ABB Ltd ($ABBN)

Thanks, and welcome to this presentation of our first quarter results. As always, we have our CEO, Martin Wider and now for the first time, we meet our new CFO, Christian Nielsen. Christian, you may be new in this setting, but you win with ABB for about 9 years as CFO of electrification. So by no means a new bee to ABB, and that matter. Great to have you here at the quarterly desk. .

Good to be here.

I'm Asa Vinod, I'm Head of Investor Relations. Morten and Christine [indiscernible] presentation as per usual, and then we open up for Q&A. And without further ado, I hand over to you, Martin, to kick off the presentation.

Thanks, Santen. And it was good to see the quarter developed pretty much according to plan. This despite the escalated situation in the Middle East. Our priority has been to support our employees directly impacted by the conflict and do our best to keep our colleagues safe. When it comes to the business and our own operations, it has continued pretty much as normal. And overall, we have so far not seen a material change in general customer behavior. I would say that our first quarter order intake is evidence of that as we, for the first time, reached orders of more than 11 billion. We improved across all P&L headlines. We had a record cash flow for our first quarter, and ROCE was at a standout 27% and about 25% without the real estate gain. I'm pleased with the quarter. In February, we published the 2025 sustainability report. This shows a steady progress towards our 2030 targets. One example is also reaching nearly 23% of women in senior leadership roles. So we're closing in on our 25% target, and we have made strong progress from the 14% level 5 years ago. Looking at our Scope 1 and 2 emissions, we have now virtually reached our 80% reduction target. And another KPI is our waste to landfill, which we have reduced to 5.3% from 8.4% in 2019 and perhaps above all. It is very good to see that our employee engagement score keeps going up every year. For 2025, we reached a score of 80. This is up from 75 when we started the ABB Way journey back in 2020. We always strive to improve, and this is an important tool for us to capture focus areas to prioritize. The employees are our most important assets. I am sure we will get to the topic of capital allocation at some point today. Outside of investing for organic growth we distributed $2.1 billion in dividend. This corresponds to about 1.3% in dividend yield based on recent share price. And in early February, we launched an annual buyback program of up to $2 billion. If fully utilized. This is about 1.2% of current market cap. I've already messaged that we want to allocate more capital to acquisitions. Cash flow should continue to be strong. And with net debt to EBITDA of 0.3, we have plenty of headroom. So theoretically, we can make rather sizable deals. But like I've said before, base case is small to midsize bolt-ons. And then we aim to add somewhat bigger deals on top. And big to me would be along the lines of 4 billion we spent on Thomas & Betts and Baldor a few years ago. It would be great if you could get some deals up to that size. But Key for us is the long-term value creation. I would rather make no deals than bad deals. And I have told the teams to do the right thing and step away if multiple becomes too demanding. But the teams are active, and I'm feeling hopeful that we will deliver also when it comes to M&A. Another proof point of us spending money in the right places is the automation team's launch of its automation extended program. This is a strategic evolution of our DCS systems, where we have the world's largest installed base. These systems are at the heart of industrial operations. But the customer's dilemma is that their control system must evolve to support digital and AI capabilities. But they don't want to disrupt operations in a process plant running 24/7. Automation extended is our way to help customers solve this problem. To do this at the customer side, we create an ecosystem, which includes 2 distinct yet securely in [indiscernible] the other is the digital environment, which enables advanced application analytics. The secret sauce is that we have connected these 2 environments with external clouds through a unified management and maintenance service systems. And combined, this enables the customer to modernize without touching or disrupting the critical part. Turning to Q1 orders. The chart shows the record high bar of $11.3 billion. On a comparable basis, this is up as much as 24%. And it is very good that the strong development is broad across all 3 business areas. But at 44% I think it's fair to say that the orders surged in electrification. On top of this strong comparable growth, our total order intake was also supported by a material FX effect of 7% and 6% on revenues, mainly due to the strengthening of the euro against the U.S. dollar. But let's focus on the business and dissect the market a bit. The short version is that we see persistently high demand across most of the main customer segments. On the positive side, data centers clearly stands out. Other segments dimension