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ABB Ltd (NYSE:ABB) Q2 2019 Results Earnings Conference Call July 25, 2019 8:00 AM ET
Jessica Mitchell - IR
Peter Voser - CEO
Timo Ihamuotila - CFO
- 杰西卡米切尔 - IR
- Peter Voser - 首席执行官
- Timo Ihamuotila - 首席财务官
Ben Uglow - Morgan Stanley
Alexander Virgo - Bank of America Merrill Lynch
Martin Wilkie - Citi Research
James Moore - Redburn
Graham Phillips - Jefferies
Gael de-Bray - Deutsche Bank
Andre Kukhnin - Credit Suisse
Daniela Costa - Goldman Sachs International
Wasi Rizvi - RBC Capital Markets
Guillermo Peigneux - UBS
Andreas Willi - JPMorgan
William Mackie - Kepler Cheuvreux
- Ben Uglow - 摩根士丹利
- 亚历山大处女座 - 美国银行美林证券
- 马丁威尔基 - 花旗研究
- 詹姆斯摩尔 - 雷德本
- 格雷厄姆菲利普斯 - 杰弗里斯
- Gael de-Bray - 德意志银行
- Andre Kukhnin - 瑞士信贷
- Daniela Costa - Goldman Sachs International
- Wasi Rizvi - 加拿大皇家银行资本市场
- Guillermo Peigneux - 瑞银集团
- 安德烈亚斯威利 - 摩根大通
- William Mackie - Kepler Cheuvreux
Please go ahead, madam.
Thank you, and good afternoon, ladies and gentlemen. Welcome to ABB's Second Quarter Results Conference Call and Webcast. As you will have seen, the press release has published at 7:00 AM on our website. This briefing is being webcast via our IR website as well as being recorded. Following our presentation, we will open the lines for your questions.
With me today is ABB's Chairman and Chief Executive Officer, Peter Voser; and our Chief Financial Officer, Timo Ihamuotila. Before we begin, I would like to draw your attention to important information regarding safe harbor notices and our use of non-GAAP measures on Slide 2 of the ABB presentation.
This conference call will include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties. With respect to our results, you will remember that orders, revenues and operational M&A results reflect our continuing operations and exclude Power Grids. Results for the 4 businesses reported as continuing operations have been recast back to 2017, in line with the business structure that became effective on 1st of April this year, and this data is also available on our website. With that, let me hand you over to Peter.
今天与我同在的是ABB的董事长兼首席执行官Peter Voser;和我们的首席财务官Timo Ihamuotila。在开始之前，我想提请您注意有关安全港通知的重要信息以及我们在ABB演示文稿幻灯片2中使用的非GAAP措施。
Thank you, Jess, and welcome to all of you. We will start with a review of ABB's results for the quarter. We will then provide an update on the group's progress in its transformation agenda, and finally, we'll outline the group's final, financial expectations for the full year of 2019.
On Slide 3, we summarize the second quarter results. Total orders were $7.4 billion and up 1% year-on-year on a comparable basis. And the revenues of $7.2 billion were up 2%. We continue to deliver some growth, led by solid growth in Electrification and Motion despite stronger headwinds in some of our end markets, particularly Robotics & Discrete Automation. The operational EBITA margin was 11.5%, impacted 90 basis points by stranded costs and a further 60 basis points by dilution resulting from the integration of GEIS.
Our group's operational EPS of $0.34 were 10% lower. The basic EPS results of $0.03 is notably lower year-on-year, driven mainly by the charge of $455 million resulting from our decision to exit the solar inverter business.
Cash flow from operating activities was 0 compared to $1 billion in the second quarter of '18. This primarily reflected the timing of employee incentive payments, which were paid in the second quarter this year, while in 2018, they were paid in the first quarter. It was further affected by less favorable movement in accounts payables compared to the same period last year.
On the next slide, ABB's regional and country order trends for the second quarter. In the Americas, total orders grew 7% in comparable terms. All of our businesses were up, led by strong growth in Industrial Automation, Robotics & Discrete Automation and Electrification. Orders continued to grow in the United States, our largest market, while developing very well in South America.
In Europe, order development was more varied. Total orders were stable despite increases in Electrification, Robotics & Discrete Automation and Motion, mainly due to weaker large orders in Industrial Automation. Strong growth in France, the Netherlands and Spain was more than offset by lower order levels from the UK, Finland, Sweden and Italy. Italy was particularly weak by comparison to a strong base from the previous period.
Lastly, you can see orders in Asia, Middle East and Africa region were 3% lower. Solid growth in Electrification and stable performance for Motion was offset by lower large orders in Industrial Automation and a fall in select end markets for Robotics & Discrete Automation. Lower orders from China and the Middle East outweighed positive developments in South Korea, South Africa, Australia and India.
To give a little bit more color, specifically on China, ABB's total order growth rate, minus 1% year-on-year, was driven mainly by significant lower orders in Robotics & Discrete Automation due to the headwinds in discrete industries. However, we saw excellent growth in Electrification and Industrial Automation. We, therefore, view the outlook as mixed rather than one of broad-based contraction.
在幻灯片3中，我们总结了第二季度的结果。总订单为74亿美元，同比增长1％。 72亿美元的收入增长了2％。尽管我们的一些终端市场（尤其是机器人和离散自动化）存在更强的逆风，但我们仍继续实现一些增长，其中包括Electrification and Motion的稳健增长。运营EBITA利润率为11.5％，受搁置成本影响90个基点，并且由于GEIS整合而导致稀释进一步影响60个基点。
Overall, second quarter order trends show ABB was impacted by slowing in some geographies. However, we are on course to drive long-term growth across our businesses, while continuously improving the way we execute to mitigate lower demand.
I will now hand over you to Timo to provide you with more details.
Thank you, Peter, and welcome to all of you. I will now provide a closer look at the second quarter performance of our businesses, starting with Electrification on Slide 5. Electrification's results show continued top line momentum with total orders increasing 5%. Order growth was broad-based with strong demand for solutions, including excellent growth in key segments like rail, data centers, wind and EV charging.
Orders growth was led by the Americas. Order growth was robust in the United States and strong in China. Revenues were up 4% year-on-year and order backlog ended the quarter up 10% compared to the same period last year. The division's operational EBITA was 250 basis points lower year-on-year. GEIS' impact was approximately 200 basis points in the quarter compared to 270 basis points in the first quarter. Excluding GEIS, margins reflect a shift in Electrification's business mix toward more solutions revenue.
Looking ahead, we expect the business's margin to continue to show the impact of a shift in mix toward solutions. Overall, we expect some sequential improvement in margin. This will include ongoing improvement in GEIS performance, which will no longer be excluded from the comparison base from Q3 onwards.
Next on Slide 6, we have Industrial Automation, where total orders were up 4%, sorry, where total orders were 4% lower. In this business, order development was impacted by lower large orders mainly from Europe and the Middle East against a tough comparison with the prior year period. Process industries, such as pulp and paper and mining as well as oil and gas, showed continued good momentum, while conventional power generation was subdued. Measurement and analytics grew very well in the quarter across end markets.
