Connect with us

News

ABB: Q3 2020 Results

gbafNews28

Third quarter revenues in all business areas were still dampened due to the impact of COVID-19, although a strong recovery in China and ongoing cost mitigation efforts supported a strong underlying performance. On the upside, the integration of GEIS and turnaround of Installation Products in Electrification is starting to bear fruit and Motion is performing robustly. Robotics and Industrial Automation, on the other hand, are taking more time to recover, said Bj¶rn Rosengren, CEO of ABB. We are pushing ahead with the decentralization of the group and the ongoing review of our portfolio, while carrying out our share buyback program as planned. We look forward to presenting further details on our strategic progress at our Capital Markets Day on November 19.

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

Comparable

9M 2020

9M 2019

US$

Comparable

 

Orders

6,109

6,688

-9%

-8%

19,509

21,702

-10%

-7%

 

Revenues

6,582

6,892

-4%

-4%

18,952

20,910

-9%

-7%

 

Income from operations

71

577

-88%

 

1,015

1,290

-21%

 

 

Operational EBITA1

787

806

-2%

-5%3

2,074

2,397

-13%

-14%3

 

as % of operational revenues

12.0

11.7

+0.3 pts

 

10.9

11.5

-0.6 pts

 

 

Net income attributable to ABB

4,530

515

+780%

 

5,225

1,114

+369%

 

 

Basic EPS ($)

2.14

0.24

+785%2

 

2.45

0.52

+370%2

 

 

Operational EPS ($)1

0.21

0.33

-36%2

-35%2

0.73

0.97

-25%2

-24%2

 

Cash flow from operating activities4

408

670

-39%

511

414

+23%

Q3 2020 Group results

Summary

Trading conditions during the third quarter remained challenging, influenced by the ongoing COVID-19 pandemic. Demand decreased year-on-year in all regions despite a strong rebound in China, which drove improved order development, particularly in Robotics. Short-cycle product businesses developed positively, but this was outweighed by lower large orders and the ongoing pull-back of service activities. Operating margins for the group were weighed by non-core charges and a loss in Industrial Automation in relation to the Kusile project in South Africa. Excluding these effects, margins showed good underlying resilience, reflecting sustained cost mitigation in all business areas, and strong progress in Electrification with the integration of GEIS and turnaround of Installation Products. Motion maintained its track record of solid performance.

Orders

Orders were 9 percent lower (8 percent comparable) in the quarter compared to the prior year period. Foreign exchange translation effects had a neutral impact and portfolio changes a net negative impact of 1 percent. The order backlog was $13,878 million at the end of the quarter.

Regional overview

“ Orders from Europe were 9 percent lower (10 percent comparable) with mixed results at the country level. Sweden, Norway and the Netherlands showed solid growth, while orders declined in most other countries including Switzerland, the UK, Italy and Spain, when compared to the prior year period. In Germany, orders were 11 percent lower (14 percent comparable).

“ Orders from the Americas were 14 percent lower (11 percent comparable), with most countries reporting lower order levels. In the US, orders declined by 13 percent (12 percent comparable).

“ In Asia, Middle East and Africa (AMEA), orders were 1 percent lower (2 percent comparable). Orders were materially lower in India, Japan and Singapore, while order developments in South Korea were robust. Chinas growth was strong, with orders up 7 percent (8 percent comparable).

End-market overview

“ In discrete industries, orders were mixed. While the group benefited particularly from select order wins in the automotive and 3C sectors, demand from machine builders was weak. Some end-markets, such as food & beverage and logistics, grew strongly.

“ Process and energy industry activities were materially lower in the quarter. Service activities were still constrained by travel restrictions, as well as customers delaying service spend. Capital expenditure projects continue to be deferred as most customers adjust to the weaker demand outlook.

“ In transport & infrastructure, investments in rail, e-mobility, wind and data centers were healthy. Furthermore, orders were resilient in electrical distribution utilities. Marine activities declined steeply.

