Divisional analysis

Electrification Products

The financial results of our Electrification Products division were as follows:

 

 

 

 

% Change

($ in millions)

2016

2015

2014

2016

2015

Orders

9,158

9,833

10,861

(7)%

(9)%

Order backlog at December 31,

2,612

2,872

2,798

(9)%

3%

Revenues

9,292

9,547

10,572

(3)%

(10)%

Income from operations

1,335

1,356

1,562

(2)%

(13)%

Operational EBITA

1,528

1,561

1,739

(2)%

(10)%

Orders

In 2016, orders decreased 7 percent (4 percent in local currencies). In the Medium Voltage Products and the Electrification Solutions businesses demand was lower due to weak market conditions and lower orders from EPC projects. Orders also decreased in the Installation Products business on weaker orders from the distributor and end-customer channels. Orders were higher in the Building Products business largely due to higher orders from distributors, but partially offset by lower demand from our direct end-customers. Orders were stable in the Protection and Connection business with growth in OEM orders offset by weaker order intake from the distributor and end-customers channels.

In 2015, orders decreased 9 percent (steady in local currencies). Local currency order growth in the Protection and Connection business was offset by decreases in orders in the Building Products and the Electrification Solutions businesses while orders in local currencies were steady in the Medium Voltage Products business.

The geographic distribution of orders for our Electrification Products division was as follows:

(in %)

2016

2015

2014

Europe

37

35

36

The Americas

27

26

24

Asia, Middle East and Africa

36

39

40

Total

100

100

100

In 2016, the share of orders in Europe increased driven by growth in several countries, especially Germany. In the Americas, while orders declined in local currencies, the region was able to slightly increase its share of orders relative to the larger decrease in the Asia, Middle East and Africa region. In Asia, Middle East and Africa the share of orders decreased primarily due to lower orders in China and Saudi Arabia compared to 2015.

In 2015, the share of orders in Europe decreased primarily due to the strong U.S. dollar. The order development in the Americas was steady, resulting in an increase in the share of orders compared to the other two geographies. The share of orders in Asia, Middle East and Africa decreased due to a slowdown of markets in China, the Middle East and Australia. The share of orders in that region compared to 2014 was also partially affected by the strong U.S. dollar.

Order backlog

In 2016, order backlog decreased by 9 percent (decrease of 5 percent in local currencies), primarily on decreased backlog in the Medium Voltage Products business on higher order execution for modular systems and primary switchgear.

In 2015, order backlog increased by 3 percent (increased by 11 percent in local currencies), driven mainly by higher backlog in the Medium Voltage Products business.

Revenues

In 2016, revenues decreased by 3 percent compared to 2015 (increased 1 percent in local currencies). In local currencies, revenues increased in the Medium Voltage Products business unit, which was primarily driven by sales for modular systems and which was partly offset by lower revenues from primary switchgear. Our Building Products business also showed an increase in revenues with growth driven through the distribution and panel builder channels, which was slightly offset by lower revenues from direct end-customers. Revenues were lower in all other business units on lower demand from the distribution and OEM channels, although this was partly offset by increases in the panel builder channel.

In 2015, revenues decreased by 10 percent (steady in local currencies). In local currencies, revenues were higher in the Medium Voltage Products, Protection and Connection and Installation Products businesses and were lower in the Building Products and Electrification Solutions businesses.

The geographic distribution of revenues for our Electrification Products division was as follows:

(in %)

2016

2015

2014

Europe

37

34

37

The Americas

26

26

25

Asia, Middle East and Africa

37

40

38

Total

100

100

100

In 2016, the share of revenues in Europe increased due to growth across several European countries, especially Germany. Revenues in the Americas decreased slightly, maintaining a steady overall share of revenues. The share of revenues in Asia, Middle East and Africa decreased primarily due to lower revenues in China and the Middle East.

In 2015, the share of revenues in Europe decreased primarily due to the strong U.S. dollar, as the region otherwise showed solid local currency growth. The revenues development in the Americas was steady, resulting in an increase in the share of revenues compared to the other two geographies. The share of revenues in Asia, Middle East and Africa increased slightly, however in local currencies the region revenues were lower compared to 2014 due to a slowdown of markets in China, the Middle East and Australia.

