks like. And then we are absolutely committed to doing it while it impacts our bottom line. So making sure that our profitability trends up to help the group towards its overall goals and get ourselves into the teens, like Alanna said, as well as keep our net working capital at 0 or negative in order to be responsible stewards of the business. And so with that, I'd like to ask Peter on stage to kick off our digital section in the last section of today.

Thank you, Brandon, and indeed, last but not least, digitalization caught a lot of attention in some of the discussions, including the lunch break we just had and the discussions there. And it was referenced too in, I think, all of the presentations as well as one of the immersions at least already. So in terms of what this session is all about, it's basically here to outline what do we actually mean when we talk about digital? It's about what's our strategy in this space. Going through, why have we chosen an organic strategy? How is that delivering? Where do we stand? What can be even better as well as then do a bit further diving into our offering in digital with concrete examples how we execute on our strategic priorities for that third point. Brandon and Juha will add additional color from their respective divisions. Starting with what do we mean? Clearly, and we've just had the session on automation. In process automation, our namesake of automation is clearly a big and the biggest part of what we do. And you heard about it also in terms of the immersion session on distributed control systems and other parts, we've got smart equipment and systems. All of that is digital technologies on the inside, but it's not what we refer to when we talk about digital here. What we're talking about here is software and digital services that can be sold separately that can be layered above the automation as a natural extension and that is there to optimize and improve performance. And this is the 500 million number we shared earlier with you today. Now if you decompose that and look at this, what's leading to that, what is required for that to be successful? And clearly, one of the first things to come to mind is technology. Now on technology, Marc Andreessen in 2011 famously declared that software eats the world. So I thought it was more than fitting to use this Pacman graphic here to illustrate that in our R&D already, more than 80% of our R&D people are actually developing software. And yes, the 20%, they develop what you saw on the other side of this wall are [ departs ]. You saw QCS in the immersion sessions, you saw analyzers. So yes, we develop hardware and that hardware is very important for us also. But already today, it's above 80% of our R&D that goes into software. And we have multiple decades of being in this business. In fact, I can say myself when I joined the company 28 years ago, it was in a role of a software architect already. Now if we next look at what are the market growth dynamics here. We talked about the devices. We talked about the automation already, but it's clear in the software and digital, that's where we're seeing the highest growth rates. And we're not going to be an enterprise resource planning kind of outfit and do all sorts of things that are way -- away from what we are strong at. But we are seeing the sweet spot for ourselves, just north of the automation side, so where the operations technologies and the IT technologies actually come together in order to enable our customers to drive productivity with getting more data, cleansing that, contextualizing that and using that data for better decisions, automated decisions as well as human decisions as a way also of mastering the huge challenges, the industries that we have -- that we serve have in terms of mastering their energy transition, their respective sustainability journeys. And of course, there's an element here and that one in recent times has gained increasing visibility there is this element of cybersecurity. If you do lean more on data and on digital, clearly, cybersecurity is foundational to that. So our service offering in this area is, of course, very important for our customers to maintain these levels of reliability that Bernhard and Brandon were referring to, the 99.999 kind of reliabilities were 99% flat would not be enough. Let me use one sort of dated-looking slide here. This is kind of the content of our 2016 digital strategy. And what do we say then? We then said in the industrial space that we're serving, this is not about kind of an iOS versus Android battle of platforms, if you want to look at it this way. But we said for ourselves, we rather want to start with the value we can create for customers and then look at how do we build on our existing strengths, our domain competence, our automation offering, the data that's coming up from this unrivaled installed base that we have and combine that with organic growth, so investing some of the profits we're generating into creating our future as well as then selected bolt-on acquisitions and partnerships, in particular, partnerships because in the IT in the cloud space, people are investing billions in scaling the technology in creating the cloud, which obviously, at the end of the day, is computers on a remote connection. And that's also why we then said our ABB Ability platform, we transparently layer that on Microsoft Azure Infrastructure as a Service, Platform as a Service leveraging their investment rather than trying to build everything from scratch in this fairly fast-paced space. So we, as a team collectively are very proud of the 500 million digital business that we have built according to the definition I just shared and have built with quite a growth momentum, as you can see here over recent years. What Alanna and I appreciate, in particular, no just kidding, all of us appreciate, in particular, is the gross margin level, our digital business is clearly accretive to the margins that we generate. So it's above average versus automation gross margin. At the same time, you can look at this as a glass half full or a glass half empty. Half full is what I just said. It's margin accretive and it's growing, so it's a nice thing. It's half empty. If you look at the best-in-class software companies, clearly, they do make better margins than we make here. But we'd rather look at that as potentially. We're on a journey, but we're making good progress on that journey. And the same can be said for the recurring revenue. Would it be nicer to have an even higher share of recurring revenue? Absolutely would be. But at the same time, if you look, we're now at 35%, 40% of recurring revenue, somewhere in that bracket, which is a big opportunity of also moving up that curve even further. So it's actually a value creation opportunity. Which brings me to kind of assessing with what we know today, 6 years after we made the strategy, assessing is the organic plus bolt-on strategy working for us. And definitely, you've seen the sort of growth rates. I think these are strong growth rates. Even in a nicely growing industry, these are good growth rates. So why do we think we've materialized that growth, the customer proximity, the cultural coherence in the process has really helped us avoid kind of too much frictions at interfaces. It's never completely friction-free. We also have worlds that collide automation folks versus digitalization. We sometimes have frictions at those interfaces, but we can manage those internally rather than kind of large companies getting into integration challenges with each other. And we can bring much of the expertise we've previously built into what we're doing at this interface between operational and information technologies. In terms of margin, in terms of degree of productization and recurring revenue, I already shared, yes, we can be stronger but I certainly look at that as potential. And then in terms of return on investment, if you look at the multiples that have been paid, the $1 billion valuations for software companies, sometimes of a smaller size than what I just showed you, that puts a lot of weight on your balance sheet and would be counter to our aspirations in terms of return on capital employed that we're delivering, which also means then going forward for our strategic priorities, we're clearly aiming to keep that growing at a double-digit growth rate. So these are quite strong absolute increments. We continue driving productization. You may have heard over the course of today some of the colleagues referred to mushrooms to trees, we certainly coming with information from the customer interface in many areas where we interface with customers. We've innovated with digital solutions based on our competence. And we have an ongoing effort in productizing this more in consolidating that into fewer taller standing trees as opposed to the many solutions. Remember, perhaps 3, 4 years ago, ABB was publicly priding itself in having 200 digital solutions. I'm actually not aiming to have more. I'm aiming to have fewer, stronger ones, and that's what we collectively pursue as a team. And then capabilities and culture, I referred to that already. I think it's super important that you're not just able to lure in some software people, but that basically you have a mindset and culture and purpose also as a company that keeps people happy and employed and productive in these roles. In terms of our offering, the way we're going about this mushrooms to trees journey, we structured our offering into these 6 customer value pillars, if you will, you could group every bit of offering that we have under one of these and then basically drive the consolidation, the continued productization that we're making good progress on. In the immersion sessions with Rajesh, with Eduardo, you've already seen the examples that are shown here on the lower line of the chart. So these are some of the demos that those of you participating in the immersions have seen whereas the examples that you see in the upper line on this chart are examples that in a moment, Juha and Brandon will share with us. And with that, let's go right into what we do in the marine industries. Juha, over to you.