The business is seeing a stronger pipeline of potential projects, including larger investments. Order awards remain subject to timing uncertainties. However, we do expect order growth to be strong in the third quarter. Year-on-year, Q2 revenues rose 3%, supported by order backlog conversion.
Operating margins were 220 basis points lower relative to Q2 2018, reflecting project mix impacts and higher costs due to under absorption and investment in growth. ABB expects margins in Industrial Automation to improve sequentially in the third quarter. However, we still expect the year-on-year margin to be lower, absent the nonrecurring tailwinds that supported margins in this business last year.
Let's turn to Motion on Slide 7, which delivered solid execution in the quarter against a tough comparison base. Total orders were up 4%, with strength in drives and services and notable benefit from large rail orders. All regions grew. Revenues improved 5%, and so did the order backlog. The operational EBITA margin of 16.7% was up 40 basis points compared to the period year ago, primarily due to favorable volumes and ongoing cost management. Going forward, we anticipate steady execution in Motion business.
On Slide 8, we turn to Robotics & Discrete Automation or RA. As anticipated last quarter, we felt the downturn in the automotive and machine building more, builder market. Accordingly, total orders for Q2 2019 were 9% lower, reflecting both the more challenging market and a tough comparison base. Weakness was most evident in the automotive, machine builder and 3C markets; and on regional bases, in AMEA and, particularly, in China. Demand remained strong for logistics automation, and the business continued to benefit from orders for automotive solutions. The order backlog ended the quarter up 10% year-on-year.
Revenues were 3% lower due to weaker book-and-bill activities, such as spare parts and services. Reflecting lower volumes and adverse mix, the operational EBITA margin of 12.3% was 260 basis points below the prior year level.
RA is strongly positioned in its addressable markets. In robotics, ABB continues to outpace broader market developments. In our machinery and factory automation business, we see significant growth in new design wins, leading to a very strong pipeline. Simultaneously, RA is focusing strongly on continuous improvement to help mitigate the effect of slower demand. We expect end market headwinds to continue, which will continue to impact order, revenue and margin developments for the next quarter compared to the previous year period.
Let's now consider the main drivers of the group margin on a year-on-year basis on Slide 9. Net cost savings amounted to $57 million, supported by our ongoing focus on OpEx and supply chain management plus some early wins from our simplification program. Volumes had a net positive impact, contributing $60 million. Mix, including under-absorption, had a dampening effect of $68 million. Investments in growth, namely sales and R&D, were $30 million higher year-on-year. Acquisitions, which is GEIS, contributed $32 million, and the FX translation headwind was $38 million this quarter.
On Slide 10, we break out the key net income drivers for the quarter. In U.S. dollar terms, restructuring-related costs were $74 million, including $51 million in charges booked to advance our simplification efforts. Power Grids' carve-out costs were $38 million. And ABB recorded a charge of $455 million from the announced sale of its solar inverter business. Looking at discontinued operations where Power Grids' performance reflected $142 million of net income was recorded.
Looking forward on Slide 11, we revisit our financial framework where we set out our proclamations for key items. Today, I will focus my commentary on issues where we have new or revised guidance.
Within nonoperating items, normal restructuring charges are now estimated at approximately $125 million for full year 2019 from $100 million previously. Simplification program charges continue to be estimated at around $500 million in total, but in 2019, we now anticipate approximately $300 million, lower than originally planned for the year as we have benefited more from normal natural accretions in this early phase. Power Grids separation costs are expected to trend higher in the second half as we move beyond the scope and phases into implementation.
For 2019, we now expect more use of transfer service agreements, which should reduce the separation cost estimate to approximately $250 million for the year. Finally, we anticipate solid operating cash flow for the year as a whole, not including cash outflows from the simplification program and carve-out activities as well as the associated cash tax impacts.
And let me now hand the call back to Peter.
在幻灯片10中，我们打破了本季度的主要净收入驱动因素。以美元计算，重组相关成本为7400万美元，其中包括为促进我们的简化工作而预留的5100万美元的费用。 Power Grids的拆迁成本为3800万美元。 ABB宣布出售其太阳能逆变器业务，收取4.55亿美元的费用。观察停电运营情况，其中电网的业绩反映了1.42亿美元的净收入。
Thank you, Timo. I will turn now to Slide 12 where we highlight how we are driving growth across our businesses with just a few examples. This quarter, Electrification introduced the first major innovation in low voltage switch gears since the '80s. NeoGear solves many of the issues encountered with current technologies, namely busbar contact failures and human errors that can result in serious injuries. It allows for up to 25% space savings and can cut energy losses by up to 20%. Also with ABB Ability connectivity, NeoGear enables digital condition monitoring that can reduce operating costs by up to 30%.
Our Industrial Automation business continued to consolidate its leadership position in pulp and paper markets. For example, during this quarter, Industrial Automation won a contract to supply Trident Limited, the world's largest wheat straw paper manufacturer, with a control system to improve quality at their mill in Punjab, India, while minimizing maintenance and reducing life cycle costs.
Motion, in collaboration with Hewlett Packard Enterprise's Aruba, reached an agreement to combine ABB Ability Smart Sensor technology with Aruba's WiFi and Bluetooth-enabled access points, widening the application of its digital powertrain offering. This will all, allow customers with large industrial size to easily monitor the condition and performance of their equipment, reducing downtime by up to 70% and extending asset's life by up to 30%. And in Robotics & Discrete Automation, we announced plans to develop and introduce collaborative robotics solutions to hospitals, including logistics and laboratory automation solutions starting with the new ABB Healthcare Research Center at Texas Medical Center, which opens in October.
Turning to Slide 13. The separation of Power Grids is advancing well and is on track to close in the first half of next year as indicated at the time of the announcement. The de-merger of PG from our Chinese holding company has been approved by authorities, and the de-merger of ABB India is also on track. This is good progress given these are 2 of the more complex country separations. Worldwide, 2/3 of the necessary legal entities have been incorporated.
With regards to the business developments, Power Grids is maintaining a strong focus on customers in a competitive market. We are seeing solid order development this year to date with the business securing several significant HVDC technology orders.
On Slide 14, we provide an update on the integration of GEIS. In the year since the acquisition, we have made good progress. We have fully integrated approximately 80% of GEIS employees. The combined sales force are operating as one to better access opportunities in the North America markets. More than $70 million in orders has been delivered through successful cross-selling to date. We're digitalizing former GEIS service records to now ABB service products to better leverage our installed base.
The team showcased new combined products to customers in the second quarter, and we will take the first products to market in the second half, including, for example, a new generation of automatic transfer switches incorporating ABB technology. We have also upgraded and enhanced the former GEIS e-commerce platform with ABB products.