would be a strong utilities market with investment in grid build-out stability and reliability. Customers are also continuing to spend on upgrades of electrical infrastructure for land-based transport. And linked to transport we still see good market conditions in the marine and rail markets. And the same goes for commercial buildings with related HVAC market. Looking at the developments through the quarter, the overall demand remained strong throughout. So for us, the Middle East conflict has not changed the overall demand picture so far. If we zoom in on the Middle East region specifically, there is no pattern of a weak March for neither electrification [indiscernible] the Middle East region where automation has an energy-linked customer base. For the group, the least represent just below [indiscernible] 5% of sales. Turning to revenue of 8.7 billion. The usual pattern of sequentially lower Q1 is visible. But year-on-year, the comparable growth of 11% is even a bit better than we expected. The beat is linked to the stronger deliveries in both electrification and automation. Despite the backdrop of hydiopolitical tension, there was no change in customers' willingness to receive shipments. And on the flip side, there was also no indication that demand was artificially boosted by customers' stockpiling. Revenue increased in both the project and short-cycle businesses and higher volumes was the biggest contributor to the strong organic growth of 11%. The teams are focusing hard on price management. It is key to balance the trust and long-term relationships with customers. whilst at the same time, depending our profitability. The backlog is at a record level of 27.5 billion, up 22%. And in my view, we performed well in a strong market. I mentioned that orders increased across the business areas. The same goal was for the different geographies. All 3 regions were up by double digits. -- strong and improved by about 30%. Europe, was up by 13% with a stable to positive development in all our top 5 countries. Let's turn to earnings. And this chart also shows a record quarter. We delivered operational EBITDA of just over 2 billion with a margin of 23.5%. This total was, of course, supported by the capital gain of 377 million from the real estate sale. When disregarding these gains in both this -- this was achieved through stronger business performance and the remaining 20 was the net impact. About 2/3 is due to unrealized FX and -- there were all operational impacts from portfolio changes in motion with the Gamesa deal now impacting the full quarter. And we have a bit of a price cost gap. I'm sure you remember that in our Q4 presentation, we talked about the time lag between price adjustment and realized P&L effect. We highlighted it specifically for electrification, and we see it in the numbers for Q1 -- is from the backlog-driven project business. In fairness, 39.4% gross margin is still a very decent level. But I never like to go backwards, even it is mainly due to the unrealized FX and commodity hedges. On a positive note, we improved operational EBITA margin through stringent SG&A cost management. These costs declined to 19.2% of revenues from 20.8% last year. All in all, operational EBITA increased by 37%, 28% in local currencies and margin was up by 320 basis points, out of which 50 basis points is real business-driven increase. Q1 was a challenging quarter with plenty of -- use term surging orders -- 44%. Add to that 7% from FX and we arrived at a new record order level of $6.6 billion -- you see it in the chart left on this slide. very strong. The good thing is that there's strength across the customer segments. In fact, all main segments increased at the double-digit rate. And looking at -- per CAGR of close to 35%. And the data center orders were very strong in both Q4 and in Q1. Pipeline looks good, and we expect this to be another strong year. Another segment I want to mention is utilities. Investment in the efficient, smart and reliable grid are needed to make power available and accessible. We see this happening, particularly in the U.S. The biggest segment in electrification is buildings at about 30% of revenues. 2/3 of that goes to commercial segment. And this market continues to be strong. The residential market on the other hand remains generally muted. We however, performed well in the quarter -- revenues, we outperformed our own expectations. Short cycle business came through stronger. This resulted in comparable revenue growth of 15% and revenues of $4.6 billion. The chart shows the usual sequential pattern of Q1 being slightly lower than Q4 and then growing sequentially into the second quarter. We expect this pattern to be repeated also this year. Higher volumes drove majority -- the team is working on price management, but like we highlighted coming into the quarter -- fully offset higher cost for commodities and tariffs. We expect that this gradually improve as we progress through the year But back of operational leverage and higher volumes, as well as good SG&A cost control. Electrification increased operational EBITDA by 25% to 1.1 billion. This reflects an improvement of 17% in constant currency, margins reached 24% and was up 80 basis points from last year. All included, the team did a good job delivering record orders, record earnings and a record first quarter margin and a strong cash flow. For the second quarter year-on-year, we expect comparable revenue growth in mid-teens range and operational EBITDA margin to improve. Now let's turn to Motion, which also delivered a record order quarter. 