ABB Ltd (ABB) on Q2 2021 Results - Earnings Call Transcript
Björn Rosengren: Thank you Ann-Sofie and warm welcome from me as well. First, as you saw in the opening video, we have a new member of the ABB Robotics family. ASTI is a leader in autonomous mobile robots or as we call them, AMRs. This acquisition is a great example of our new division led M&A process. So let's take a look at the Q2. It's a great to see a strong performance both overall and in all our four business areas. Even though our comparison from last year was the lowest during the pandemic. We now saw demand improve significantly versus last year, but also slightly up sequentially. On top of the strong underlying markets, there was an impact of stock building. But our teams have done a really good job in handling certain components shortages in the Q2 and managed to limit impact on our customers deliveries. That said, we expect to see continued challenges in supply chain in the coming quarters in part of our businesses. We delivered this step profit improvement in Q2, which was held by high volumes, a cost base which is still impacted by the pandemic and price increases coming through and largely offsetting increases in raw material costs. I'm also pleased that we managed to deliver another quarter of solid cash flow. So far this year we have generated $1.2 billion. This sets up nicely for the delivery in 2021 as we have promised. As you can see on the order chart on this side, we have had a positive sequential momentum since the lowest point in summer last year. In total, comparable orders were up by 24% year-over-year and the key drivers was increased customer activity in most segments of the short cycle business. We also saw comparable orders in our service business which shakes up as much as 20%. We have earlier flagged that we expected improvements in the process related businesses during the second half of this year. Now we see signals of that with a positive development in several industries. In the Q2 order numbers, there is an element of customer building stocks. In this environment with strong underlying markets combined with component shortages and cost inflation, many acts secure ability to deliver. We are managing incoming customer orders in an effort to avoid too much inventory volatility in the end to end supply chain. Now let's take a quick look at the different regions on slide 5. Growth was strong in all three regions. We already touched upon the pandemic impact last year. So on low comparables both in Americas and Europe improved by more than 40% and 20%. Note that Europe was actually up 30% when looking at the base orders. You also remember that EMEA driven by China recovered sooner. Still, the region and China noted strong growth of 50% in the quarter supported by strong development in all RBAs.
Timo Ihamuotila: Thanks, Björn. And now let's take a look at the results of our business areas and let's start with electrification where we saw solid improvements in virtually all customer segments. It was really only oil and gas, which was the moderate side of this. This led to a double digit order growth in all divisions supported by the three regions. And as you can see on the slide, the absolute levels are high also in a historical perspective. Now Björn mentioned a certain impact from stockpiling and EL is the area where this was noticeable. We have consciously tried to safeguard the quality of the order book when taking orders. In total comparable orders grew 28% and revenues by 17% and the order backlog increased by 9%. The higher volumes drove better cost absorption. EL also benefited from the earlier implemented price increases all the while raw materials remained partially hedged at a still relatively low level. As we have highlighted earlier, this will gradually change in Q3 and Q4 as raw materials both at higher rates are used in production. I'm really-really pleased to see a continued strong performance from EL as they improved operational EBITDA 70% year-on-year and increased the margin by 480 basis points to the good level of 17.4%. Looking ahead at the third quarter, we anticipate growth rate to reflect the easy comparable from last year and reach a double digit base for both orders and revenues with orders growing more than revenues. Sequentially, there will be some margin headwinds from commodities and fixed cost.
Björn Rosengren: Thank you, Timo. And I would just like to share another two slides with you. The first one being the ASTI deal, which is a good example how the businesses drive the M&A agenda. RA requires a leading supplier of autonomous mobile robotics or AMRs. It complements them well and further extends the offering of increased flexibility in production. ASTI offers a portfolio that covers all major applications enabled by versatile software suits. It has had a close to 30% annual growth since 2015 and is aiming for about $50 million in revenues this year. I expect to see more of these small and mid size deal going forward. We have a strong balance sheet and we want to use it to grow and add value. Lastly, I would like to update you on the progress we are making towards the reduction of our carbon emissions in keeping with the goals of the Paris Agreement. You already know that our target is to achieve a carbon neutrality in our own operations by 2030. As part of delivering on that, we have joined the initiatives by the international nonprofit climate group.