谢谢蒂莫。我现在转到幻灯片12，我们将通过几个例子强调我们如何通过我们的业务推动增长。本季度，Electrification公司自80年代开始推出低压开关设备的首次重大创新。 NeoGear解决了当前技术遇到的许多问题，即母线接触故障和可能导致严重伤害的人为错误。它可节省高达25％的空间，并可将能耗降低多达20％。此外，通过ABB Ability连接，NeoGear可实现数字状态监控，可将运营成本降低多达30％。
Motion与Hewlett Packard Enterprise的Aruba合作，达成协议，将ABB Ability Smart Sensor技术与Aruba的WiFi和蓝牙接入点相结合，扩大其数字动力总成产品的应用范围。这一切都将使工业规模较大的客户能够轻松监控设备的状况和性能，将停机时间缩短70％，并将资产寿命延长30％。在机器人和离散自动化领域，我们宣布计划为医院开发和引入协作机器人解决方案，包括物流和实验室自动化解决方案，从10月份开放的德克萨斯医疗中心新的ABB医疗研究中心开始。
In addition to expanding market access, we have taken steps to optimize our footprint and supply chain, while investing in factories and upgrading critical equipment to improve delivery and performance. For example, we announced plans to optimize our medium voltage manufacturing assets in the United States, investing approximately $40 million to expand and upgrade our factory in North Carolina by June 2020.
On a stand-alone basis, the business is showing an improving trend in performance and achieved roughly 5% operational EBITA margin in the second quarter. We remain on track to capture the targeted cost synergies from the integration. We continue to expect the integration of the business to be a strong contributor to Electrification's progress towards its 15% to 19% medium-term target margin corridor.
Let's look at our transformation milestones on Slide 15. The reorganization is in full implementation mode. During the quarter, in addition to global sales, we transferred the quality and operations and service functions from the group to the businesses. The transfer of country resources to the businesses has also commenced. And around year-end, our future country model will go into effect. Furthermore, by end of December this year, we expect to have established a stand-alone Power Grids legal structure.
So let me sum up with Slide 16. We continued to grow in the quarter despite market headwinds. We are doing what we said we would do with our transformation and continue to expect $150 million to $200 million in run rate savings from ABB-OS by the end of this year. The carve-out of Power Grids is on track. We have been making good progress on the integration of GEIS, and we are actively managing our portfolio with the announced exit from our solar inverter business.
Looking ahead, we anticipate headwinds in some markets to continue in the short term, particularly for discrete industries. That said, we expect slight growth in comparable revenues for the group for the full year, supported by our order backlog. We are maintaining our strong focus on performance management to continue to improve the underlying businesses. Group operational EBITA margin is expected to improve for the full year, aided by an improved GEIS performance, ongoing stranded cost elimination, noncore improvements and our simplification program. Lastly, we expect cash flow from operating activities to be solid for the year as a whole.
Thank you for your attention. We are now ready to open the line for your questions. And Jess will do that for us.
Thank you, Peter and Timo. Operator, may we have the first question from the lines, please.
[Operator Instructions] The first question comes from Virgo, Alexander from Bank of America Merrill Lynch. We lost connection with the questioner. We'll go ahead with the second question from Ben Uglow with Morgan Stanley.
[操作员说明]第一个问题来自美国银行美林公司的处女座，亚历山大。 我们失去了与提问者的联系。 我们将继续讨论Ben Uglow与摩根士丹利的第二个问题。
It was really a little bit more color around China. There was actually some helpful steers in the introduction. But if I look at the order grade, minus 1, Peter or Timo, could you help us quantify a little bit across the 4 businesses how strong relative with Electrification products? How much of a headwind was Robotics? I'm assuming that Robotics must have been really quite difficult given that it was up in North America. So if you can put some sort of bandwidth or some numbers on the different businesses in China, that would be very helpful.
And then the second question is really how should we think about the cadence of growth? So some of your China competitors have talked about things decelerating during the quarter in 2Q. Is that, in China, I'm talking about. Is that something that you saw? And how should we think about the setup in China into the second half? Those are my questions.
中国周围真的有点色彩。 在介绍中实际上有一些有用的阉牛。 但是，如果我看一下订单等级，减去1，彼得或蒂莫，你能否帮助我们量化4家企业中与电气化产品的相关程度如何？ 机器人技术有多大的逆风？ 我假设机器人技术一定非常困难，因为它在北美上升了。 因此，如果您可以为中国的不同业务提供某种带宽或某些数字，那将非常有帮助。
然后第二个问题是我们应该如何看待增长的节奏？ 因此，您的一些中国竞争对手已经谈到了第二季度该季度减速的事情。 是的，在中国，我在谈论。 那是你看到的吗？ 我们应该怎样考虑下半年在中国的设置？ 这些是我的问题。
Thanks, Ben. Let's split this one. Timo will give a little bit more color on China, and then I will take you the second one on second quarter and the outlook in more general.
谢谢，本。 让我们分开这个。 蒂莫会给中国带来更多的色彩，然后我会带你第二季的第二个和更普遍的前景。
Okay. So thanks, Ben. Yes, in China, the situation is actually fairly varied in a way that we had in Electrification business, and actually also in our Industrial Automation business, double-digit growth, so strong growth. Motion was more sort of in last-year-level type of areas, and then significant double-digit decline in Robotics & Discrete, so that's why we are saying that many markets in China continue to be resilient for us, and this is really quite much happening in one pocket.
好的。 非常感谢，Ben。 是的，在中国，情况实际上与我们在电气化业务方面的情况相当不同，实际上也在我们的工业自动化业务中，两位数的增长，如此强劲的增长。 Motion更像是去年级别的领域，然后是Robotics＆Discrete的显着两位数下降，这就是为什么我们说中国的许多市场对我们来说仍然具有弹性，这真的很不错 很多事情发生在一个口袋里。
If I'll then take that up, Ben. I think for the quarter, which is Q2, I would say that in Robotics & Discrete, we saw it coming actually for quite a few months, and we saw some competitors reporting lower numbers earlier than we have been reporting. So therefore, in June, what really came down, or towards the end of the quarter was our conventional power generation. That's where we saw quite a significant slowdown there.
In terms of looking forward, we think actually that in China, the way Timo just described it, we will still see headwinds obviously on Robotics & Discrete. And we would still be positive, as we said, on the other 2 like Timo described, which is Industrial Automation and Electrification. So I think that's the way we look at China.
We said that the U.S., we have given you all the numbers, we see that as a positive trend going to the second half. So I think Europe is more or less stable in that sense, so I wouldn't, but you have, we'll have some differences between the countries, but let's settle there on stable. And I think China, if it develops the way we are forecasting, then that will be pretty much in line with the way we have given our outlook as well from a kind of total 2019 results point of view.
That's very helpful. If I can have one quick follow-up. Just on the China robotics side, I know your business is quite evenly balanced in China between, let's call it, automotive and then general industry. Is it all really coming from the automotive side, the China weakness? Or is it also coming from general industry?