Thank you, Peter. So when it comes to the [ marina port overing ], you have seen our sort of heavy metal piece of our spectrum. Now we go to the total other side to the digitalization. On the other hand, we, of course, also connect that heavy metal piece to digitally to our operational centers to be able to provide as a performance services. So we have categorized our digital solutions into these 3 offerings. As a performance management, vessel operation optimization and then the fleet management solution. So that means here our own installed base. We are supporting our customers to optimize the performance of the assets that we have delivered to these vessels. Then on the other hand, the vessel operation optimization, that addresses the wider market of up to 60,000 vessels , the same with the fleet management solutions, which I'm going to explain one by one. So today, we have already 1,600 vessel subscribed to these services. And as I said, there are 60,000 -- or almost 60,000 more vessels to be addressed, so we have definitely a good start, but we have a room to grow. Okay. Let me then explain the first, which is the asset performance management. I already explained in my anchor product session that when we already delivered the new project, we enable all these products and solutions digitally enabled. It means that when the vessel is then delivered, we are able to offer them this as a performance solution. So in simple terms, how it works. So we collect this performance data like from Azipod in this case, we utilize the SIP satellite connection and send this data to the data cloud. And by that, the crew of the ship, ABB's operations center and in some cases, also a customer operating center if they have one, are able to connect online under the same data. And then we have, for example, one of the services is remote diagnostics. Should there be any issue with the Azipod in this case, we're able to help to grow -- to solve it swiftly by utilizing ABB's expertise on these operation centers. And then we go even beyond that. So we have huge amount of data collected from these 500 vessels where we already have a connection and we're able to provide even a condition and predictive base maintenance. So with that -- so we are able to help our customers to increase the asset availability, reduce the downtime of the vessel as again, our solution is a mission-critical. And at the same time, they also save significantly in the service and maintenance cost. Let me then show the other example, which is a vessel operation optimization software, what we call as OCTOPUS. So there we have multiple software solutions to either improved and its efficiency or the safety of the vessel. So just to give you one example on the energy side, we have a dynamic trim solution that helps our customers to sell the vessel with an optimized floating position and with the minimized water resistance. And by that, they are saving fuel from, let's say, from 3% to 5%. Then on the other side, Motion Advisory. This was the business that we acquired some years ago, and now we have combined that with our energy advisor. We have one comprehensive portfolio to optimize the vessel operation. To give you one example on that side, which is quite interesting. You probably know that more than 3,000 containers are lost at sea when the large container vessels are operating in rough seas. And that has increased the demand for the digital weather routing advisory services. And we are the one of the leading provider of those. In our solution, we combine the wave measurement, weather forecast, most of measurement that we measure with some sensors, navigational data with ships characteristics and loading condition. And then our software will guide vessel to the safe route and then it can avoid any excessive motions. And more importantly, they are able to keep containers or cargo on board a vessel. So with that, they are also able to load the vessel with the higher container stacks because they know that with our software, they are able to avoid any sort of situation that they would lose the containers. What next is very exciting for us is that we have a Software-as-a-Service business model. In rather the short time, we have been able to deploy this solution already for more than 750 vessel and there are more to come. So we are serving all the leading container aligners like Maersk, MSC and so on. Then my final example is actually the completely a new solution or concept. So this is the -- what we are -- we are partnering with [indiscernible] Marine. [indiscernible] Marine is a Swedish ship designer and ship management company. So they have a sustainable shipping as a key value pillar. So together with them, we are going to offer a first time in the market, [ fleet support ] as a service. So this is totally a unique offering. So the bigger players, the bigger ship operation companies, they already have their own capabilities. They have their own operations center. They have been shifting focus from the single vessel to optimize the operation of the fleet of the vessels. But this small- and medium-sized operation -- ship operators don't have this capacity to invest in similar services. And we addressed that demand, and we have been almost completed already our solution, and we are going to launch that later this year to the market. So basically, in this solution, we combined the Vale used a strong expertise on how to operate the vessels with ABB's digital capability. And this will run on our Genix platform that Rajesh has already explained you in the immersion session. So then is similar than in our asset performance management, so we connect the vessel to our operation center. But in this case, we not only provide the asset performance, but provide a comprehensive set of voyage asset and environmental performance digital services. And with that, our customers can subscribe the services without their own investment and they get a significant fuel savings. They improved the safety and sustainable performance. This is really exciting opportunity for us to expand further our digital offering beyond of those 1,600 vessels that we already have subscription. So with that, I thank you from my side, and then I invite Brandon to the stage, and he will explain more on the energy side.