9% comparable growth plus 3% acquired growth and another 6% from FX. This resulted in total orders of 2.5 billion. The segment pattern was very similar to recent quarters. We had positive momentum in areas like food and beverage and HVAC for commercial buildings. Similar to electrification, customers continue to invest in grid stabilization to secure power availability. On the software side, there are the process industries related segments. As we continue to see this as a strong area for us. Revenues of $2.1 billion had multiple drivers,; led by comparable growth of 7%. Portfolio changes added 3%, and this is the Gamesa acquisition, which is now fully incorporated in the results for the full quarter. But there's also material FX of 6%. All in all, book-to-bill -- so based on Q1 revenues motion has a full 3 quarters of revenue in the backlog. That's good top line support for this and next year. Operational EBITDA was up by 11%, but the margin dropped by 110 basis points to 18.5%. There are several items to keep in mind. While the Gamesa deal comes with revenues of just over 60 million for the quarter, it made a small loss. This is according to expectations for the deal. But right now, the dilution of margins is significant at 70 basis points. And this will be dilutive for 2026 as a whole. Our plan allows for a couple of years to bring profitability to double digit as we embed offering in our broad leading market reach. The second point to mention is high power division, where we had some operational inefficiencies. This diluted the margin by about 15 basis points. The team is on it, and we expect this to be resolved during the second half of the year. And lastly, in the quarter, we had an adverse mix from higher share of revenues from the backlog-driven -- business -- to decline. -- year-on-year on reasons we just mentioned for Q1. Now let's turn to automation, where comparable orders increased by 5%. And Morten mentioned earlier that this is where some market disruptions in the Middle East region was noted towards the end of the quarter. Energy plans have been targeted for attacks and these are automation customers. But so far, any change in demand patterns is contained to the Middle East region, which is less than 6% of Automation's revenues. From a segment perspective, both marine and ports continued the strong trend. Oil and gas was down, market remained solid, but with the added uncertainty I just mentioned. Customers in the nuclear segments continue to be active. Mining orders actually increased in the quarter, although in general, this market remains a bit on the muted side for us. Orders in the discrete market, meaning machine automation were up strongly on a comparable, which is still at a fairly low level. We see the general market for machine builders still being fairly cautious. Continued soft environments are still noted for chemicals and pulp and paper. Revenues were stronger than expected also in automation. On a comparable basis, we're up by [indiscernible] billion. These higher revenues came with an adverse mix compared to last year. meaning we had higher share stemming from backlog driven -- or then offset this with stringent cost control in, for example, SG&A. As a net total, the operational EBITDA margin improved 50 basis points to 14% on revenue coverage as for Motion. The automation order backlog now sits at 10.4 billion. This covers nearly 5 quarters -- as a base. Looking into the second quarter, we expect automation's comparable revenue to improve in the mid-single-digit range. And operational EBITDA should improve year-on-year. Now let's move to cash, which was another highlight in the quarter. The strong outcome was a result of improved operational cash flow in combination with a larger release on trade net working capital year-on-year. So despite higher paid tax and pressure from discontinued operations we virtually doubled the free cash flow from last year to $1.3 billion. This includes a contribution of about $425 million from the real estate sale. This makes it a good and improved delivery from the business. So well down to the team -- So we aim to slightly improve the full year free cash flow from last year's 4.6 billion. This will be supported by higher cash flow in the business and a higher real estate impact. Then we have some anticipated offsets in the bridge. First, in continuing operations, we assumed some headwinds from growth-related buildup of net working capital. Then we have offsets in the discontinued operation linked to the robotics divestment. This includes 300 million of tax cash impacts from closing the deal -- Baltic Hub in Sweden. So all in all, we should be able to slightly improve. Morten, I hand it back to you.