Income from operations

In 2016, income from operations decreased 2 percent primarily due to lower revenues and lower gross margins compared to 2015. Reductions in selling, general and administrative expenses resulting from ongoing restructuring and cost savings programs, as well as lower restructuring and restructuring-related expenses partly offset the impact of lower gross margins. In addition changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 4 percent.

In 2015, income from operations decreased 13 percent. The decrease is primarily due to lower revenues as well as higher restructuring charges in connection with the company-wide White Collar Productivity program which negatively impacted income from operations. In addition changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 8 percent.

Operational EBITA

The reconciliation of income from operations to Operational EBITA for the Electrification Products division was as follows:

($ in millions)

2016

2015

2014

(1)

Amounts also include the incremental implementation costs in relation to the White Collar Productivity program.

Income from operations

1,335

1,356

1,562

Acquisition-related amortization

95

100

113

Restructuring and restructuring-related expenses(1)

73

124

49

Non-operational pension cost

3

(3)

(2)

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

8

4

(7)

FX/commodity timing differences in income from operations

14

(20)

24

Operational EBITA

1,528

1,561

1,739

In 2016, Operational EBITA decreased 2 percent (steady when excluding the impacts from changes in foreign currencies) compared to 2015, as declines in Installation Products and Protection and Connection businesses were offset by improvements across all other businesses.

In 2015, Operational EBITA decreased 10 percent (steady when excluding the impacts from changes in foreign currencies) compared to 2014, as declines in Installation Products business were offset by other businesses.

Discrete Automation and Motion

The financial results of our Discrete Automation and Motion division were as follows:

 

 

 

 

% Change

($ in millions)

2016

2015

2014

2016

2015

Orders

8,654

9,222

10,559

(6)%

(13)%

Order backlog at December 31,

4,078

4,232

4,385

(4)%

(3)%

Revenues

8,714

9,127

10,142

(5)%

(10)%

Income from operations

831

991

1,422

(16)%

(30)%

Operational EBITA

1,195

1,295

1,595

(8)%

(19)%

Orders

Orders in 2016 were 6 percent lower (4 percent in local currencies). Strong order intake in the Robotics business and higher orders from light industries, such as the food and beverage industry, were more than offset by lower orders in the Motors and Generators and the Drives and Controls businesses, primarily due to declining orders from the oil and gas sector. Orders in the Power Conversion business were also lower due to a decrease in orders from customers in the solar industry.

Orders in 2015 decreased 13 percent (5 percent in local currencies) due to weaker markets in most of our businesses. Declining oil prices and slower growth in China affected the order intake negatively, especially in the Motors and Generators and the Drives and Controls businesses. Orders in the Robotics business increased in local currencies, supported by strong demand for services. Orders in the Power Conversion business were lower and were impacted by lower large orders from the rail segment.

The geographic distribution of orders for our Discrete Automation and Motion division was as follows:

(in %)

2016

2015

2014

Europe

36

34

39

The Americas

33

35

32

Asia, Middle East and Africa

31

31

29

Total

100

100

100

In 2016, the share of orders in Europe increased mainly due to strong demand in Germany and Finland, respectively driven by the Robotics business and the Drives and Controls business. The share of orders from the Americas decreased mainly due to lower orders in the Motors and Generators business and lower orders in the Drives and Controls business.

In 2015, the geographical distribution of our orders changed primarily due to the impact of the large rail orders from Europe in 2014. In addition, orders from the Americas and Asia, Middle East and Africa benefitted from strong orders in the Robotics business.

Order backlog

Order backlog in 2016 decreased 4 percent. In local currencies, order backlog was flat as lower order backlog in the Drives and Controls business and Motors and Generators business was offset by increases in the backlog for the Robotics and Power Conversion businesses.

Order backlog in 2015 decreased 3 percent (increased 3 percent in local currencies) compared to 2014. In local currencies, order backlog increased as lower order backlog in the Motors and Generators business was offset by increases in the backlog for the Robotics and Power Conversion businesses.

Revenues

In 2016, revenues decreased 5 percent (2 percent in local currencies) due to lower revenues in the Motors and Generators, the Drives and Controls and the Power Conversion businesses. Revenues were higher in the Robotics business as we executed on the strong orders received and the strong order backlog.