Yes. Thank you. And I think, Ansi, with 4 slides left, I feel good for people making their flights. So in a similar landscape to what you saw from Juha. And I think it's exciting to see what you guys are doing in the marine industry on the digital perspective. A similar landscape from our side. Across all the industries, we have, of course, all the 6 value pillars or digital pillars that Peter talked about in his presentation. I'm just going to highlight 2 today. One is on sustainability. And if we think back to that kind of S curve, at the beginning of that S curve, sustainability kind of coming up that now, not that it hasn't been important, but the relevance that it's gaining now more than ever. Cybersecurity, a little higher up that curve, been relevant, tough to read an article or anything out there today without talking about that, and it impacts all of our lives in some way, shape or form. And I'm also really proud to talk about that energy industries, we represent about half of the volume that Peter talked about from the digital portfolio side. And so a great growth that we've had, and we certainly look to continue that trajectory. Peter talked about mushrooms and trees. And I think this is an exciting example for me of what we're doing to try and productize these offerings, take those mushrooms together, put them on a common technology stack and be able to deploy them to add value to a customer. And so that's exactly what we're doing here with energy management, energy optimization in order to really drive the efficiencies of these plants. Tying energy management to automation is exactly what we talked about earlier, and you heard it in Jo's session, you heard it in my session and you saw it in some of the sessions before lunch. And so this portfolio or this pillar, fast-growing, $30 million going from a relatively probably $5 million, $7 million a couple of years ago to $30 million now. So good growth rates. And also, if you look at the benefit for the customers, again, start customer out and come back into ABB, reducing their energy bills 2%, 3%, 4%, 5%, improving steam efficiency or however their processes are run, you can imagine the payback for the customers is very quick on these kind of investments. And so instead of looking at an entire investment of a process automation system, what kind of applications do we have that we can deploy in an agnostic way and really go add value to the customer. And so I think a great example here from sustainability. The second example is cybersecurity. What you see on the right-hand side is a big project that we did in the Middle East for a customer. We're actually in execution on that project now. And that allows kind of one view for the customer, what's the status of the system? How protected is it? The updates that are out there need to be deployed across the ABB solution, but also other systems that are there. And an interesting thing about that, our orders here range from, say, $50,000 or $60,000 to several million dollars, depending upon the services that we're deploying, the engineering and the engagement that it's going to take, how many systems are being tied together all these kind of things. And so this business is approaching $100 million part of our portfolio, so very relevant in terms of not only my digital business, but if you look at the overall volume for energy industries, really important. And then one thing to focus on, on the bottom. I mean, of course, meeting all the requirements that are out there even exceeding, making sure that we can protect the ABB brand as well as our customers' assets critically important to us, but we're launching new offerings in this space. And we launched a new offering just a couple of months ago in this space that allows us to certainly go after third party control systems and solutions that are out there on the process side, on the safety side. And that opens up 4x the market that we had access to before. And so we've had great success in this, nice double-digit CAGR, profitable business, and now we've opened up an even larger market. And so excited about what we're doing in cybersecurity. Last comment is really that we're also looking to expand from just the OT environment. Of course, we're really good in the OT environment. But we have to look at a customer's asset up the entire value stack. And so we're working in partnerships and in collaborations with other companies in order to go into that OT IT space and kind of blend in the middle there of what makes sense for the customer. And so I think that's an exciting kind of next step that we have as we look at organic growth and continue our journey that Peter showed earlier. And so Peter, I hand it back to you.