Thanks, Christian. Now let's finish off with the outlook. And we raised our ambitions for the year, both for top line and margin. It may seem bold to do it now when we don't really know the full impact from the Middle East conflict. And admittedly, the risk for the global economic trading environment has escalated. -- gives us confidence -- for revenues, We now expect comparable revenue growth to be in the high single to low double-digit range. And the operational EBITA margin should improve year-on-year even when excluding the real estate gain in the first -- so now and see.

And also, please remember to -- wewill allow for as many of you as possible to be heard. And I will voice those questions over from here. .

Happening here this surge in demand, Is it company specific? Or is this an end market topic -- can you talk about the book-to-bill excluding data center because you talk about this broadening out of growth, but what's the data point behind that, please, in terms of the book-to-bill. And on the growth that we're seeing in those orders, is it fair to...

That's a long 1 question. Let's see how we go. .

Yes. I may start here. If we are gaining market share, not that is, of course, it's the -- I probably -- we will all know more about that a few weeks from now. But our focus -- probably a bit more -- market these days. So that would be the electrification that triple -- it goes for electrification, but it goes for the whole company. 90% of ABB's not data center -- on top, that is giving the very strong performance of the first quarter. For price, we see about 1% in the first quarter. There will be -- there is a bit of catch-up, as we said earlier as well because we have seen raw material pricing coming up -- for the whole company. We do see more as expected. Oil price increase in Americas and less in Asia due to like China as 1 example. But that is -- but also we see a positive -- slight positive trend also on price in China. So that's a bit on how we see the electrification part.

And then we open up the line for Anders at ABG. Anders, are you with us? .

So -- just wondered about your capacity basically in electrification, given this very strong order trend. I mean previously, you talked about even having some capacity slack in the U.S. And I know that you now add well, another 100 million to the CapEx budget. So could you maybe just update us on that? And maybe also in connection to that, just the margin potential that you saw, particularly in the U.S. in terms of electrification, what's the progress report on that given these additional volumes?

No, we are taking and getting more capacity online in the electrification, but it's not only electrification goes to also motion and automation. But of course, the majority of CapEx has been spent in the last few years in electrification and we are doing that as well. We've guided also a bit higher CapEx spend this year. And when we see that because with the order increase, That is also needed, the capacity expansions that are -- is now coming online, what you kind of money that was spent 2 years ago and last year, this is now coming into more capacity we talked earlier. I can give you a practical example from our smart power unit in San Antobiand Mississippi. That factory is double the size today compared to what it was 3 years ago. but the production line is this year putting into -- on place. And that means and we are hiring more people. We're training and you're getting capacity kind of more month by month, quarter by quarter up because building new capacity doesn't come in stepwise. You can complete a building by getting automatic production line, getting people trained and getting that efficiency gain that you also need month by month is -- takes some time. So that's what we're seeing happening now. I don't think we are the limiting factor when you're talking about build-out, especially like in the energy expansion. We know the equipment like gas turbines, low power transformers is more of a limiting factor when it comes to than we are on switchgear and the component level. We're also expanding capacity by appointing new partners, what we call the OEM partners, the ones who will build switchgear and build more of these do the system integration on ABB's behalf. And that is also how we can scale up capacity without doing everything in-house, but using that kind of partnership network. We look at the margin expansion in the United States. I mean, first of all, we don't give detail in our quarterly report. But we have said earlier kind of where we are developing. And this is as we get more capacity online as we get more efficiency out of that new capacity. We also see that margin is going up, but we are still not on the expected level or U.S. electrification business is dilutive to the rest of electrification performing much, much better than before, but still a gap up there to the average level. And as you may know, that many of our, let's say, peers in this market, the main profit pool comes from the U.S., and that is not the case yet for ABB. So that's the upside we have talked about. So hard work still remains, but making steady progress.

And maybe I can add to the U.S. margin more than. As a reminder, this is, of course, good that we see these volumes coming in because that's 1 driver of the margin. The other 1 is the continuation of the build-out of the operations in terms of robotization and automation. And that is also, like Morgan said, we are expanding that. And that also is a good driver of the continuation of the margin expansion in the U.S. for electrification.

Thanks, Anders. Thanks, Anders. We take 1 question here from the web tool, and we have Kolide here who wants to know, I want to better understand the growth in the short-cycle businesses across the 3 business areas. And if this growth has benefited from large projects. .