“ Buildings were mixed, depending on geography.

Revenues

Revenues were 4 percent lower (4 percent comparable) year-on-year reflecting weakness across all four business areas. Foreign exchange translation effects had a net positive impact of 1 percent and portfolio changes a net negative impact of 1 percent. The book-to-bill ratio for the quarter was 0.93x1, compared to 0.97x in the prior year period.

Income from operations and operational EBITA

Income from operations was $71 million. The result for the quarter includes approximately $311 million goodwill impairment and $203 million of charges due to changes in obligations related to divested businesses.

In addition, the result reflects regular non-operational items including amounts related to timing differences on commodities and foreign exchange and expenses related to restructuring and integration efforts.

Operational EBITA1 was 2 percent lower (5 percent in local currencies), at $787 million. The operational EBITA1 margin of 12.0 percent expanded 30 basis points year-on-year. Margins were higher in Electrification, while all other businesses reported lower margins on a year-on-year basis, mainly reflecting lower volumes. Corporate and Other improved by $24 million compared to a year ago, due to the removal of stranded costs and lower ongoing corporate costs, partially offset by higher charges for non-core business activities.

The 12.0 percent operational EBITA margin includes a negative 80 basis points impact from the proposed settlement in South Africa with Eskom in relation to the Kusile project which resulted in a further project revaluation and, in addition, a negative 130 basis points impact from the aforementioned charges for non-core business activities.

Net income and basic earnings per share

Group net income attributable to ABB was $4,530 million. Net income benefited from the net income from discontinued operations of $5.0 billion, which included a $5.3 billion pre-tax book gain on the sale of Power Grids and income tax expenses related to the divestment. ABB also recorded non-operational pension costs of $343 million. Further details on this item follow below. Income tax expense was $164 million in continuing operations.

Basic EPS of $2.14 was up 785 percent on a year-on-year basis. Operational EPS of $0.211, down 36 percent2 compared to the prior year period.

Cash flow from operating activities

Cash flow from operating activities was $408 million including a $273 million negative impact from a cash outflow to facilitate the transfer of certain pension schemes, compared to $670 million in the third quarter of 2019. Cash flow benefited from favorable timing of tax payments and net working capital movements, which offset the effects of a reduction in business activities. As a percent of revenues, net working capital was 12.5 percent at quarter end.

Q3 2020 business area results

All commentary by business area relates to third quarter results on a year-on-year basis.

Electrification (EL)

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

Comparable

9M 2020

9M 2019

US$

Comparable

 

Orders

2,952

3,188

-7%

-5%

8,810

9,890

-11%

-7%

 

Order backlog

4,471

4,537

-1%

+2%

4,471

4,537

-1%

+2%

 

Revenues

3,031

3,161

-4%

-2%

8,568

9,490

-10%

-6%

 

Operational EBITA1

493

450

+10%

 

1,159

1,267

-9%

 

 

as % of operational revenues

16.3%

14.2%

+2.1 pts

13.5%

13.3%

+0.2 pts

 

Short-cycle activities showed good resilience overall with healthy momentum in distribution utilities, data centers, food and beverage, wind, rail and e-mobility, offset by fewer large orders and weaker long-cycle demand. Buildings were mixed, depending on geography, and oil and gas activities declined materially. Demand from the Americas and AMEA showed continued COVID-19 impacts, offsetting the strong recovery in China.

Resilient short-cycle business revenues were dampened by a more challenged project business, mainly in the US.

Margin accretion of 210 basis points reflects solid operational performance. The third quarter result includes benefits of approximately 100 basis points from items that may not repeat. Good cost mitigation and supportive pricing actions helped offset the impact of lower volumes. The exit of the solar inverter business and improved performance from Installation Products and GEIS also supported margins.