Ann-Sofie Nordh: Thanks Björn and Timo. But actually, before we move into the Q&A, I would just like to do a little bit of a commercial break and take this opportunity to welcome you to our capital markets day, which we're hosting after the summer. On the September 29, first of all, we invite you to Helsinki to meet with the motion team. And on this day, you will learn more about their offering and strategy and also visit their operations on site. Then secondly, on December 7, we will host a group CMD here in Zurich and on this occasion, we will focus on the topic of sustainable transport and of course that is on top of the update of the strategic process for the group. And of course, this is all COVID permitting. But you will be able to join us both on site and virtually.
Alex Virgo: I am indeed. Ann-Sofie thanks very much. Good morning to you all, Björn and Timo. So two questions please, the first one, I wondered if you could just go through a little bit more detail the divisional performance in demand terms in China, just to give us a little bit of color around the sequential development momentum there and also thinking about how we've started Q3. And then second question, I wonder if you could just give us an indication of how much you think inventory building or stockpiling has helped or contributed to the growth you've seen in EL and MO? Thank you.
Björn Rosengren: Thank you, Alex. I mean, first, we have 21 divisions, it will take me the whole day to go through each of them. But if we look at the four businesses we have, we see we have double digit growth I mean, in the Chinese market, but of course sticking out, as usual here is electrification and motion, who has a great development in the Chinese market. So yes, I mean, you should also know that the comparison numbers in China, we had growth actually last year also. So it's been the growth engine for the whole last year, but we still have 15%. So this was a positive to see that growth continues in China. On the stockpiling everything, it's like Timo said it's mainly we see it in the electrification business and we say with maybe 1% to 2% effect on the group. That's a little bit how we looked upon it. Maybe you want to add something that Timo?
Timo Ihamuotila: No, that's exactly right, about 1.5 or so in the group, and maybe 3 or a bit more on electrification. So it's actually down as an impact from Q1 when we said about 5 in electrification.
Alex Virgo: All right. Thanks very much.
Björn Rosengren: Thanks Alex.
Ann-Sofie Nordh: Thanks, Alex. And then we'll take the next question. Daniela Costa - Goldman Sachs Group are you there?
Daniela Costa: Yes, I'm here. Good morning, everyone. Thanks for taking my questions. I'll ask two as well. But on the first one I wanted to understand. So do you still keep within your margin guidance you mentioned the upper end of the guidance for 2023. But what would be interesting to hear from you, given the strong performance so far, what could be the headwinds that would take you away from that already being mapped in 2022, if any? And then my second question, I think last quarter, you kind of alluded to doing some review within process automation that you think you were going to present to the board in October. But can you give us a little bit more color exactly what are you looking at there given all that you have done already in the portfolio so far? Those are my questions. Thank you very much.
Björn Rosengren: Thank you, Daniela. And yes on the market -- it's correct that it's great to see 15% is, as I said, before in a quarter. And for me, this is of course show that it is possible to reach over 50%. That's my viewpoint, a company like ABB should be about these numbers. I don't think though, on the other hand, that we are there yet. So it's one quarter, we have still the quarters to come. And there are a little bit challenging for the next quarters when it comes to these material prices as well as supplies of semiconductors and everything and it's like us with us, like everybody else, we all don't really know what the real effects is going to be. So we just did a little bit cautious on that part. Where is margins? Yes, we are ahead of schedule, I think you I've said that before. We still have the margin corridor for 2023. When we feel that we are there, we might make adjustments. But I think this is from my perspective, a step target in the direction where I believe ABB should be in the long term, but it's a great improvement from all the businesses. Everybody's been contributing well during this quarter. So I'm very pleased with this performing. Then on PA. PA is a little bit different from many of the businesses that I've been working with before. It's a lot of learning for me to understand what makes these business takes what is the actual potential for these for going forward. So we actually spent quite a lot of time understanding these business and what we need to do to get these business up to the profit levels where we are in the group. And that's a journey. I think they have great ambitions in that business to improve like every other business that we have. So we continue to do that. It's correct I said that we will have a special review of this in September because the board also wants to understand this business what are the potential for the future. Nothing else to to add at this stage, but good to see the 12.5% really coming from the service kicking in back again. So that's good news for ABB. I hope that's the answer that's okay.
Daniela Costa: Perfect. Thank you.
Timo Ihamuotila: Thank you.
Ann-Sofie Nordh: Thanks, Daniela. And then we move to Andreas Willi at JPMorgan. Are you there, Andreas?