No, it has not benefited from large projects that it hasn't because the short cycle business is more smaller project faster moving. What I can say is that when you're looking at the size, it is in all 3 business areas, automation and motion more in the high single digits, while in electrification, we see double-digit growth on that side. So it is very much which -- what I like to see is kind of across the board. It's not standing out in 1 segment or 1 geography or 1 division or business area, it is really across the board. I think that's what was very encouraging to see in this quarter.

Yes. And then we open up for another question from Martin at Citi. Martin, your line should be open.

Just to come back to data center. I mean obviously, across the industry, including for yourselves, Q4 was a phenomenal quarter, and you've sort of beaten that again. What sort of drove that be -- because I'm guessing you have some visibility in the pipeline. I guess it's quite a big uplift relative to what everyone thought sort of 3 months ago. Just a bit of an understanding as to -- so what drove that? And how did the pipeline still look when you're looking at the sort of customer build that and so forth for the remainder of the year?

Thanks, Martin. When we're looking at the data center profile, it was many projects. It's hyperscalers. Yes, it's colocation, locators. Yes, it is -- it's Europe, it's Asia, but it is a big part. You saw that also with 68% growth in the United States. Of course, a lot of that also sits in -- from data centers. So that's kind of -- so it's really also here across the board. There's no kind of call elephant orders. So it's not big. There is many or is it just high demand, what we see from -- especially from hyperscalers where we as you know, work with all of them and making good progress there, but also increasing with scope. You heard when we talk about the medium voltage UPS earlier. . It's a product that is gaining also traction and gaining more share in that market. So that, of course, for us, that's a scope expansion that would give us additional growth compared to others as we were historically not that and didn't have that share on that market. So overall, just a very solid and strong demand in our years. If you look in the outlook and our pipeline, it's still very strong. We have -- that's also the basis of the confidence that we were having when we're talking about the outlook, The discussions. We are more, of course, executing what we're doing, but we're also putting a lot of efforts now into our technology road map into how we are able to supply that 800-volt DC architecture that comes a year or 2 from now. None of the orders what we show today is related to that. This is all new projects to come, but we do see still a very -- very strong pipeline and the feedback from the customers in the discussions that we have is very positive and more about how we can do more and how we can help them to expand faster.

Thanks, Martin. And linked to the data center question, here's 1 from risk.who asks, do you think the data center market is heading for a more integration one-stop shop model and away from the partnership model. And do we have any white spots?

No, I think the -- when it comes to how data centers are built today, it's always you work together different parties. I mean, first, of course, with the operators, if that be -- 1 of the hyperscale is run the data center. But then you have also so much equipment inside there that be racks, that's been on cooling, that've been both on ship level but also on the whole facility. So there are so many parties involved. So what we do is to make more of that partnership thinking and with all the related party on the site that we could be on the cooling side with many of the large cooling specialists that most of them are our customers and partners in there. And then we need to make sure that -- our solution fits perfectly well with that solution. That's the our commitment and therefore, we can work with many. I think that is 1 of our strengths in this field because as capacity and the build-out has happened kind of now getting bigger and bigger. There is also risk putting everything all your eggs in 1 basket, and we also see that from the -- especially from hyperscalers that they want to have a technology expertise from us. But they want us also to work with others where we are relevant of that we can come with that combined offering. And that's how I see the market and that's also part -- a big part of our success here and how we are successful in those discussions.

And then we open up the line for WIL at Cape Chevre, please. .

I'm going to go a little off peat. I would like to ask a question about your automation extended commercial model. I thought it was interesting you've put it in the slide deck there, and you've highlighted the scale of the installed base in DCS. And your opportunity to grow in software and life cycle, but I don't see any financial targets or scoping. Could you perhaps give us some guidance.