Industrial Automation (IA)

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

Comparable

9M 2020

9M 2019

US$

Comparable

 

Orders

1,164

1,438

-19%

-20%

4,226

4,726

-11%

-9%

 

Order backlog

5,152

4,944

+4%

+2%

5,152

4,944

+4%

+2%

 

Revenues

1,403

1,492

-6%

-7%

4,247

4,590

-7%

-6%

 

Operational EBITA1

89

135

-34%

 

348

530

-34%

 

 

as % of operational revenues

6.4%

9.0%

-2.6 pts

8.2%

11.5%

-3.3 pts

 

Industrial Automation results were impacted by the proposed settlement in South Africa with Eskom in relation to the Kusile project which resulted in a further project revaluation. This lowered both orders and revenues by 3 percent and operational EBITA margin by 400 basis points. A revaluation of the same project had a similar margin impact in the same period a year ago.

Orders were otherwise materially impacted by the ongoing downturn in energy and marine, although the business area benefited from select large order wins and resilience in process industries, including Pulp & Paper. Orders were lower in all regions, with a severe drop in the Americas. Subsequent to the quarter, the business area secured a marine order in excess of $300 million.

Revenue weakness reflects a substantial drop in book-and-bill activities, particularly mobility constrained services.

Aside from the project impact in South Africa, margins improved sequentially as the business worked to fast-track cost savings, but remained impacted by lower volumes and unfavorable mix, with service activities still hampered by COVID-19 restrictions.

Motion (MO)

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

Comparable

9M 2020

9M 2019

US$

Comparable

 

Orders

1,535

1,618

-5%

-5%

5,022

5,180

-3%

-1%

 

Order backlog

3,349

2,947

+14%

+10%

3,349

2,947

+14%

+10%

 

Revenues

1,611

1,630

-1%

-2%

4,704

4,876

-4%

-2%

 

Operational EBITA1

281

290

-3%

 

790

828

-5%

 

 

as % of operational revenues

17.4%

17.8%

-0.4 pts

16.8%

17.0%

-0.2 pts

 

Moderate growth in short-cycle products and strong rail demand was outweighed by broad-based weakness in project and services activities from the continued downturn across sectors such as oil & gas. Orders were up in the Americas but declined in AMEA and Europe.

Revenue development reflects resilience in short-cycle business, as well as good execution on the order backlog.

Margins held up well versus a tough comparable, benefiting from mix and cost mitigation efforts.

Robotics & Discrete Automation (RA)

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

Comparable

9M 2020

9M 2019

US$

Comparable

 

Orders

720

709

+2%

+0%

2,169

2,559

-15%

-14%

 

Order backlog

1,442

1,416

+2%

-2%

1,442

1,416

+2%

-2%

 

Revenues

806

831

-3%

-5%

2,106

2,527

-17%

-16%

 

Operational EBITA1

76

107

-29%

 

178

307

-42%

 

 

as % of operational revenues

9.5%

12.9%

-3.4 pts

8.5%

12.1%

-3.6 pts

 

Orders were steady relative to an easier comparison period as a result of select robotics investments in the 3C and automotive sectors, mostly in China, while activity levels among machine builders was weak. Orders fell sharply in Europe and the Americas, mitigated by very strong growth in the AMEA region.

Revenues declined on a year-on-year basis, but improved relative to the previous quarter, driven by catch-up in backlog execution in robotics for automotive and general industry, as COVID-19 restrictions lessened.

Margins were materially lower relative to the prior year period but improved sequentially. Ongoing cost mitigation efforts continued to soften the impact of lower volumes and adverse mix.

Corporate and Other

KEY FIGURES

 

 

CHANGE

 

 

CHANGE

 

($ millions, unless otherwise indicated)

Q3 2020

Q3 2019

US$

9M 2020

9M 2019

US$

Orders

(262)

(265)

+3

(718)

(653)

(65)

Revenues

(269)

(222)

(47)

(673)

(573)

(100)

 

 

Income from operations

(411)

(272)

(139)

(737)

(787)

+50

 

Operational EBITA1

(152)

(176)

+24

(401)

(535)

+134

 

Corporate and Other Operational EBITA improved to -$152 million compared to a year ago. This reflects the elimination of stranded costs related to Power Grids sale and lower ongoing corporate costs.