这非常有帮助。 如果我能有一个快速的跟进。 就中国机器人技术方面而言，我知道您的业务在中国之间是平衡的，我们称之为汽车业，然后是一般行业。 这一切真的来自汽车方面，中国的弱点吗？ 或者它也来自一般行业？
Yes. Thanks, Ben. It's clearly the higher one is automotive. But I would also say that we are seeing weakness on the other side as well. So therefore, I think it's, in general, it is a weaker environment clearly driven by automotive. But the OEMs in that sense are also weak.
是。 谢谢，本。 显然，更高的是汽车。 但我也会说我们也看到了另一方面的弱点。 因此，我认为，总的来说，这是一个明显受汽车驱动的弱势环境。 但这种意义上的原始设备制造商也很薄弱。
The next question comes from Virgo, Alexander with Bank of America Merrill Lynch.
Apologies for the phone problems just before. I wondered if I could follow-up on the China question. We're just trying to quantify or clarify what below 0 means in terms of discrete, because obviously below 0 is, could encompass quite a lot. So I'm just wondering if you could maybe clarify a little bit around that for us.
And then secondly, maybe one for Timo, could you just talk a little bit about why cash flow was so weak in the quarter? And how we should think about that through the second half?
为之前的电话问题道歉。 我想知道我是否可以就中国问题采取后续行动。 我们只是试图量化或澄清0以下的离散意义，因为显然低于0，可能包含很多。 所以我只是想知道你是否可以为我们澄清一点。
Yes. Thanks, Alexander. I think I cannot give much more on your first question because, I mean, I don't have a crystal ball looking forward. So from that point of view, I think we, you have seen us actually reacting already from Q1 to Q2 that we were adjusting. And you saw that in the RA margin from 11.1% to 12.3%. We were adjusting our cost base to the weaker general macro environment, and that's obviously through continuous improvement that's continuing. So we are looking into a second half, which is weaker on that side, but I would just leave it, as I said before. The automotive is the bigger one, the more critical one. But OEMs do also, I think we are looking at a soft second half, but I can't give you much more for the second half. You just have to look at this month-by-month, quarter-by-quarter.
So for the second one, over to you.
是。 谢谢，亚历山大。 我想我不能在你的第一个问题上给予更多，因为，我的意思是，我没有期待的水晶球。 所以从这个角度来看，我认为，我们已经看到我们实际上已经从第一季度到第二季度做出了反应，我们正在调整。 你在RA边缘看到了从11.1％到12.3％。 我们正在调整我们的成本基础以适应较弱的一般宏观环境，而这显然是通过持续改进而持续的。 所以我们正在考虑下半场，这方面较弱，但我会离开它，正如我之前所说的那样。 汽车是更大的，更重要的一个。 但是原始设备制造商也这样做，我认为我们正在考虑下半场的软弱，但我不能在下半场给你更多。 你只需逐个季度地看这个月。
Okay. Thanks, Alex, for the question. So if you look at the cash flow from operating activities, and here, it is better to compare first half, first half because we had this change in the bonus payment. So first half, first half, which is really comparable, we are down about $750 million. And that comes mainly from 3 components: First one is payables, and I'll come back to that in a minute. Then the second one is cash related to the restructuring and to the Power Grids separation and the simplification program. That's about $130 million more than previous year. And then we have about $260 million from discontinued operations. So these are the main buckets.
And the payables are about $380 million, and the driver there is that we are as a company moving to a systematic global process in our purchase to pay process, and it will have this impact. We expect long-term, i.e., our DPO worsened compared to last year. We expect long-term, this has to give us tools to manage also our DPO even better. And as we said for the year, we expect solid cash delivery when you exclude the items related to Power Grids separation and also to OS implementation and the related tax area.
The next question comes from Martin Wilkie with Citi Research.
It's Martin from Citi. So the first question is on Industrial Automation. You have talked about some under absorption, some growth investments. And presumably, if you have maintained a certain cost level for an assumed high level of volume, you are investing for growth. Just looking a bit more color on the group outlook. I think you said you do expect orders to pick up next quarter. But just what's giving you that confidence? Is it final investment decisions in certain markets are picking up? Is it your own investments mean that you're going to start retaking share in certain areas? But just to understand the growth outlook in automation.
The second question I had was on the Electrification business. You have obviously given us the dilution effect from GEIS, but we have seen this systems drag as well. And just want to understand a bit more as to why you're making that move into more systems. We've seen some other companies going the opposite direction. Just a little bit of color around why you are making that push into systems side in Electrification.
Okay. Thanks, Martin. Let me try the first one, give Timo a little time to think about the second one. I think we are looking into, well, I say Q3 and specifically on Industrial Automation. We have got quite good visibility on some of the larger projects we have been working on and, therefore, we expect some of that to come through. And hence, our remark on, let's say, the order positive outlook for Q3.
In terms of the longer term, I mean, Peter Terwiesch is working on continuous improvement, spending money for growth, but also taking, at the same time, costs out. It's a very mixed bag in the second quarter, obviously, which, because we have with process industries and also management and analytics are growing very well, both on revenue and on orders. But because of the tough comparable, we had some slowdowns and some project mix also in the quarter and, therefore, is taking some measure on that one.
The backlog overall has obviously increased as we have seen it. That gives also, from a revenue perspective for the longer term, a positive outlook I would just like to say, here, we are talking about long-cycle pieces here, so it will take some time before they actually hit the revenue line. But we are very positive on how this has actually developed over the last 1 or 2 or 3 quarters. But we have got good visibility on the orders side for Q3, and we hope that this will actually come through.
Second one to Timo.
Okay. Thanks, Martin. On Electrification, we have to separate a couple of items here. So first of all, when we look at the dilution from GEIS, it is lowest that it has been, and we are making very good progress on the integration and also improving the results in that area.
Then on the solutions business versus product business. So we have a mix impact where our solutions business now has been growing faster. But we are, of course, also focusing on growing our product business. So this is a mixed impact. It's not like we would have particularly pushed the other one versus the other one. So again, we absolutely want to grow our product business, and we have made good progress there as well when you look at this a little bit longer term. And this has been coming through in the margins. So we had 11.5% of EBITA margin for the quarter. Last year we had 12.6% margin. And when you take GEIS, that has about 60 basis points impact. But we also had higher warranty cost in the solar than last year, which is having an impact. So that's how you come to the comparable, and as we said, we would expect the margin to improve slightly in Electrification going into the third quarter.
The next question comes from James Moore with Redburn.
Peter, Timo, can I ask about Robotics and Electrification, please? On the Robotics margin, the margins stepped down to 11%, 12% in the first half. But given the soft orders that we had, and that may have some worse pricing in it. I don't know. But have we seen the full extent of the Robotics margin reset? Or should we expect a further step down into the second half or even into 2020? And have you stopped the Chinese robotics plant expansion plans to double capacity, which you did in response to KUKA's quadrupling theirs?