In 2015, revenues were 10 percent lower (2 percent in local currencies). Revenues were weaker, as growth in the Robotics and Power Conversion businesses, supported by strong order backlog, was offset by weaker revenues resulting from the lower order intake in the short-cycle businesses such as low voltage motors and drives.

The geographic distribution of revenues for our Discrete Automation and Motion division was as follows:

(in %)

2016

2015

2014

Europe

36

35

37

The Americas

34

35

33

Asia, Middle East and Africa

30

30

30

Total

100

100

100

In 2016, the geographical distribution of revenues was similar to 2015. The share of revenues in Europe slightly increased due to the execution of a strong order backlog, while the share of revenues in the Americas decreased due to lower volume in the solar market. The share of revenues from Asia, Middle East and Africa remained flat as higher revenues in the Robotics business offset the decline in the Drives and Controls and the Motors and Generators businesses.

In 2015, revenues declined in all regions. The share of revenue from Europe was lower than in 2014 due to the weak markets for motors and drives. The share of revenues from the Americas increased, especially due to the revenue development in the Robotics business. As a result the share of revenues from Asia, Middle East and Africa remained flat as higher revenues in the Robotics business somewhat compensated the decline in the Drives and Controls business.

Income from operations

In 2016, income from operations was 16 percent lower compared to 2015 mainly due to the impact of costs recorded for a change in estimated warranty liabilities for certain solar inverters designed and sold by Power-One. During 2016, we recorded $151 million as a charge to cost of sales to recognize a change in the estimated warranty liability for these products, the majority of which were delivered to customers by Power-One prior to the acquisition date in 2013. Of this charge, $131 million related to the products sold by Power-One prior to the acquisition and has been included as an adjustment, in the table below, to determine the segment profit for the division. Additionally, lower revenues and low capacity utilization further reduced the income from operations. Restructuring and restructuring-related expenses in 2016 were lower than 2015. Income from operations benefitted from a strong performance of the Robotics business but was offset by declines in the other businesses. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 2 percent.

In 2015, income from operations decreased 30 percent compared to 2014 due to lower revenues and lower capacity utilization. Steady income in the Robotics business could not compensate for the profit deterioration realized in other businesses. The Drives and Controls business was negatively affected by the weaker business climate in China while the Motors and Generators business suffered from low oil prices and weak demand leading to lower factory utilization. Income from operations in the Power Conversion business was flat despite both continued price erosion and higher warranty costs in the solar business. The division’s income from operations was also negatively affected by the impact of the higher restructuring charges incurred in connection with capacity adjustments and the company-wide White Collar Productivity program. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 7 percent.

Operational EBITA

The reconciliation of income from operations to Operational EBITA for the Discrete Automation and Motion division was as follows:

($ in millions)

2016

2015

2014

(1)

Amounts also include the incremental implementation costs in relation to the White Collar Productivity program.

Income from operations

831

991

1,422

Acquisition-related amortization

120

128

138

Restructuring and restructuring-related expenses(1)

88

125

25

Non-operational pension cost

2

3

6

Changes in pre-acquisition estimates

131

21

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

18

26

FX/commodity timing differences in income from operations

5

1

4

Operational EBITA

1,195

1,295

1,595

In 2016, Operational EBITA decreased 8 percent (6 percent excluding the impacts from changes in foreign currencies) primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2015, Operational EBITA decreased 20 percent (11 percent excluding the impacts from changes in foreign currencies) compared to 2014, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

Process Automation

The financial results of our Process Automation division were as follows:

 

 

 

 

% Change

($ in millions)

2016

2015

2014

2016

2015

Orders

5,866

7,347

9,213

(20)%

(20)%

Order backlog at December 31,

5,258

6,036

6,515

(13)%

(7)%

Revenues

6,598

7,224

8,618

(9)%

(16)%

Income from operations

696

685

931

2%

(26)%

Operational EBITA

824

863

1,045

(5)%

(17)%

Orders

Orders in 2016 declined 20 percent (18 percent in local currencies) compared with the previous year, mainly due to continued low or decreased levels of capital expenditure in both the onshore and offshore oil segments. Orders were lower in most Process Automation businesses, but mainly in the Oil, Gas and Chemicals business, Marine and Ports and Process Industries. The Process Industries business continued to be affected by low commodity prices leading to weak demand from the mining and metals industries, where spending overall, both capital expenditure and operational expenditure, was cut.