The non-core business incurred $88 million of losses versus $23 million in the prior year period.

Corporate and Other orders and revenues primarily represent intersegment eliminations.

 

Capital structure optimization

ABB divested 80.1 percent of its Power Grids business to Hitachi on July 1, 2020, recording a book gain of $5.3 billion in the quarter within net income from discontinued operations. As previously announced, ABB intends to return to shareholders net cash proceeds from the divestment of $7.6-7.8 billion. A buyback program of 10 percent5 of the companys share capital commenced July 23 on a second trading line on the SIX Swiss Exchange.

In addition to the ongoing share buyback program, ABB intends to purchase 30-35 million treasury shares during the next 12 months mainly for use in connection with its employee share plans. The purchases will be made at the market price on the ordinary trading line on the SIX Swiss Exchange. ABB currently owns 89,710,731 treasury shares including shares repurchased through the buyback program.

In July, ABB repaid the remaining balance of the ‚¬2 billion short-term revolving credit facility put in place to strengthen liquidity in the face of COVID-19, and in early October, the company repaid a ‚¬1 billion bond upon maturity. In addition, ABB repaid $2.8 billion of commercial paper during the third quarter. In total, ABBs gross debt has been reduced by approximately $4 billion over the last six months.

During the third quarter, as part of an ongoing review of its pension structures, certain of the groups pension plan obligations were transferred to third party insurers, who have assumed the obligation to pay all pensions and benefits due to those plan members.

The transactions, which cover an estimated $1.3 billion of pension obligations that were underfunded by an estimated $450 million, are being facilitated by $320 million of cash contributions of which $273 million was paid in the third quarter by ABB, as well as the transfer of approximately $850 million of existing pension plan assets. As a result, ABB recorded a non-operational pension charge of approximately $380 million in its income statement. The transfer strengthens ABBs financial profile and supports de-risking of its balance sheet for the long term.

During the fourth quarter 2020, ABB intends to continue its capital structure optimization program including further reviews of its debt, credit and pension structures. ABB currently expects these actions to create non-operational costs and expenses of approximately $330 million. Cash flow from operating activities is expected to be negatively impacted by $90 million. Besides the share buyback program, the company anticipates the capital structure optimization transactions of this phase to be largely complete by the end of this year.

ABB takes a responsible approach to financial management, and our capital structure optimization program continues to deliver clear benefits for our stakeholders. The divestment of Power Grids has significantly strengthened our balance sheet, allowing us to improve returns to shareholders while continuing to deleverage and invest in long-term growth, said Timo Ihamuotila, CFO of ABB.

Short-term outlook

The global economy is expected to contract in 2020 after a rapid deterioration in outlook driven by the COVID-19 pandemic. Despite an earlier recovery in China being followed by other large parts of the global economy, there remains considerable uncertainty around the continued pace of recovery. Many countries continue to face ongoing or renewed COVID-19 related restrictions, which could slow recovery, with anticipated long-term economic consequences.

The impact of COVID-19 continues to weigh on the short-term outlook across many end-markets, particularly in oil and gas, conventional power generation, automotive, marine and buildings. Some end markets such as electrical distribution, transport, data centers, consumer electronics and food and beverage continue to show relative resilience.

Against this background, ABB expects fourth quarter order and revenue growth rates to remain challenged on a year-on-year basis and revenue growth rates to decline sequentially. Operating margins are expected to be higher year-on-year including fewer negative impacts from non-recurring items, while weakening on a sequential basis including seasonal impacts. The company anticipates resilient cash delivery for the full year.

Transformation progress

Given the outlook and continued effectiveness of ABBs overall mitigation efforts, remuneration reductions voluntarily taken by all members of the Board of Directors and Executive Committee, and by many senior employees since the onset of COVID-19, were concluded at the end of September.