On Electrification, some good profit momentum in GEIS, but do you think you can continue that towards, say, high single-digit levels in the second half? And I sense that the Thomas & Betts margin, which is about 13%, I think, when you bought it after you sold some pieces, has come down a bit lately with some tough price versus raw material. But can you talk about where it is today and what a realistic goal is for Thomas & Betts?
彼得，蒂莫，我能问一下机器人和电气化吗？ 在机器人利润方面，利润率下降至11％，上半年为12％。 但鉴于我们拥有的软订单，可能会有更糟糕的定价。 我不知道。 但是我们是否看到了机器人边缘重置的全部范围？ 或者我们是否应该期待进一步下半年甚至到2020年？ 你是否已经停止了中国机器人工厂扩建计划的双倍容量，你是为了应对库卡的四倍而实现的？
关于电气化，GEIS有一些良好的盈利势头，但你认为你可以继续下去，比如下半年的高个位数水平吗？ 而且我觉得托马斯和贝茨的利润率，大约13％，我认为，当你在卖掉一些零件后买下它时，最近有一些价格与原材料相比有所下降。 但你能谈谈今天的情况以及Thomas＆Betts的现实目标吗？
Okay. Thanks, James. I start with the Robotics. I start with your second part, which is on the plant. We are still planning to go ahead with the plant. I think we have earlier said that it will be finished or will be constructed by the end of '20. That will be a little bit later. It will slip into '21, but the plan is still to go ahead with it as we see the long-term growth rates for Robotics actually justifying to increase capacity for us.
I will question your remark about that this is a response to KUKA. I think this is a response to our success that we are strong in Robotics rather than as a response to a competitor. So I think that's the first one.
In terms of margins, as I have already said, Sami and his team have taken actions between Q1 and Q2. They take further actions or have taken further actions into Q3 and Q4 in terms of adjusting to, the cost base to the macroeconomic environment. So I think we will see this also coming through to the results. So I think that's as far as I will go in terms of predicting the second half.
And with that, maybe over to Timo on the GEIS and Thomas & Betts.
So why don't I go through the math again because I was using the group numbers instead of Electrification numbers in previous, so just that we get that one corrected. So Electrification, as I said, the impact on Electrification actually is 200 basis points, and it's now at its best. And we had 13.5% margin. Last year, it was 16.1%. So it is, again, the same 60 basis point delta, as I discussed. And also relating to that, we had impact from mix, but also from a bit higher warranty on the operational side from the solar business.
On the GEIS, I don't have any further comments. I mean we are making very good progress on the integration and also, we are getting, making good progress on our market share in the North American market, which is the key market for us for that business.
On Thomas & Betts, we are also making good progress. We have new management in place, which is really looking through this whole business and looking at what are the right pieces of the portfolio to drive, but we do not give that margin separately as we don't give those margins externally.
The next question comes from Graham Phillips with Jefferies.
I have 3 questions, please. First of all, just a little bit more on GEIS. Can you talk about the growth rates of that business on a comparable organic basis? And some perhaps tangible examples of where you have had some success in integrating the business with Electrification. Second question, I will take them in turn, actually.
请问我有3个问题。 首先，关于GEIS的更多内容。 您能谈谈该业务在可比较的有机基础上的增长率吗？ 还有一些可能的实例，说明您在将业务与电气化整合方面取得了一些成功。 第二个问题，我实际上会轮流接受它们。
Okay, Graham. So why don't I, Timo here. Thanks for the question. So on the GEIS, we have not yet done a full product integration because it does not happen that fast. But what has happened, and that's also visible from our North American customers, like [indiscernible] is that we have a different focus on the business. We are also having a more focused sales effort, and we are continuing to drive this momentum. We have reasonable or good top line development in U.S., in particular, and we are pleased with the development.
好的，格雷厄姆。 那么，为什么我不是，蒂莫在这里。 谢谢你的提问。 因此，在GEIS上，我们尚未完成全面的产品集成，因为它不会那么快。 但是发生了什么，而且我们的北美客户也可以看到，就像[音频不清晰]一样，我们对业务有不同的关注。 我们的销售工作也更加集中，我们将继续推动这一势头。 我们在美国有一个合理或良好的顶线发展，我们对这一发展感到满意。
Okay. I mean, you can't give us an organic growth number in the business.
No. We will not do this. This is Peter. What I can say that when we look at market data in terms of volume growth and market shares, this looks positive for us on GEIS and in general. So that's, I think, just an additional data point.
不，我们不会这样做。 这是彼得。 我可以说，当我们从数量增长和市场份额的角度来看市场数据时，这对于我们在GEIS和整体而言看起来都是正面的。 我认为，这只是一个额外的数据点。
Okay. Just on B&R inside Robotics & Discrete now, given the move of that business into that division, can you talk a little bit about whether there's some disruptions caused by that? Again, how is that business faring in terms of growth and margins now given the pressure on Discrete that you talk about?
好的。 现在只是在机器人和离散的B＆R上，考虑到该业务进入该部门，您能否谈一谈这是否会造成一些中断？ 再一次，考虑到你所谈论的离散压力，这个业务在增长和利润率方面的表现如何？
Yes. I take this one. I think we are happy with the acquisition. I think it has developed very well over, since we have it. I think as part now of the Robotics & Discrete Automation organization from, led by Sami, there is further integration and combined offering now taking place, which gives us another avenue of growth. So the growth expectations have been met. And also, the financial pieces have been met so far.
Yes, there is clearly some headwinds in the market as well, but we are clearly steering the business together with Robotics towards capturing the growth opportunities which are there as we are expanding into new areas, into new countries in the world. And we have also, clearly, you can see this also in the price, et cetera. We have had some wins on the design phase for integrated discrete automation sales or fabrications which we had. So therefore, we are pleased that we are gaining good traction in that business and can weather the macroeconomic storm over time.
And I think it's not the first time that B&R is facing that. Their overall growth rate over the last 10, 15 years actually shows that they can manage that very well. And with the addition of robotics, I think we have a very good terms, value proposition for our customers.
Thanks, Graham. I think we'll leave it there, if that's okay, and move on to the next caller. Thank you.
谢谢，格雷厄姆。 我想我们会把它留在那里，如果可以的话，继续前进到下一个来电者。 谢谢。
The next question comes from Gael de-Bray with Deutsche Bank.
The first question is about EP. I understand there are some natural mix effects weighting on the margins. But some of your peers have been able to absorb these negative effects in the quarter with pretty strong pricing actions. So I guess my question is could you talk a bit more about what you are doing on the pricing side in Electrification products? And if there was actually any benefit coming from your pricing actions in the quarter.
The second question is, well, still about EP. Could you maybe tell us what EP growth in the U.S. specifically? And could you perhaps elaborate on how the various end markets are developing: resi versus nonresi, industrial buildings, utilities and so on, and so forth?