Orders in 2015 declined 20 percent (9 percent in local currencies), mainly due to the impacts of a reduction in capital and operating expenditures in the oil and gas sector resulting from continued low oil prices. This negatively impacted the Oil, Gas and Chemicals business. The continued low oil prices adversely impacted the marine sector and in particular the offshore drilling vessels segment. This development negatively impacted the Marine and Ports business. The Process Industries business was also adversely affected as the mining sector remained at a low level as customers in this segment either continued to delay or postpone investments due to low commodity prices.

The geographic distribution of orders for our Process Automation division was as follows:

(in %)

2016

2015

2014

Europe

42

38

34

The Americas

21

22

22

Asia, Middle East and Africa

37

40

44

Total

100

100

100

In 2016, orders declined in all regions. Orders in Europe declined less than other regions, thus increasing the geographic share of orders from Europe. The volume in Europe was supported by orders from marine industries, specifically for specialty vessels like cruise ships and ice-going vessels. The share of orders from the Americas fell slightly with order declines especially in Canada, the U.S. and Chile, where the Process Industries business was affected by low capital expenditure in mining due to low demand from China for raw materials. In the Asia, Middle East and Africa region, orders were lower especially in the Marine and Ports business due to weak demand for oil and gas related vessels and the lack of infrastructure projects from the ports business. In addition, the Oil, Gas and Chemical business as well as the Process Industries business suffered from the lack of large orders in this geographic area.

In 2015, orders declined in all regions. The share of orders from Asia, Middle East and Africa declined due to large orders received from the Marine and Ports business in 2014. In addition, the region was impacted by weak domestic demand in China. Orders in the Americas declined by a lower percentage than the division as a whole, resulting in a steady share of the orders from the Americas. Declines included the impacts of lower mining investments in South America, as well as slowing demand in the U.S. from the upstream oil and gas sector. As most major industrial economies in Europe were either steady or contracting only slightly, the geographic share of orders from Europe increased.

Order backlog

Order backlog at December 31, 2016 was 13 percent lower (10 percent in local currencies) than at December 31, 2015. The lower backlog was a result of the lower order intake during the year and the continued execution from the existing backlog.

Order backlog at December 31, 2015, was 7 percent lower (3 percent higher in local currencies) than at December 31, 2014. Order backlog in most businesses was lower due to the impacts of lower orders during the year. The increase in order backlog in local currencies was due to the receipt of higher large orders near the end of 2015.

Revenues

In 2016, revenues declined 9 percent (6 percent in local currencies) compared with the previous year. The largest decline was in the Process Industries business due to the lower opening order backlog and the continued low level of order activity from the mining and metals sector. A continued lack of orders from the oil and gas industry negatively impacted revenues in the Oil, Gas and Chemicals business. The overall decrease in revenues was mitigated by steady revenues in the Marine and Ports business which was supported by the strong opening order backlog for ice-going and cruise vessels. Revenues were also steady in the Power Generation business due to solid execution from the order backlog. Of the product businesses, Control Technologies had revenue levels similar to the previous year, but the Measurement and Analytics and the Turbocharging businesses were slightly lower due to lower order intake.

In 2015, revenues decreased 16 percent (5 percent in local currencies). Revenues in the Oil, Gas and Chemicals business declined, reflecting the lower opening order backlog as well as reduced opportunities from slower customer order tendering, especially in the service business. The Marine and Ports business also recorded lower revenues, reflecting lower activity in the offshore oil and gas industry and large project delays. The Process Industries business, which includes mining and metals, also declined. Revenues in the Measurement and Analytics business declined, largely due to lower demand in the upstream oil and gas segment. In local currencies, the Turbocharging and the Power Generation businesses were flat while the Control Technologies business had higher revenues.

The geographic distribution of revenues for our Process Automation division was as follows:

(in %)

2016

2015

2014

Europe

37

34

36

The Americas

21

23

23

Asia, Middle East and Africa

42

43

41

Total

100

100

100

In 2016, revenues continued to decline in the Americas and in Asia, Middle East and Africa, while Europe was stable. This resulted in an increase in the share of revenues from Europe. Except for the Marine and Ports business, revenues in the Americas declined in all businesses, especially the Oil, Gas and Chemicals, Process Industries and the product businesses. Revenues in Asia, Middle East and Africa were especially impacted by the weak demand from the Process Industries business, particularly mining.