COVID-19 aside, ABB continues to accelerate its transition to a fully decentralized operating model while conducting a review of the groups portfolio. ABB remains on track for faster delivery of the approximately $500 million per annum net savings initiated through the ABB-OS simplification program, while shifting its focus to continuous improvement across its 18 divisions under the ABB Way. A new division-level scorecard system using standardized KPIs became operational in July, enabling a clear prioritization of improving profitability in underperforming divisions.

ABBs Capital Markets Day on November 19 will provide more insight into the evolution of ABBs portfolio and the companys new way of working under the ABB Way, while providing a closer look at the strategies of its business areas and divisions.

More information

The Q3 2020 results press release and presentation slides are available on the ABB News Center at www.abb.com/news and on the Investor Relations homepage at www.abb.com/investorrelations. A conference call and webcast for analysts and investors is scheduled to begin today at 10:30 a.m. CEST (9:30 a.m. BST). To pre-register for the conference call or to join the webcast, please refer to the ABB website: www.abb.com/investorrelations. The recorded session will be available after the event on ABBs website.

ABB (ABBN: SIX Swiss Ex) is a leading global technology company that energizes the transformation of society and industry to achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back more than 130 years, ABBs success is driven by about 110,000 talented employees in over 100 countries.

INVESTOR CALENDAR

Capital Markets Day

November 19, 2020

Q4 and Full Year 2020 results

February 4, 2021

Annual General Meeting

March 25, 2021

Q1 2021 results

April 27, 2021

Important notice about forward-looking information

This press release includes forward-looking information and statements as well as other statements concerning the outlook for our business, including those in the sections of this release titled Capital structure optimization, Transformation progress and Short-term outlook. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, the economic conditions of the regions and industries that are major markets for ABB. These expectations, estimates and projections are generally identifiable by statements containing words such as anticipates, expects, believes, estimates, plans, targets or similar expressions. However, there are many risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this press release and which could affect our ability to achieve any or all of our stated targets. The important factors that could cause such differences include, among others, business risks associated with the volatile global economic environment and political conditions, costs associated with compliance activities, market acceptance of new products and services, changes in governmental regulations and currency exchange rates and such other factors as may be discussed from time to time in ABB Ltds filings with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved.

Zurich, October 23, 2020

Bj¶rn Rosengren, CEO

________________________

1 For a reconciliation of non-GAAP measures, see supplemental reconciliations and definitions in the attached Q3 2020 Financial Information.

2 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2019 exchange rates not adjusted for changes in the business portfolio).

3 Constant currency (not adjusted for portfolio changes).

4Amount represents total for both continuing and discontinued operations.

5 Maximum 10 percent of the companys issued share capital, including treasury shares.

 

ABB Ltd

Affolternstrasse 44

8050 Zurich

Switzerland

Investor Relations

Phone: +41 43 317 71 11

Email: [email protected]

or

Media Relations

Phone: +41 43 317 71 11

Email: [email protected]  

 

News

Zane Morton to oversee DHL Global Forwarding in New Zealand and Fiji

gbafNews28

  • The logistics veteran brings four decades of DHL experience to the key role in the South Pacific

SINGAPORE – Media OutReach – 1 December 2020 – As the business in DHL Global Forwarding New Zealand and Fiji continue on its growth trajectory, the freight specialist of the Deutsche Post DHL Group officially appoints Zane Morton as Managing Director for these two countries in the South Pacific effective today. Having built an illustrious career with the Group spanning almost four decades, Morton will lead the operations in New Zealand and oversee the growth of the business in Fiji, managed by Country Manager Ray Viegas, who will report to him.