第一个问题是EP。 据我所知，边缘有一些自然混合效应加权。 但是，一些同行已经能够通过相当强大的定价行动吸收这一季度的负面影响。 所以我想我的问题是你能谈谈你在电气化产品定价方面做了些什么吗？ 如果本季度您的定价行动实际上有任何好处。
第二个问题是，关于EP。 您能否具体告诉我们美国的EP增长情况？ 您是否可以详细说明各个终端市场的发展方式：resi与nonresi，工业建筑，公用事业等等等？
Okay. I give this to Timo.
So first of all, on EL so yes, we have been driving pricing actions in our product business. And it actually is visible in our numbers. As I said earlier in the call, we are driving product business and related pricing. But as the solutions business has been growing faster and there is more solutions business coming from backlog, that's impacting the mix overall in the segment negatively. Actually, what is important to note also that in our solutions business, when we look at that business separately, we are actually improving our margin. So it is really the mix between solutions and products overall, which is impacting the situation.
Then we had growth in Electrification overall in the U.S., which is good to see. And it's driven mainly by, for example, data center and those markets, less so on residential construction, so more industrial and data center than residential.
首先，在EL上，是的，我们一直在推动我们产品业务的定价行为。 它实际上在我们的数字中可见。 正如我在电话会议前面所说，我们正在推动产品业务和相关定价。 但随着解决方案业务的增长速度越来越快，并且有更多的解决方案业务来自积压，这对整个市场的整体组合产生了负面影响。 实际上，还需要注意的是，在我们的解决方案业务中，当我们分别看待该业务时，我们实际上正在提高我们的利润率。 因此，它实际上是整体解决方案和产品之间的混合，这正在影响这种情况。
What kind of growth was it in the U.S.? Was it more like mid-single digit or double digit?
Well, we had some growth, yes.
The next question comes from Andre Kukhnin with Credit Suisse.
It's Andre from CS. I wanted to dig a little bit deeper into IA. And could you talk about how you developed relative to markets in Q2 or year-to-date, whether you've gained or lost share? And specifically on pulp and paper, we are seeing signs of, that what has been very good market starting to roll over. So I just wanted to get your view on that and maybe a comment on whether you're seeing any signs of that in your order pipeline.
And then finally on that one, I thought there were some relative one-off effects in the quarter from effects revaluations and maybe others. I wonder if you could quantify those for us, if they are non-repeat.
这是CS的安德烈。 我想深入了解IA。 您是否可以谈谈您在第二季度或年初至今的市场发展情况，无论您是获得还是失去了份额？ 特别是在纸浆和纸张方面，我们看到了一个非常好的市场开始滚动的迹象。 所以我只是希望得到你的观点，也许是评论你是否在订单管道中看到任何迹象。
Okay. Thanks, Andre, for the question. So first of all, when we look at the Industrial Automation business, I don't think you can look at the market share on that market quarter-by-quarter. It's not that kind of base business, because were talking about longer-term project business. We are making good progress in the area. We continue to be number 1 in the DCS by external studies.
Then you asked quite specifically for, about pulp and paper. That actually continued to develop strongly for us in IA, and we also continue to have good pipeline then, there. So when we really look at the quarter impact, we had a fairly significant slowdown at latter part of the quarter on the conventional power generation, which really impacted the business performance during the quarter. We also had then related to this, some under absorption. And we also had impact from, small impact from currency as well late in the quarter, mainly coming from [indiscernible] per Swedish krona. So these all impacted the quarterly margin, which then came out at this 12.1% for the quarter. But you are right, there were some late quarter impact.
The next question comes from the line of Benjamin Szekeres with Goldman Sachs International.
接下来的问题来自Benjamin Szekeres和Goldman Sachs International的合作。
It's actually Daniela here. Two questions. First one, just to go back to the matrix structure on regions that was removed earlier in the year and ask you how the progress on that. I remember you had a few thousands of people that were sort of put in, in the group and sort of were going to be reallocated. Where do we stand? And what's the name of the number of people that haven't yet been reallocated? And whether they could turn into fixed cost savings.
And then a second quick question, just if you could update us a little bit on the CEO process. And whether, given the time that has now gone, shall we assume it's an external candidate? Or there is still some chances of an internal candidate?
这实际上是Daniela。 两个问题。 第一个，只是回到今年早些时候删除的区域的矩阵结构，并问你如何取得进展。 我记得你有成千上万的人投入，在集团中，有些人会被重新分配。 我们站在哪里？ 那些尚未重新分配的人数是多少呢？ 他们是否可以转为固定成本节省。
然后是第二个快速问题，就好像你可以在CEO流程上稍微更新一下。 而且，鉴于现在已经过去的时间，我们是否应该假设它是外部候选人？ 或者还有一些内部候选人的机会？
Okay. Thanks, Daniela. I will take the CEO progress, and the more qualitative one on the structure, and then Timo can maybe just add to that the cost piece, et cetera, how we are progressing there. So if I start with the CEO one, the process goes well. As I have said previously, we have done first the external candidates in order to have the benchmark for the internals. We are in that benchmarking exercise at the moment, and we are pleased, as a Board, with the progress, with the list of candidates. And it's going actually faster than anticipated, so we are pleased with the progress, and we'll announce whenever we are ready to announce. So that's on that one.
In terms of the transformation, I think we are making very good progress on this one. And as I've said in my speech, we have moved things over in various areas. Also, we have named all the new country heads, who are now double hatting. So they run a business, and there are also country heads, apart from a few very special countries that [indiscernible], the biggest ones like India, China, the U.S., for example. But we are moving very good and very well and very fast. We are naming the leaders for all the jobs within the countries, within the businesses, but also those who have got both hats in the future. So let's say we obviously for fiduciary duties, we need someone on the finance side, who will be the country CFO, and then on the HR.
So that's all being done. We are successfully now what, yes, we are successfully now moving the country structures into the business structures. That's ongoing at a quite high pace. So therefore, we expect really by year-end to have everything in place, including the carve-out in terms of PG from an organizational point of view. So therefore, I think I will call it slightly ahead of the game in the way we're moving. And then from a cost perspective, I'll pass it on to Timo.
Yes, thanks. Thanks, Daniela. I don't think I have that much to add to this. But we confirm that we are making good progress on our run rate target saving of $150 million to $200 million. A big part of this is coming from the corporate activities. And if you look at the first half this year compared to first half last year, we were about $70 million lower in the overall corporate cost. This, of course, also includes the stranded cost as well as the noncore impact. But nevertheless, we are seeing some early signs of the project coming through in the numbers, and we also have a target that everybody at ABB will then go to Power Grids or in their new roles under the ABB operating system organization, would know their new roles by end of Q3. That's the target, so I said we're making good progress here.
对了谢谢。 谢谢，丹妮拉。 我认为我没有那么多补充。 但我们确认，我们的运行率目标节省了1.5亿至2亿美元，取得了良好进展。 其中很大一部分来自企业活动。 如果你看看今年上半年与去年上半年相比，我们整体公司成本降低了约7000万美元。 当然，这也包括滞留成本以及非核心影响。 但是，我们看到该项目的一些早期迹象正在通过这些数字，我们还有一个目标，ABB的每个人都将去Power Grid，或者他们在ABB操作系统组织下的新角色，会知道他们的新 第三季度结束时的角色。 这是目标，所以我说我们在这里取得了很好的进展。
Your next question comes from Rizvi Wasi from RBC Capital Markets.