and that is why when we are looking at this is Berewood, we're tracking is the service revenue, the -- what we call the upgrades here, this becomes for us like an ARR. This is when you are on site, this is how we track it. So we do that by customer and looking at also the kind of how we can support customers throughout the lifetime. We often talk about automation about leading with service, service of the sales and sales of the service. This is how that whole circle is moving. When we're looking at the margin and the profile of it. We are more still here, looking at how can we long term be that technology provider partner for our end-user customers and be able to also be their trusted partners when they come to specifying all the new equipment that comes in, that helps our electification and our motion. This is what I talk about the power of ABB and how we're able to bring this together. That is also how what we measure about the success rate. So it's not only about measuring automation of what they're doing kind of with their own developed DCS and their own systems. but it's also what they're able to bring the rest of ABB equipment and making an ABB or a customer's facility more and higher and higher ABB content on site. So that is our parameters that we measure, of course, And we believe that this is not only driving volume growth in our automation and for ABB, but it also, over time, we see that also is the more service content, the more of upgrade content, it also drives margins through because service is normally -- it is a better margin profile than the new sales. So this is how we also then measure our automation team as part of their KPI model when we do that. So -- but the main part here is to be a long-term technology partner for our customers because we believe we see that, that is what creates trust, and that means also we are part when they make new expansion, the new project, we are helping them also making their specification and making how it to run. And that's overall what drives performance for ABB in many of these segments.

Yes. And maybe if I add, Martin, it's a little bit of a plug for the CFO of the ABB Way. I mean this is automation extension in this 1 part that we are looking at and just that's just how we operate. We kind of obsessively love the accountability drive. We said targets, and we operate and really measure our business. We talk about it, of course, at the division level and division minus 1. But initiatives like this and when we look at extra areas of investing and so on, we bring the same rigor of accountability and measurement to that aspect. So just to add. It's a good example of a big way it.

And if we stay with you, Christian, here's a question from the web tool from Thomas for the new CFO. Tmall has stated that he is comfortable with leveraging ABB to 2x EV EBITDA. Do you agree? Is that do you -- with this view? And what is the M&A capacity that you see? .

Okay. Kind of 2 parts of the question, I guess. So first of all, I would absolutely concur with the prior view of TMO that kind of leveraging up to the 2x, give us comfort to do that in the current framework we are in terms of ratings and so on. If I think about that a little bit on M&A firepower, the question was the second part. Yes. If I think about the run rate of our EBITDA right now for the last 12 months, growing will take us to 7 billion and change. less the current debt, and we do that at 2x will bring us to maybe 13 billion and some change. And of course, on top of that, we have the sale of robotics in the second half of the year. So add 5 billion to that. So in terms of M&A firepower in our current structure, I would be as comparable as the TMO was on that 2x, meaning we get to that 18 billion or so. And that, of course, like I said, means that we stay with our current framework of share buybacks of up to 2 billion and so on. And those are things that variables that 1 can always look at to add into that firepower, of course, if so would be needed. But yes, I feel very comfortable with the same 2x leverage.

Thank you. And then we open up the call for Joe at Cowen, please.

I'm just curious, particularly in, I guess, across the board, but mostly in data center, just given the magnitude. When you say that the order patterns are not really reflective of any sort of over ordering or excessively early ordering, how do you really evaluate that. How do you understand if your customers aren't seeing developments in the mines potentially spiraling it and wanting to just make sure that they're procuring ahead of something that -- I know you're not seeing any behavior changes yet, but I guess -- what's the thought process and kind of understanding that dynamic. .

No, it is based on the discussions we have with all our major customers in this field. That's kind of where our conviction and confidence comes from. We should also remember that Q1 last year was a bit lower in the data center space as we kind of didn't -- yes, that was not the booming quarter. I remember this time 12 months ago, I had a lot of questions that is data center slowing down. And now it's the opposite. So a year can make a big difference. So that is also -- we have to take that into account as well when you look back at the maybe the transcripts from April '25. But again, our confidence is built on the discussions in the CapEx plans in also, of course, what our customers and partners what they share with us on what's their need and we're -- and we don't see a lot of preordering but of course, it is about getting -- making sure that capacity will be allocated to them in the right time frame. And that is a high demand and high concern, of course, on the hyperscaler, but also from a we're having an approach here, especially when you talk about U.S. capacity that we don't want to kind of sell everything accounting to data center. We are trying to find a balanced approach serving so many different markets as we are and giving their kind of a fair allocation or a fair treatment into these different segments. So -- and that is what -- earner has been kind of a top priority is to be a reliable partner.