[View Image]

 

“Across his many different roles and responsibilities, Zane has proven himself to be a respected leader, who is customer-oriented in his outlook and finely attuned to developments in the logistics and freight forwarding industry. We are confident he will help our businesses in New Zealand and Fiji reach greater heights amidst the current challenging microenvironment and augment existing synergies between our operations in New Zealand and Fiji,” said Charles Kaufmann, CEO, DHL Global Forwarding North Asia South Pacific.

 

New Zealand’s exports grew 58.6% in the last decade between 2009 and 2019. DHL Global Forwarding is optimistic about the growth potential in the market and considers perishables, life sciences and healthcare, amongst others, as promising areas that the company would further develop.

 

Reporting to Kaufmann in this new role, Morton said, “I’m acutely aware that I’m taking on the role at a very interesting time. In the short term, the industry will face a massive undertaking of delivering an unprecedented volume of more than 10 billion doses of vaccines worldwide; at the same time, DHL Global Forwarding is undergoing a digital transformation with the rollout of myDHLi in accordance to the Group’s Strategy 2025 to futureproof the organization and improve operational excellence in the long term. I am excited to lead the teams in New Zealand and Fiji to take on these challenges and leverage the opportunities to bring the business to greater heights.”

 

DHL recently published a white paper on securing a stable supply chain for vaccines and medical goods during health crises and how the transport of vaccines as a highly temperature-sensitive product can be managed effectively to combat the further spread of the COVID-19 virus. The global logistics leader has been serving the life science and healthcare sector for over 20 years, shipping all sorts of pharmaceutical and medical-related products, including vaccines and therapeutics, worldwide.

 

Morton first joined DHL in New Zealand in 1983 and held various positions during his career, including Operations Management, Country Sales & Marketing Manager, Country Ocean Freight Manager and Wellington Branch Manager. In 2006, he relocated to Dubai where he was the Regional Marketing and Sales Manager for DHL Middle East and Africa for DHL Global Forwarding. He returned to New Zealand in 2011 and was appointed Head of Ocean Freight in 2012, and subsequently named Head of Sales in 2015.

 

Note to editors:

The New Zealand- Europe FTA represents an opportunity to gain better access to the bloc’s almost 500 million consumers through lower tariffs, and new multi-modal shipping options could also lead to even more savings for importers. Read more on DHL’s Logistics of Things.


DHL – The logistics company for the world

DHL is the leading global brand in the logistics industry. Our DHL divisions offer an unrivalled portfolio of logistics services ranging from national and international parcel delivery, e-commerce shipping and fulfillment solutions, international express, road, air and ocean transport to industrial supply chain management. With about 380,000 employees in more than 220 countries and territories worldwide, DHL connects people and businesses securely and reliably, enabling global sustainable trade flows. With specialized solutions for growth markets and industries including technology, life sciences and healthcare, engineering, manufacturing & energy, auto-mobility and retail, DHL is decisively positioned as “The logistics company for the world”.

DHL is part of Deutsche Post DHL Group. The Group generated revenues of more than 63 billion euros in 2019. With sustainable business practices and a commitment to society and the environment, the Group makes a positive contribution to the world. Deutsche Post DHL Group aims to achieve zero-emissions logistics by 2050.

Continue Reading

News

Blake Dair Announces New Managing Partner

gbafNews28

SINGAPORE – Media OutReach – 1 December 2020 – Blake Dair Consulting Pte Ltd, the Singapore based front office trading and technology specialist recruitment company, would like to announce that Nafisa Manasawala will be appointed as Managing Partner of the business from 1st December 2020.

Nafisa has more than 20 years experience in top tier banking as a successful private banker, executive search recruiter and internal talent acquisition specialist. She has worked with banks like Merrill Lynch, Standard Chartered, Credit Suisse and Morgan Stanley. Nafisa combines team management experience with hands-on recruitment experience and deep business understanding, making her a trusted strategic partner in talent management and acquisition.

Nafisa commented, “I am excited to join an established recruitment firm such as Blake Dair Consulting and keen to contribute to the growth of the company through exceptional client service and candidate advisory. My first priority is to build the team selectively, to deepen our experience pool and enhance our market reach.”