Andreas Willi: Yes. Good morning to Björn and Timo for the time. My first question is around the raw material component empowerment maybe more at the raw material impact. You normally give a little bit more commentary on near term margins for some of the divisions that you have given earlier in your speech Timo, particularly outside the electrification. Maybe you could clarify a little bit, what we expect the negative impact to be relative to the likely still positive impact from continued sequential revenue growth. So maybe an indication there what the impact would have been if you were not protected by still in Q2, that's my first question. And the second one on the ASTI acquisition, could you give some indication on the kind of range of revenue multiple you paid for this business? And this highlight a much broader planned expansion or targeted expansion into kind of assembly into logistics robots from kind of the assembly focus historically?
Timo Ihamuotila: Yes. Thanks, Andreas. Why don't I start with the raw material impact question. So we'll go business area by business area and talk a little bit about the driver. So first of all, in electrification, when we look at this sequentially, we're also of course coming from a very high level of 17.4 and there we said that we are expecting to see the raw materials particularly if you will look at copper a little bit also on the steel to have a negative impact. On the other hand, so far, the team has done a really good job in pricing but can like compensating everything with price is getting, I would say not more difficult going into Q3. Then if you look at motion, we have impact there. We would also expect, of course to see a negative impact. But there, I think we'll also have a bit of a more positive divisional mix on the other side of the equation. And then maybe the bigger question mark in motion is really, again the semiconductors because that could then really impact the deliveries. But so far, the teams have managed that really, really well. And then if you look at PA, there is less impact on the raw materials. And as we say, we expect stronger order growth, stronger revenue growth, in PA going into Q3 and also the services growth was already now better than the overall growth. So we would not expect that much impact on this topic on PA. And in RA, it also always may be bit less on the raw material price and bit more on the component side, especially in the machine and factory automation. So those are really the dynamics.
Björn Rosengren: Good. And if we look at the ASTI it's great to see. We moved strategy of M&A process towards the divisions and they've been working hard. I think all our divisions to identify potential acquisition objects. This is the first one and of course, we are encouraged about this. This is more nice company that is in growth mode, good technology. And we think we can utilize the platform of robotics global structure to drive the good growth and good improvements here. So it's well in line with their strategy. We didn't disclose the price. That's pretty clear. But we all know that everything is expensive today. So of course we paid a good multiple for this business also, on the other hand, reasonable. It's not crazy. I think we all think that this will add a lot of value to ABB going forward. And this is typical, one of these growth strategic opportunities where we need to and this was a little bit of a black spot in us. We didn't have this technology and I think this will speed up our presence in this way. How they will go forward? Yes, this is related to a lot of material transports and logistics also. So there are a lot of applications areas where we can use this and that's in combination with the robots, it really helps our customer to become much more flexible in their production facilities and also distribution centers and so on. So it's a good add on. So we're very excited about this acquisition. I hope that question was what you expected.
Andreas Willi: Yes. Thank you very much.
Ann-Sofie Nordh: Thanks, Andreas. Yes. And then we moved to Ben Uglow at Morgan Stanley. Please, hope your line is open.
Ben Uglow: Can you hear me?
Ann-Sofie Nordh: We can hear you.
Björn Rosengren: Very well.
Ben Uglow: Hi, everyone. I hope all well. A couple of questions please. Björn I'm going to dig a little deeper on your answer to Alex's question in the beginning. You kindly told us that sequentially demand was getting a bit better. But I guess what we all want to know is if we think about the second quarter versus the first quarter. Number one is, is China still on an improving trend. i.e. is it growing? And then if we look at the two other regions, 2Q versus 1Q is it fair if I look at your orders, is it fair for us to assume that Americas is getting better, but Europe is more stabilized? Really just the kind of idea around how 2Q has trended the overall level of demand versus 1Q? So that was my first question.