Structure from the terms and conditions like Morten said. So that's just a part to add.

Okay. Very good. And then we Thanks, Joe. And then James from Redburn.

The medium voltage GPS business is growing as a share of your data center order cake. And tied to this, in general, the really strong orders you've had in data center in the last 2 quarters. What do you think the duration of delivery of those is on average? And is it changing? .

First of all, I talk about the scope expansion. It's what we referred to earlier on the medium voltage UPS side, where you're moving the low-voltage UPS scope instead of doing this power supply reliability on that level, you can take part of it and it on the outside often part of a house as a medium -- on the medium voltage level. That is able to reduce both the OpEx, the run cost because it has better energy efficiency. And it also reduced the white space requirement, which is normally much more expensive to build than the gray space. So this is how we are able to address market. And as you may know, we are positioned on the white space. It's not as strong as it is on the gray space. So that's kind of how we are able to gain some market share in this segment by getting more kind of a different technical solution. And we are the first and the only provider of medium voltage UPS, which is also 1 of the building blocks that will sit in our D.C. 800-volt architecture, So it's 1 of the key building blocks. So that's why I'm confident kind of also in this long-term view in that space on. I think when we say looking at the different customers. There is no specific kind of no bigger project. It was an overall strong -- a strong demand across -- so that's also -- and that's Also, how I would see kind of into the pipeline, we're working with a very diverse customer base here in the data center space. And therefore, that also -- what we would like to see and not being kind of fully dependent on 1 but really having a wide customer base as possible.

That's helpful. Just to clarify, can I mean the orders you're taking in the quarter, would you expect to deliver those in 12 months' time or 24 months' time?

Most of them would be in the 12 to 24 months time horizon. And that is because a data center of these sites is not being -- you can get some smaller change orders that comes in kind of last minute, but most of them are going into -- when the building and the whole data center is coming up. that takes quite a while. So we're talking about 12 to 24 plus months time span.

James. And then we have another question, I hand it over to you, Christian. And I assume that this question is regarding electrification from Oliver.who asks, which quarter do you expect a positive price cost gap again because that's where we.

We walked into Q1, as we said, and anticipated that there is a little bit of a gap specifically for electrification. And as natural when we put price to offset the cost, a little bit some contractual differences or the timing of that. We expect that to get to shrink -- it will shrink further in Q2, and I feel we feel good about this being totally, let's say, closed out in the second half of the year.

Thank you. And then we open up the line for Daniela at Goldman's, please? Can you hear us? .

I just wanted to ask about oil and gas exposures. I guess there's some hopes now that we will see maybe an oil and gas CapEx sort of diversifying away out of the Middle East after the what has been happening. Can you remind us sort of your exposure and where sort of in the value chain you are more relevant? And also, if we do start to see, let's say, SDIs, how long does it start does it take until we start to see things flowing through in your backlog and P&L, respectively. .

I'm going to start here. It's the -- I mean, overall, exposure in, of course, as an energy industry sits with our automation business for the company, we are at around 4% in overall, but of course, more in the -- I will get here. Anssi probably to help me also on the exact numbers. So I don't -- but I mean also saying here, our exposure and strongest on the oil and gas side in 2 areas is in the North Sea, where we have a strong position and more and more and the gas, especially on the gas side, LNG is in the United States. Very successful there on the -- when you talk about drilling pipelines and terminals where we are partner in many of the big expansion that's happening already. talking about in Texas and Louisiana, which are the 2 states that benefits the most these days. So those are projects that we are heavily involved in, and I think that was for me also very visible when I was at CERAWeek in Houston earlier this year, talking about this energy expansion and the build-out that is already ongoing, and we see that in some of the orders, especially on the LNG side for United States. I do believe that we will see an energy expansion kind of building energy resilience in so many countries after now, what we've seen take Europe as 1 example, being so in the past, dependent on Russian gas. A lot of that dependency have now been moved to the Middle East, and that's kind of where we are today. So doing a stronger build-out would in my opinion, be needed in the North Sea to increase, but also with new terminals that has been built, for instance, now both in Greece and Italy and the north of Germany. So we can receive gas here in Europe from other places that the United States probably as the main part. So this is just -- we will see more of that build-out coming in, I think, in the next in the next years. And I think, Hans, you would have also correct maybe if I...