您的下一个问题来自RBC Capital Markets的Rizvi Wasi。
Yes, it's Wasi here. Just 2 left for me. Firstly, could you help us understand what's going on in North America a bit? We've heard conflicting things from peers and distributors over the last few days. So I'd be interested in hearing how your business is performing across your end markets and divisions.
And then the second question was just on your 2019 framework. So I understand the simplification program costs have certainly moved. But in terms of the transaction and separation costs that are lower and the finances expenses are lower. Are they all cash costs that would be lower so, therefore, it's a positive movement on your cash flow statement for the year?
是的，这是Wasi。 只剩2个给我。 首先，您能帮助我们了解一下北美的情况吗？ 在过去的几天里，我们听到了来自同行和经销商的相互矛盾的事情。 因此，我有兴趣了解您的业务在各个终端市场和部门中的表现。
然后第二个问题就在你的2019框架上。 所以我理解简化程序的成本肯定已经发生了变化。 但在交易和分离成本方面较低且财务费用较低。 这些都是现金成本会降低，因此，这是您今年现金流量表的积极变动吗？
Yes. Okay. Thanks, Wasi. So first on the North America market. So when we look at the North America situation overall, so as I said, we had growth in the U.S., as we discussed earlier. And as we said, the growth was actually strong in the Electrification area. And then also, we had strong growth actually also in Robotics & Discrete in the U.S. And then on the other areas, it was a bit more subdued. So that's how the U.S. performed for us. And as I said, in the Electrification, for example, data center market is working well for us in the Robotics & Discrete. This was more in logistics, which is an important growth area in general and where U.S. growth came in quite nicely. So as we said broadly, we are doing well in the U.S.
Then on the simplification program and on the cash, so we had couple of movements here, as you described. We said that we expect a bit less cost to go through in the simplification program. So overall, again, we are expecting $500 million. But for this year, we expect $100 million less than earlier. That's mainly coming from the fact that we have been running this ABB first program very recently, and we are seeing more natural attrition, and we have been filling those roles with ABB people. And then also on Power Grids, we are lower than our earlier estimate. And in that area, it is mainly coming from the fact that we expect a bit more Transition Services Agreement, which also pushes the cost slightly forward. So you are right, we expect also then bit less cash impact to come through this year than we would have expected earlier.
And as I said earlier, we had about $130 million cash impact compared to last year during first half. We would, of course, expect that to be higher during second half.
The next question comes from Guillermo Peigneux with UBS.
I Guillermo Peigneux from UBS. I wanted to ask a little bit about the balance between prices and raw materials. I guess, you have a little bit of help on commodities this quarter. Could you give us some granularity as to how the second half of the year will be on net pricing, especially with the focus on EP and Robotics, if I may?
来自瑞银集团的Guillermo Peigneux。 我想问一下价格和原材料之间的平衡。 我想，你们本季度对商品有一点帮助。 你能否给我们一些关于今年下半年如何对净定价的细化，特别是关注EP和机器人，如果可以的话？
Yes. It's Peter here, Guillermo. Thanks for the question. Now that's a difficult one to have the outlook for the second half on this one, so I cannot give you any color around that. We are managing this obviously, very diligently, and that so far, in the first 6 months, that has worked well for us. And now for the second half, I think we have the processes, we have the systems, the people in place. We are not going to forecast any commodity swings going forward. That will be just too risky for me at this stage. But we are managing this on an ongoing basis in order to actually offset that as quickly as we can or as best as we can, so that the swings, on the one side, are actually covered on the other side at the same time. So I cannot give you much more on this one. Maybe Timo will, yes.
是。 这是彼得，吉列尔莫。 谢谢你的提问。 现在对于这个问题来说，下半场的前景很难，所以我不能给你任何颜色。 我们正在非常勤奋地管理这个问题，到目前为止，在前6个月里，这对我们来说效果很好。 现在，对于下半年，我认为我们有流程，我们有系统，人员到位。 我们不打算预测任何商品价格波动。 在这个阶段，这对我来说太冒险了。 但我们正在持续管理这个问题，以便尽可能快地或尽可能快地抵消这一点，以便一方面实际上同时覆盖另一方的波动。 所以我不能在这个上给你更多。 也许蒂莫会，是的。
Yes. I can comment briefly just on a high level, that when we look at the margin, it really, this is coming from mix and not negative pricing. So when we look at the different categories, the pricing is actually working quite well for us.
是。 我可以简单地评论一下，当我们看到保证金时，实际上，这是来自混合而非负价。 因此，当我们查看不同的类别时，定价实际上对我们来说非常有效。
The next question comes from Andreas Willi with JPMorgan.
I just had a follow-up question on IA trends. You talk about the process markets and the power gen. Maybe you could give some comments what you're seeing in marine, which is also an important market for you, both in terms of specialty vessels and obviously the general marine contracting, which has collapsed in the first half of the year. What you are seeing there in terms of trends.
And secondly, on IA, you mentioned the weakness in power generation towards the end of the quarter. Could you elaborate a little bit on that? Given it's a long-cycle market that's been bad for years, what suddenly happened in that business in Q2?
我刚刚就IA趋势提出了一个后续问题。 你谈论过程市场和权力。 也许你可以对你在海洋中看到的东西发表一些评论，对于你来说这也是一个重要的市场，无论是在专业船舶方面，还是在今年上半年已经崩溃的一般海上承包方面。 你在趋势方面看到了什么。
其次，在IA上，你提到了本季度末发电量的疲软。 你能详细说明一下吗？ 鉴于这是一个多年来一直不好的长周期市场，第二季度该业务突然发生了什么？
Okay. Thanks, Andreas. I think on the marine one, and then I'll let Timo think about the second one. I think on the marine one, the visibility, which we have into the second half is actually not as negative as we have experienced it in some areas of the marine business over the last 6 to 12 months. So therefore, I will just call it kind of semi-positive as we are seeing from a project and potential order taking over the next few months. I think there, we can see some, I wouldn't say light at the end of the tunnel, but some positive effects, which could be helpful for us. But clearly it was a tough comparable for us compared to last year.
好的。 谢谢，安德烈亚斯。 我想在海洋上，然后我会让蒂莫想到第二个。 我认为在海洋方面，我们进入下半年的能见度实际上并不像我们在过去6到12个月内在海洋业务的某些领域所经历的那样消极。 因此，正如我们从一个项目和未来几个月的潜在订单中看到的那样，我将其称之为半正面。 我想在那里，我们可以看到一些，我不会在隧道尽头说光，但是一些积极的影响，这可能对我们有所帮助。 但显然，与去年相比，这对我们来说是一次艰难的比赛。
Yes. And then on the conventional power gen, so this impacts ABB in 2 ways. So we're exposed to the market in 2 ways: So we are exposed in automation, and that, of course, is a slower cycle. But we are also exposed to the actual engines through the turbo business, which then have some shorter-cycle elements. So both of these are playing a role here, and some of these customers, as you have well seen, have also noted some tougher market conditions.