Björn Rosengren: Okay, let's start with that, Ben. Yes, China, we have read in some of the reports here that we see slowed down, but China actually started to grow already Q2 last year. And you remember, we had a slight growth in the China market, even though the pandemic was very hot at that time, while we saw big drops in other parts of the world. China then has become really the growth engine for us and we have seen huge growth numbers. What's great to see here we, as you remember, we saw growth in Q1 also, even though when we look at look at the comparison here, maybe remember that the pandemic in China actually hit first quarter the last month last year, which made that did maybe look like we had a little bit more growth from that perspective. Second quarter, China was up and running again. So it was a little bit more challenging from that perspective. So we think 15% is very strong, maybe even a little bit surprisingly strong. And the good thing it's not only some of the businesses, it's really all four of our businesses, even though we see electrification and motion the one sticking out there on the China growth side. So and then, of course the question how is that going forward. And that's of course difficult to see, we can only see a couple of weeks into this month then we see the trend continues on a strong basis, how that will be read through the quarter is difficult to draw any conclusions. On the Q1 and Q2, normally if you look at traditional ABB first quarter, we normally have higher orders than we have revenues. And normally, in second quarter we normally see revenues coming up. But some sequentially lower orders. This time actually orders grew slightly from Q1 to Q2 which I think shows that we see strong market but it's clear U.S. looks very big on the paper. And even Europe looks good. If we look at base orders we are up 30%, which I think is a more better indicator of the real demand in the market. But of course you remember last year, these two markets was severely impacted from the pandemic while China not so. Yes. I mean, it's difficult to say but even the Q3 was quite severely impacted last year. So we should continue to see strong growth numbers both in Q3 and Q4. That's what I expect. Why don't you add on that Timo?
Timo Ihamuotila: Just a quick Europe comment, because I think if I remember correctly, Björn, you had in your note, sequential down minus four in Europe, but we didn't really have any large orders now in Europe during Q2, whereas if I remember correctly, we actually had in Q1, this goes back to Björn base order comment.
Björn Rosengren: So base order is a better indicator of the real demand to be honest.
Timo Ihamuotila: And if I look at Europe, all the countries are growing really nicely. So it's really, really broad based in Europe at the moment.
Ben Uglow: That's a very helpful clarification. Thank you. And then just one big picture question. I guess it sort of relates similarly to the question that Andreas has asked about ASTI and the whole kind of AMRs space. I remember from the capital markets day, back in February 2020, I guess it was that you were beginning to talk a little bit more about let's call it the warehousing area and the potential not just of material handling and logistics but actually the warehouse vertical in particular. What I wanted to know is that that is a sort of different move in terms of customer base, getting away from more sort of industrial customers towards maybe more consumer/retail. How are you thinking big picture about the warehousing space? Is this part of the strategy beyond?
Björn Rosengren: I wouldn't say that this is a new strategy, but I think Sam and his team has been very clear. We wanted to get away from the system sales from automotive, that's clear. And I think automotive overall is a low margin business. And we see in that while we see much better margins in general industry in the electronics, but also in the warehousing. And we had a great success lately with Amazon and many other customers also within this area, but it's clear, yes we are looking into this as a strategic area where we are not just looking at the packing, also transports of components. And so from the . So, yes it is a very strategic area. It's also very growth area where we see good potential for both robotics as well as this AMRs.
Ben Uglow: Super helpful. Thank you very much indeed. I'll pass it on.
Timo Ihamuotila: Thanks Ben.
Ann-Sofie Nordh: Thanks Ben. And then we open up for Martin Wilkie at Citi.
Martin Wilkie: Yes. Good mornings. This is Martin from Citi. The first question is just going back to acquisitions and I realize you're not disclosing the price of the robotics even this morning. But just more generally, you've obviously got some of those disposals already, maybe you get some more of those when you do the process review later in the year. When you think that you could be getting several billion dollars coming in over the course of the next couple of years or so. How are you thinking about the M&A environment. You commented on the price of being reasonable or or whatever they really might be. But is there an environment still where you can buy these higher tech businesses that we will rate of return? That's first question.
Björn Rosengren: Thank you Martin. I think it's good question. Yes, it's the acquisition that we haven't disclosed the price there. But yes, of course, it's reasonable margin. It's not super high multiples, but it is high multiples for our business like that. But we think we selling bigger businesses, which we think it's a very good time of doing that. And we're buying smaller technology business which will easily be integrated into the divisions and drive growth, but also drive technology development in these places. So I definitely think this is to be expected going forward. All our divisions have been working a year. It's the action part of their variable compensation to have these potential M&A candidates in this business. And we say also on the software side. So the list of potential candidates are growing every day and we are approaching them. We're looking at what are the synergies, what are the growth opportunities and how can the division drive this? So I think this is an exciting part. This is going to cost some money going forward. And we have been very clear that the money from these divestments we hopefully can use for these kinds of acquisitions. If we don't, yes, of course, we aren't going to be a bank. We always said that. But we have, the businesses are getting encouraged by the strategy and we think there are a lot of opportunities here. Why don't you add on Timo?