No, no. If you look at oil and gas, it's about 9%, 10% of the group level. And if you look at automation, specifically, which you referred to, it's about double that size in terms of share of revenues. .

So a bit more than I said also, yes. Good. .

Thanks, Daniela. And then we move to Ben at Bank of America Merrill Lynch. .

We've had some recent updates to the Section 232 and tariffs in the U.S. And I was wondering if this is something that could have incremental impact to you, the incremental benefit, if there's any analysis or views that you can share on that topic in the U.S.?

Maybe I'll take it on the 232. I mean, as we see it today, right now, this should be a fairly limited exposure for us. And the main driver for that limit is the content where we are most often well below the 15% that is dictated in that 232 guidance. So for us, right now, I will see it the exposure is fairly limited.

Thanks, Ben. And then we'll move to Jonathan at BNP Pariba, please.

Just really circling back to the balance sheet and the strength, it's really clear to hear about the firepower. Obviously, that's a lot of cash that can potentially be deployed. What about the pipeline on M&A sort of thinking, how does it compare to a year ago? What are the regional focuses, the technology focuses and all into that, in the absence of deals and with the comment about the money from robotics, so we really need -- as 1 example in motion that -- kind of the deals, more the bolt-ons that is happening every month and you will see a list every quarter when they come on board. What we are on us, we have identified a few areas where we would like to expand also through M&A. And those are markets where either we have a strong position already as ABB or we see an opportunity with a nice adjacency that we can make a relevant offering to our customers in that field. Of course, the focus here is, as you would expect, we're looking at can we get even more share in the data center space. Can we get more into markets where like North America, where we do see good strong growth. utilities, in general, all over the world, grid automation and that builds on grid resilience. This are all areas where we are looking actively into M&A, and that could be -- but 1 thing always we said at ABB, and I've said from iStar is all about value creation opportunity. We need to make a solid business plan and having a good payback on those deals that needs to be -- need to be, of course, better than doing a share buyback program on top of it. So it's the value creation that is there. And when we are confident in finding the right assets with also with an acceptable price, then we're going for it. So that's the criteria. I always say, I would rather do no deals instead of doing bad deals. But of course, our focus is to good deals. That's the focus. And we have a pipeline there. that we are working on and we will inform you all when we are ready with those kinds of announcements.

Okay. Thanks, John. We have a couple of minutes left. So we're squeezing in Ben from cap also please. Your line should be open. .

I guess my question maybe a slightly odd 1 for Morten, but we've seen this step change in electrification and actually on the power side. in the last couple of quarters. And I guess, when you track your internal metrics, when you look at quotation activity, the kind of list of projects, the list of potential orders, did you see that sort of step change, let's say, back in September, October, you kind of looking at that tender pipeline, you knew it was coming and I guess the obvious follow-on is when you look at that tender pipeline today, is it continuing to build, or do we feel confident? Or is it beginning to level out? I guess we're trying to figure out, is this the new normal? Or are we just going to continue going up from here, which is pretty incredible.

Thanks, Ben. -- would we have forecasted precisely the order intake of electrification in the last couple of quarters, I would have to say no. I think our hit rate has been higher than normally expected. We have seen a strong pipeline, a strong outlook, and we see that also going forward, but our hit rate has been on a very good level, very strong level. You also have to see when you're looking at what's the level to expect, I think kind of Q1 is always a very strong if you look at the relative kind of total order. Q1 is normally stronger than Q2 in not -- when I talk about like-for-like comparison. So if you look at the historical values, you will see that normally, Q1 is a very strong order intake quarter. So we don't give any forecasts on order intake. We do that on revenues and on profits. But what I can say, pipeline still looks very strong. But historically, normally, you have seen a bit of lower value in Q2 than what you have in Q, which is normally order intake, 1 of the strongest.

Thanks, Ben. And with that, we close this session. Thank you very much for taking the time to join us. Much appreciate it, and we'll see you in about a quarter's time. .

Thank you.