Thank you, Brandon. And let me wrap up this session on digitalization. I think both our progress as well as our excitement and potential have come across, we really do see digital as a key contributor towards both sustainable performance as well as further growth. We, as a team, and I hope that became clear during the day are proud and confident in the strategy that we have chosen and where it got us to date. We're happy to already have margin accretive, strongly growing digital business as part of the mix. But at the same time, we're also honest and transparent enough to say there's further margin opportunity, this further productization and recurring revenue opportunity here where we have headroom for further development and that we're actively working on. So our plan clearly is to continue the double-digit margin accretive growth in this area with continued focus on customer value creation. And with that, let me lead over to a final Q&A of the day and ask Ansi and Bernhard back on stage.

5 is a crowd. Okay. We ask directly here in the audience, if there is anyone now who have some questions for these guys. Yes, please. And here on the.

It's Andrew Wilson from JPMorgan. It's probably quite a quick one. I'm interested in the recurring revenue number. I think you kind of -- you talked about sort of 35% to 40% number. And I think you sort of alluded to potentially moving that number higher. I guess, I'm interested where that was maybe 5 years ago and then where it might be in 5 years' time? And if there's a sort of optimal level, obviously balancing out the rest of the portfolio?

Yes. Unfortunately, I have to give you a short answer there because if you look in terms of transparency in our data 5 years ago, we weren't even actually reliably looking at that KPI. So in terms of establishing the transparency we need to actively drive then the accountability among ourselves here. We've only really since about a year established a KPI, and that's part of our maturity journey. I mean there are things you absolutely have to measure, including this one, when you want to be in the software business, but it's 1 that 5 years ago, we did not reliably measure. In terms of how far will it go? I certainly see it going a lot further, but still I think we wouldn't be -- with the lack of history in this area, we wouldn't be in a position to pinpoint it to an exact number. I'm sorry for that. But here, I'd rather be honest and say something that we'd regret later.