Timo Ihamuotila: Yes. So I think the question is really good one. And we're, of course, fully aligned here. And we all the time, when we talk with our businesses, we look at make versus buy. And I think it's important to note that our organic R&D is going up as well. And in this environment, you often get better return on organic R&D and then you have to complement that with some stuff to get speed. And that's exactly what we are I think doing here with ASTI. But it's not like again, I just want to remind that we have a quite structured view on how we look at this and do the comparisons before we will pull the trigger.
Martin Wilkie: I think that's really helpful. The second question is related to M&A volume. One hand in the past that obviously another good performance from electrification, are all the GIS benefits now done and in the margin. So we see the incremental benefit of those cost savings from GIS beginning to sort of people is still a lot of opportunity from this acquisition as well?
Björn Rosengren: I've been very clear that I think this is, the GIS acquisition one of the biggest value drivers in ABB at the moment and they've done a great job in both putting the footprint in place one for the future, but also replacing old technology with the new ABB technology. The journey is not there yet. We still have both factories to close and to consolidate and there are still replacement of products especially on the switch gear for the North American market that where we think there is good potential for improvement also going forward. So there are more to come when it comes to synergies from putting these together. On the other hand, we have seen a tremendous development from the electrification people and actually even surprised me that the improvement has gone that fast.
Martin Wilkie: Great, that's very helpful. Thank you.
Ann-Sofie Nordh: Thank you. And let's see if we have Shane McKenna from Barclays on the line. Are you there Shane?
Shane McKenna: I am here. Good morning Björn, Timo and Ann. My first question actually is on robotics and discrete automation. Just wondering if you can give us a feel for what their drag on margins was in Q2 from delivering these legacy turnkey orders as well as what you're seeing now in terms of the margin profile of the current order book and how that stacks up versus the sort of 13% to 17% midterm target and then as an add on, where are the margins now tracking within that range given the management changes that we had several quarters ago and the growth that you're seeing and then I have one follow up question on the .
Björn Rosengren: I'll come back on that as well. Why don't we take the robotic first. Let me start and then I hand over to Timo. We said and we very clear that the our robotic business is a 15 plus business and that's our target for 2023. I think we are moving in this direction. We said we will be over 10% during this year. It's gone a little bit faster there. And yes, the automotive is becoming less but in our revenues, there is still a certain amount of drag. So why don't you give a little bit clarification on that Timo?
Timo Ihamuotila: Yes. Thanks Björn and thanks Shane for the question. So we said earlier that this business is maybe sort of more than $100 million. So on annual basis, you could say maybe $150 million number like that. So it is meaningful there. I'm not going to go to the exact margins. But I think it's important to note that now when you look at our orders in robotics and discrete automation business area automotive is between 20% and 25% of the orders used to be about 40. So this is really meaningful strategy change, and how we follow this is of course to the gross margin. And when we look at the gross margin now in the order backlog of RA, it is clearly trending up. And that will then help us as we have said to get clearly back to the corridor without giving any timing stamp here on that matter. And then also in machine and factory automation of B&R. The margin is clearly improving, I would say towards the target which to be honest given us in general.
Shane McKenna: Perfect. Very clear. In terms of EL are you expecting a similar recovery in oil and gas and conventional power generation demand for that division as we go into H2 as you're guiding with NPA and just trying to get a feel for how large that segment is in North America for EL? I think from memory as a divisional level it's around 20%. Is it slightly larger in North America? Is that one of the reasons for the sort of lower growth in EL in North America relative to peers?
Timo Ihamuotila: So you are checking now oil and gas for electrification not for process automation just to make sure we get the question, right.
Shane McKenna: Correct. Correct. Because it's been in the market that you've been calling out some time that's been sort of holding you back.
Timo Ihamuotila: Yes. It is not.
Björn Rosengren: It is probably more in PA I think than electrification.
Timo Ihamuotila: Yes. Well, but there is, of course, medium voltage stuff in that market as well in electrification. But it's not a significant part. But I would say overall, when you look at the U.S. growth, yes, maybe proportionately, we have a bit more bit bigger proportion in U.S. in medium voltage versus low voltage which probably has impacted the growth a little bit. But I would say the oil and gas is not the huge driver for our EL businesses clearly, clearly bigger driver in the process automation.
Shane McKenna: All right. I'll pass it on. Thanks a lot.