“Nafisa joining is fantastic for the team at Blake Dair,” says James Ient, the Founding Shareholder. “The experience Nafisa brings to Blake Dair really helps us achieve our objective of being the preferred employer and preferred vendor in this sector.”

Blake Dair Consulting is a specialist recruitment firm operating in Singapore since 2011 that services clients with roles in Japan, Hong Kong, Malaysia and Singapore in Front Office, Trading and Trading Technology.

+65 67213050

[email protected]

www.bdc.sg

 

Employment Agency License: 11C2852

Continue Reading

News

Salaries set to rise in 2021, but employers in the Philippines signal increased caution, says Mercer survey

gbafNews28

  • Companies forecast a 5.6% overall increase in salaries for 2021, but more than half say they expect changes to salary increment levels.
  • Nearly seven in 10 companies have implemented a hiring freeze
  • 14% of companies expect lower bonus payouts for 2021, with one in two stating it is too early to tell

MANILA, PHILIPPINES – Media OutReach – 1 December 2020 – Salaries in the Philippines are projected to increase in 2021 despite the economic fallout from the coronavirus pandemic. Companies in the Philippines are forecasting an average 5.6% overall increase in salaries for 2021, up from 5.3% this year.

 

This is according to the annual Philippines Total Remuneration Survey (TRS) 2020 by Mercer, a global consulting leader in talent, health, retirement, and investments. The survey polled 416 companies across multiple industries in the Philippines between April and June this year, with additional surveys conducted in July and August in light of the fast-changing market environment.

 

The projected salary increments come on the back of an uncertain economic outlook for the Philippines, with Gross Domestic Product (GDP) expected to contract by 8.3% this year. While growth is expected to rebound to 6.5% [1]in 2021, downside risks such as a slower-than-expected global recovery that could weigh heavily on trade and investment, have resulted in caution among companies.

 

Floriza Molon, Mercer’s Career Business Leader for the Philippines said, “Due to the uncertainty, more than half of the companies have indicated that they will delay the increase of salaries or revise salary increment levels. With sustained pressure on businesses to keep costs down, we see that companies are taking a cautious approach with regards to salary budgets.”

 

Across industries surveyed, the Chemical industry is expected to see the biggest rebound in salary increments at 5.5% in 2021, up from 3.9% in 2020. The Consumer, Life Sciences, Energy as well as Retail and Wholesale industries also saw slight increases compared to last year.

Ms Molon added, “While the salary increase budget remains stable in spite of the pandemic, what we are seeing is that companies are increasingly prudent with their compensation policies as well as the allocation of the salary budget. Some of the considerations include how business-critical the roles are, the potential and performance of the employees, flight risk and availability of jobs in the market.” 

Variable Bonuses for 2020 remained stable, but decreases expected in 2021


Overall, average budgeted bonuses for 2020 dipped slightly at 16%, compared to 17% in 2019. The Life Science industry saw the highest increase at 23% compared to 20% in 2019, while bonus payouts decreased in the Consumer, Logistics and Shared Services & Outsourcing industries.

Ms Molon said, “91% of companies provided bonuses in 2020, reflecting their strong performance in 2019. However, we foresee a decrease in bonus payout in 2021 due to the uncertain economic environment.”

Looking ahead, 14% of companies expect the bonus payout for 2021 to be less than the previous year, while 50% say it is too early to tell. Only 8% of companies expect budgeted bonuses to increase in 2021.

With the cautious business outlook, recruitment efforts are expected to slow in the year ahead. 69% of companies in the Philippines indicated that they have imposed a hiring freeze in 2020, with 10% reducing headcount due to the pandemic.

Embracing Flexible Working


The survey has also seen a shift to remote working arrangements among companies in the Philippines. 67% of the organization have implemented remote working arrangements in response to the COVID-19 outbreak with 58% projecting that employees will be more likely to use flexible working arrangement post-pandemic.