Thank you. Martin, please?

It's Martin Wilkie from Citi. So I think you put aside or put to bed the question as to whether you're going to do big deals in software. But if we want to try and compare you to some of your competitors, if you put aside where they compete in PLM and design and all these things, and you just look at what you offer in asset management performance and these kind of things. I mean how do you benchmark yourselves in the areas that you do compete with those competitors? .

Look, you've seen in terms of the comparison of our organic approach against people who followed an inorganic route. I think if all you are interested in is what's your current degree of recurring or SaaS, you will find others that are ahead of us at this point in time. The minute you start looking at how much did you pay and how much do you have goodwill on your balance sheet? And how is that payback looking with current forecast, then I think we're very confident in your comparisons if you take into account that yes, we're sacrificing some of our profitability, but we're protecting our balance sheet from these multibillion investments. We will do bolt-ons. In fact, a part of what -- you have showed contained a small bolt-on that we did a couple of years ago. So here and there, it buys us time to market, where it buys us the technology differentiation that would take us too long to develop. We'd rather take a bolt-on acquisition there, but I think we're not the people with our strategy to make a big platform acquisition and the KPIs I highlighted, other ones to then benchmark us on.

And I'll take the liberty to squeeze in a question that's come through here from Jack, and it's aimed at for Brandon. He wants to know is ABB developing cybersecurity technology in-house? Or is that something you source externally?

No. Largely, our cybersecurity development is in-house. So tested on our own equipment, our own solutions. And certainly, we're complying with all the standards and all these things that are more publicized, but then how we do it and what we do for our own solutions developed in-house.

Yes. There are very special requirements for the OT space. There are standards like IEC 62443 that we have to comply to. And obviously, since we know the systems best, we think we can actually also protect the systems best.

And we've worked with some of the relevant authorities in this space in the different countries that set the standard. So we're well networked there. And we're also well networked across the OT/IT divide, if you want to look at it this way. So whenever customers come to us and say, I've got the OT side and I've got the IT side. I want to do a comprehensive approach to that, then we basically look at partnering rather than doing everything ourselves. So we have proven technology and commercial interfaces in this area.

And I believe we had a question right at the front here, please.

I wanted to ask about the business model I heard, I think, in our breakout session that there are thoughts about maybe not selling your products and System A is under exchange so on, but sort of like leasing it maybe to another company. Presumably not a very, very large-scale oil and gas plants, but maybe smaller plant. First question, are you going towards the direction? How far will you go there? And then I have a follow-up.

Okay. I'll start with the first one then. Actually, last 10 years or so, the question of, can we rather source your system as a service rather than buy it. That question has come an awful lot of times. But whenever the moment of actually signing a contract with each other came closer. Customers changed their mind and said, it's such an important and critical part of my process plant that I want to rather own it because of the criticality that you saw in the automation session. So it's a super tiny fraction where really the automation side would be sourced as a service. Fundamentally, we're open to it if the economics make sense for it. What I think is different there is when you look at the Fleet Management as a Service, what Juha was showing, in that area, we see far more willingness. So one level up from the automation to go for, especially small- to medium-sized companies that don't have critical mass for whom ownership would actually not have the best economics to come to us and in many industries, trust in ABB and our ability to deliver our domain competence to actually go buy as a service. So that's changing the more we move from automation to digital. And then, of course, even in some of the traditional areas, if we take sensing and okay, I struggle to think of drones as very traditional. But when you think of the methane emission topic that you saw, you can buy the analyzer from us. You can buy a solution that encompasses the drone or the car or you could actually buy that as a service as an inspection service. So here, commercial models, they need to make sense for ourselves and the customer. But the more we go into this digital space, the more also in that side of the business, it's -- it can be measurement as a service, it can be fleet management as a service. It can be many other things as a service. But usually, the automation is just too closely ingrained for people to ultimately sign that contract, even though the discussions come up a lot.

Right. So my follow-up becomes irrelevant because it was about cannibalization, but with the answer you gave me is not. [Audio Gap]