Ann-Sofie Nordh: Thanks Shane. Joseph Giordano at Cowen, are you on the line for the next question, please?
Joseph Giordano: I'm here. Can you guys hear me?
Ann-Sofie Nordh: We can indeed.
Björn Rosengren: I hear you fine Joe.
Joseph Giordano: Hey, good morning. So few questions in the robotic side. Perhaps -- I see in the slides it's mostly auto levered. Currently, it's mostly Europe levered. Do you see this as a kind of a flagship business that you expand and kind of bolt other acquisitions into it? Do you have aspirations for this to be like a broaden from an in market and geographic perspective for that business?
Björn Rosengren: Now let's talk about robotics a little bit. As you know, robots been with ABB started up it was actually one of the really pioneers within this area. It has always been placed in ABB maybe from some people said a little bit of odd business within the group. I think it's more coming into the automation and taking a broader viewpoint. We think robot business is one of our really core businesses when it comes to driving transforming the industries point. I think it’s even getting even more focus now after the pandemic where people see flexibilities coming higher up on the agenda. Yes, I mean, it's not I mean, there's one of our businesses we have 21 businesses in ABB and I always said that I think the businesses we are on number one and number two in the areas where we operate. I see robotics is a great business and I think it has more profit potential, but growth definitely this is one of the strongest growth areas that we have in the group going forward. That's pretty clear. Why don’t you add there.
A – Timo Ihamuotila: On the AMRs in particular I think we said in our presentation today that we are right away starting this now also in China and we have already gotten customer inbound that it's great that this is now ABB, because it's of course totally different to go with this kind of offering as ABB to China than as a company which has approximately, as we said $50 million revenue this year. So we think that we can expand the diversity offering quite nicely through our channel and also the exposure to automotive, we think that AMRs as was discussed earlier in this call, will actually get us position in a broader market and longer term will help us to even better diversify the overall customer impact to better quality of revenue as we have spoken earlier.
Björn Rosengren: And to add on that, I mean, you mentioned geographically. I think we've been very clear on that part that we are market leader in Europe and in China that is spot. Our market share in North America is not as strong as in other parts of the world. And that's one of the areas where we are planning to strengthen our presence.
Joseph Giordano: And Björn in the press release you mentioned robotics in construction and broadening your severe exposure there. Can you maybe talk a bit about that and maybe lastly, one of your competitors recently buying a cloud based automation solution. I mean, obviously different markets there. But just curious where you think you are on software and how you see that progressing whether it's in-house or in partnerships; however you want to kind of tackle that. Thank you.
Björn Rosengren: Yes I mean, robot, in the strategy that been very clear and is tried to move away more from the systems within the automotive side which big risk, low margin, but also, the whole automotive segment is a low margin than other segments. So we are moving to a general industry I said electronics very much today, logistics, which is a very growing, but one new area is construction. But construction is maybe not building a house out on the field. They built the modules that are then being assembled out in the fields or building these modules, there are more robots being used. And it's a new segment for us. And we talk a little bit about it, because we think it's exciting, and there are some potential for that. Then on the software side I think we'd be very clear with the strategy that we have in software. We are growing pure software solutions. We have embedded software, building our domain expertise, and a lot of software included in our product that is continued to grow in the pod. We are, of course also looking for potential software companies that fits well in with the businesses where we operate and that we can see synergic pods from that. But we think that our offering today is both strong and well-positioned and a lot of software embedded in the products and the pure software is also growing a lot, especially in process automation. Anything you'd like to add there. You're the software guy coming from Nokia.
Timo Ihamuotila: No, I think you covered it well, but I think as you said, we are executing a clear strategy. And I think we are on a good path on that one.
Ann-Sofie Nordh: Are you happy with that Joe. I hope so. You got quiet. And then we see James.
Joseph Giordano: Yes. I am. Thank you.
Ann-Sofie Nordh: Very good. James who please. Hope your line is open now.