Teng Alday, Mercer’s CEO for the Philippines said, “Companies in the Philippines have successfully implemented flexible work arrangements amid the pandemic, with only 14% of companies stating a decrease in the level of productivity. We foresee more employers embracing flexible working arrangement which provides an opportunity for companies to review their compensation and total rewards packages more holistically to adopt variable pay and other reward initiatives such as work-from-home allowances to recognise and retain critical talent.

“As the financial impact of the pandemic continues to play out, companies are taking a cautious approach in light of cost pressures and the need to protect their core business. We encourage companies to adopt strategies that balance economics and empathy as employee engagement and retention will be critical in their road to recovery.”

About Mercer’s Total Remuneration Survey

The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.

For more data and insights from Mercer’s Philippines Total Remuneration Survey 2020, please see here.

About Mercer

Mercer builds brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 75,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter [View Image]@Mercer.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
gbafNews28 gbafNews28
News1 hour ago

2021 skincare solutions just a click away with POND’S Skin Advisor Live chatbot now on Shopee

Banish Pandemic-induced Skincare Woes with POND’s Beauty Tech on Shopee   HO CHI MINH CITY, VIETNAM – Media OutReach – 1 December...

gbafNews28 gbafNews28
News1 hour ago

Consumer spending in Islamic economy sectors forecast to rebound by end-2021, market size slated to reach US$2.3 trillion by 2024

Takeaways from the State of the Global Islamic Economy Report 2020/21 will be unveiled at Reimagine: Halal in Asia 2020,...

gbafNews28 gbafNews28
News1 hour ago

Infor Launches Hospitality Management Cloud Solution based on Amazon Web Services in China to Spur Digital Transformation among Chinese Hotels

Rich capabilities allow hoteliers to centralize cross-platform hospitality management systems; AWS partnership ensures stability and security of data in the...

gbafNews28 gbafNews28
News1 hour ago

Zipline, Medical Drone Delivery Pioneer to Headline HISA2020

JOHANNESBURG, SOUTH AFRICA – Media OutReach – 30 November 2020 – Technology is transforming industries on a global scale, with the COVID-19 pandemic...

gbafNews28 gbafNews28
News1 hour ago

“Emma by AXA”, your insurance and healthy living partner Download now to enjoy first-in-market free “Post-Vaccination Protection”

HONG KONG SAR – Media OutReach – 30 November 2020 – Emma by AXA — AXA‘s all-in-one insurance & health services platform...

gbafNews28 gbafNews28
News1 hour ago

Lee Kum Kee Sauce Group Appoints Ms. Katty Lam as Chief Executive Officer

HONG KONG SAR – Media OutReach – 1 December 2020 – Lee Kum Kee Sauce Group announces the appointment of Ms. Katty Lam...

gbafNews28 gbafNews28
News1 hour ago

Salaries set to rise in 2021, but employers in the Philippines signal increased caution, says Mercer survey

Companies forecast a 5.6% overall increase in salaries for 2021, but more than half say they expect changes to salary...

gbafNews28 gbafNews28
News1 hour ago

Blake Dair Announces New Managing Partner

SINGAPORE – Media OutReach – 1 December 2020 – Blake Dair Consulting Pte Ltd, the Singapore based front office trading and technology specialist...

gbafNews28 gbafNews28
News1 hour ago

Zane Morton to oversee DHL Global Forwarding in New Zealand and Fiji

The logistics veteran brings four decades of DHL experience to the key role in the South Pacific SINGAPORE – Media OutReach –...

gbafNews28 gbafNews28
News1 hour ago

The Public Relations Network (Asia Chapter) to offer regional intelligence & local expertise to industries benefiting from the recently-signed RCEP amid COVID-19 Challenges

HONG KONG SAR – Media OutReach – 30 November 2020 – With the signing of the Regional Comprehensive Economic Partnership...