是。 然后是常规电源，因此这有两个方面影响ABB。 因此，我们以两种方式接触市场：因此我们在自动化中暴露出来，当然，这是一个较慢的周期。 但我们也通过涡轮增压业务接触到实际发动机，然后涡轮增压业务有一些较短周期的元素。 因此，这些都在这里发挥作用，正如你所看到的，其中一些客户也注意到了一些更为严峻的市场条件。
Okay. Thank you, Andreas. And we are coming to the end of our hour, so we'll take a last question.
好的。 谢谢你，安德烈亚斯。 我们即将结束时间，所以我们将提出最后一个问题。
The last question comes from William Mackie with Kepler Cheuvreux.
最后一个问题来自William Mackie与Kepler Cheuvreux。
A couple of quick ones. Firstly, active portfolio review has always been a part of your business, and we've seen the moves that were made in solar and inverters. I mean, to what extent, given there's some speculation about power conversion, to what extent are there many other businesses within the portfolio that are being reviewed? And with relation to solar inverter, I mean, is portfolio change an important part of you being able to reach your 15% to 19% margin target within EP?
And then a detailed question on cash. I was surprised to see $260 million of cash outflow from discontinued in H1. Can you provide some indication of how the cash development will be for the full year within the former PG business, please?
几个快速的。 首先，积极的投资组合审查一直是您业务的一部分，我们已经看到了太阳能和逆变器的举措。 我的意思是，在多大程度上，鉴于对电力转换的一些猜测，投资组合中的许多其他业务在多大程度上正在被审查？ 关于太阳能逆变器，我的意思是，投资组合变化是您能够在EP内达到15％至19％保证金目标的重要部分吗？
然后是关于现金的详细问题。 我很惊讶地看到上半年停止的现金流出2.6亿美元。 您能否提供一些关于前PG业务全年现金发展情况的指示，好吗？
Yes. Thanks, William. On the portfolio side, as we also say, this has always been active in ABB, and there is no change to that. In February, we flagged that we were reviewing some $3 billion of revenues to see what's, how we are progressing with those businesses. That could be the case that we are fixing them, or we are divesting them or we are joint venturing them, whatever it is. So we are reviewing those. We have made the decision quite clearly on the solar inverter one. We have made the decision.
We already communicated that actually when we bought GEIS that we have got a few areas where we would be proactively looking into potential divestments there, and that has been now the, we have came out in China with the joint ventures, which we there have, which we're negotiating with our joint venture partner to actually give them over to them, so that we don't, because we don't need them. So that will always be part of us, and we will drive this even in a more accelerated way.
On the margin question, we have said it, I think clearly, that the 50 basis points or slightly more than 50 basis points, which we see in the medium term as an uplift because of the solar inverter, which we have sold, now that is, will help us obviously, to get into the 15%, 19% margin kind of band. And if you are selling, like the one in China out of GEIS, obviously, that would also account for that one by, and more ones, which we have already seen now, being also talked in the market, same would apply.
Okay. Thanks, William. And then on the discontinued operation, the cash generation. So first of all, when we look at the Power Grids business, we have now gotten some of these large orders that we are expecting, advances from those coming in the second half. If you look at this $260 million dynamics, so we have part of this is coming from lower profitability than last year. But profitability is up from Q1 to Q2, so we are on a good trend here in profitability. And then rest is coming from networking capital. And we expect this networking capital trend to significantly change during the second half, driven by how the backlog comes in and by some of these advances. And overall, we expect better cash in discontinued operations for 2019 than 2018.
好的。 谢谢，威廉。 然后就停止运营，现金产生。 首先，当我们看看电网业务时，我们现在已经获得了一些我们期待的大订单，这些订单来自下半年。 如果你看看这个2.6亿美元的动态，那么我们的部分原因是盈利能力低于去年。 但盈利能力从第一季度到第二季度上升，因此我们在盈利能力方面处于良好趋势。 然后休息来自网络资本。 我们预计这种网络资本趋势将在下半年发生重大变化，这取决于积压工作的进展情况以及部分进展情况。 总体而言，我们预计2019年停产的运营现金将比2018年更好。
Okay. Thank you, Will. Before we close, I'd just like to remind you about a few of our upcoming events. Our Q3 results will be on Wednesday, the 23rd of October, and that would be hosted by Timo. And then we will be having our Electrification Investor Day and Factory Tour, hosted by the President of our Electrification business, Tarak Mehta and the Electrification team, and that is on the 5th of November. So if anybody has an interest in that event, please let us know in IR. Otherwise, I'll just hand you back to Peter to close the call.
好的。 谢谢，威尔。 在结束之前，我想提醒您一些即将举行的活动。 我们的第三季度结果将于10月23日星期三举行，由Timo主持。 然后我们将举行电气化投资者日和工厂之旅，由我们的电气化业务总裁Tarak Mehta和电气化团队主持，并于11月5日举行。 因此，如果有人对该事件感兴趣，请通过IR告诉我们。 否则，我会把你交回给彼得接听电话。
Yes. Thank you very much, Jess, and also thanks, Timo. And thanks to all of you for calling in. I think after a few months now in the job, I'm very pleased on how the company is reacting to all the challenges which we have on the table, with the carve-outs, with the new business model, with the transformation and the headwinds in the market. I think we are moving well ahead, fully driven by improving through continuous improvement our results in all the businesses, and response from all the staff internally is very strong.
And that gives us a good outlook for the second half. We will just be continuing our drive, and then Timo will report in Q3 on how we have been managing the third quarter. So thank you very much for that. And to all of you, enjoy your summer, recharge your batteries and then we will all be back in hopefully still not a macro economically too downwards-looking world. So thanks for that, and have a good day.
是。 非常感谢，Jess，还要感谢Timo。 感谢你们所有人的来电。我想在工作几个月之后，我很高兴公司如何应对我们在桌面上所面临的所有挑战，以及开展工作， 新的商业模式，随着市场的转型和逆风。 我认为我们正在向前迈进，完全是通过不断改进我们在所有业务中取得的成果来推动，并且内部所有员工的反应非常强烈。
这给了我们下半场的良好前景。 我们将继续我们的动力，然后Timo将在第三季度报告我们如何管理第三季度。 非常感谢你。 对大家来说，享受你的夏天，重新充电，然后我们都会回来，希望仍然不是一个经济上看起来太宏观的宏观世界。 所以，谢谢你，祝你有个美好的一天。
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
女士们，先生们，会议结束了。 感谢您选择合唱电话，并感谢您参加会议。 您现在可以断开线路。 再见。
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