Unidentified Analyst: Good morning, everyone. Yes thanks. I've got one question if I could so to be so bold two questions. Björn you mentioned, base orders are a better indicator of demand. And I think we'd all agree, and it was a shame when you stopped them. So if you could bring them back, that would be great. And my questions are on raw material and robotics and factory automation. So Timo really, maybe to you and raw material. Thanks for color but I wondered if you could in any way size, how much bigger that growth or material year and year dollar million impact is going to be in the third quarter versus that which you saw in the second quarter? I understand that there will be pricing on the other side just trying to flavor. What the changes are we talking about a $25 million buck increase in the year on year pressure, or is it a big $250 million impact? I have no idea really because it's hard to understand your raw material exposure. And the second question is the 41% organic order growth in RA. Could you I'd love the three numbers, but if not, could you flavor the differences between auto robotic, auto non-robotic and factory automation and they get some real asking, does factory automation growing faster globally than the no- automotive side of robotic? Thanks.
Björn Rosengren: Yes. Why don't I start with the raw materials? And thanks for the question, James. So it's definitely in between your 25 and 225. But jokes aside, Q1 I think we kind of like said that the pricing positive impact was about $25 million, and that well compensated. And if you calculate the pricing impact from our bridge now, it's somewhere around $60 million, and you can all do the math. And this is of course, compensating now for a bigger impact in raw material at least if you look at copper or some stuff has now started to stabilize at least on a very high level. Steel is, I would say, even higher now proportionately than copper. So it's going to be I mean, we don't know exactly what how this is going to go out, come out, but it's going to be definitely closer to the Q2 number than the Q1 number so that much we can say about it.
Unidentified Analyst: Thanks.
Björn Rosengren: And the other question was? What was the other?
Unidentified Analyst: It was on the robotics and growth?
Timo Ihamuotila: Robotic growth.
Unidentified Analyst: And factory automation.
Björn Rosengren: Yes. Okay. Sure. Yes. And give you a little bit of a clarification. If you actually take out the total automotive part of the business it grew about 60%. So that gives you a flavor. If you take out just the, say the automation part or the system part of that business, it grew approximately 30%-40%, was that correct 30% or 40%? I think I got somewhere around that. 40%. And then, if you include the whole automotive part we are a little bit about 20%. I think that's where it is. When you see factory automation we are closer to 100% growth. So that business has been growing like crazy for two quarters at the moment.
Unidentified Analyst: That's great color. Thank you so much.
Björn Rosengren: Thanks.
Ann-Sofie Nordh: And now we only have a couple of minutes left. So Jonathan if you promise to be fairly quick, please we'll open up your line. Thanks.
Unidentified Analyst: Okay, I'll try. And there's been a few questions about the ASTI acquisition and I guess maybe people just kind of understand the scope of your ambition in the press release, you talk about a $14 billion market by 2025. I mean, you've also mentioned during this call your number one, number two in robotics, depending on the segment. I mean, a $50 million business doesn't address very much of a $14 billion market, maybe what we're just still trying to understand is what your ambition really is in terms of the verticals you're going to go into. How much can you upscale this business given the platform you have in automotive, what are the sales synergies? I mean, really to become a number one or number two player in AMR is that your ambition, maybe for sub segments of AMR. Really what are you trying to achieve here?
Björn Rosengren: First the AMR business is a various scattered business. There are so many small players in that. So you probably will see some kind of consolidation also going forward. Yes, it's a quite a big market. And you can use it in all different region everything from logistic to automotive but also to general industry. So I think that ambition is that this is definitely a growth acquisitions meaning using the technology platform and then utilize our platform we have all over China, in Europe, but also in North America. And that's where we go on to drive growth in this area. So I think the old robotics team is quite excited. We can leave it difficult to go in on the growth numbers because we haven't given them out yet. But it's clear, big growth that we are expecting from this business if it's going to be successful going forward.
Timo Ihamuotila: Yes. Can I throw a software comment here now.
Björn Rosengren: Yes, that’s okay.
Timo Ihamuotila: Because this area will benefit from the new software on the whole LIDAR technology, similar technology, which is used in mapping applications when you do street mapping and that kind of stuff where I was earlier involved a bit. And that's why technology wise, this will get more complex and it's going to be tougher and tougher for all these smaller players to survive. That would be my sort of gut software comment on here. So there's lots of opportunities to expand this from technology perspective.
Björn Rosengren: And we could spend quite a lot of time looking at the different opportunities here and we think this is definitely the one that suits us very well both technology wise and the potential to grow.
Ann-Sofie Nordh: Thank you for that. And with that we round off for today. Thank very much for taking the time to spend it with us and we will see you again in about two quarters time.
A - Björn Rosengren: Yes and wish you a good vacation.
A - Timo Ihamuotila: Thank you.
A - Björn Rosengren: Bye. Bye.