The regional distribution of revenues in 2015 remained steady compared to 2014 as a downturn in the oil and gas and commodities sectors affected all of the geographies. The share of revenues from Europe declined, reflecting lower oil and gas and marine activities in Norway. Revenues in the Americas decreased proportionally. The larger proportional revenue decrease in Europe and a steady share of revenues in the Americas resulted in a redistribution of the share to Asia, Middle East and Africa.

Income from operations

In 2016, income from operations increased 2 percent compared with 2015, despite decreasing revenues as restructuring charges relating to the ongoing White Collar Productivity program and other restructuring activities were lower. Operating margins were maintained as we reduced overhead costs by removing organizational costs at the local division level and downsizing operations in areas with low order backlog and low market demand. Key actions included closing warehouses and consolidating operations to fewer locations, but mainly included reducing the number of personnel. Restructuring programs were implemented in all businesses due to a continued weak market outlook. Overall, the number of employees in the Process Automation division was reduced by approximately 1,200 during 2016. In addition, changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 4 percent.

In 2015, income from operations declined 26 percent compared to 2014, mainly from higher restructuring charges due to the implementation of the company-wide White Collar Productivity program as well as the decrease in revenues explained above. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 8 percent.

Operational EBITA

The reconciliation of income from operations to Operational EBITA for the Process Automation division was as follows:

($ in millions)

2016

2015

2014

(1)

Amounts also include the incremental implementation costs in relation to the White Collar Productivity program.

Income from operations

696

685

931

Acquisition-related amortization

11

12

18

Restructuring and restructuring-related expenses(1)

79

130

36

Non-operational pension cost

2

6

17

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

9

14

32

FX/commodity timing differences in income from operations

27

16

11

Operational EBITA

824

863

1,045

In 2016, Operational EBITA decreased by 5 percent (2 percent excluding the impacts from changes in foreign currencies) compared to 2015, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2015, Operational EBITA decreased 17 percent (9 percent excluding the impacts from changes in foreign currencies) compared to 2014, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

Power Grids

The financial results of our Power Grids division were as follows:

 

 

 

 

% Change

($ in millions)

2016

2015

2014

2016

2015

Orders

11,232

12,205

12,768

(8)%

(4)%

Order backlog at December 31,

12,437

12,502

12,619

(1)%

(1)%

Revenues

10,975

11,621

12,518

(6)%

(7)%

Income from operations

888

613

257

45%

139%

Operational EBITA

1,021

877

607

16%

44%

Orders

In 2016, orders decreased 8 percent (5 percent in local currencies) compared with 2015. The decrease partly reflected a lower level of large orders, which was primarily caused by the timing of order awards. Base orders were also lower, reflecting general macroeconomic uncertainty and sluggishness in some geographic markets such as Saudi Arabia and the U.S. The lower pull-through of orders from other ABB divisions, primarily the Process Automation division, reduced orders by 3 percent. Third-party base orders decreased 3 percent (steady in local currencies) with order growth in the Grid Systems, High Voltage Products and Grid Automation businesses offset by market-driven base order weakness in the Transformers business. Large orders in 2016 included a $640 million UHVDC transmission link in India, two UHVDC orders for China (each worth more than $300 million), and a $250 million high-voltage cable system to connect the Hornsea offshore wind farm in the North Sea to the United Kingdom mainland grid. The general market remains competitive with macroeconomic and geopolitical challenges.

In 2015, orders decreased 4 percent (increased 8 percent in local currencies) compared with 2014. The growth in local currencies mainly resulted from a higher level of large orders. Large orders in the Grid Systems business included an HVDC order awarded to connect the Norwegian and German power grids and a $450 million HVDC order for an interconnection between Norway and the United Kingdom. Large orders were also supported by the continued selective investments in large transmission projects in the U.S. and China. In local currencies, base orders were lower, mainly due to the challenging macroeconomic conditions. The markets remained competitive with continued pricing pressure.

The geographic distribution of orders for our Power Grids division was as follows:

(in %)

2016

2015

2014

Europe

27

37

34

The Americas

27

27

31

Asia, Middle East and Africa

46

36

35

Total

100

100

100

In the Power Grids division, the change in the geographic share of orders often reflects changes in the geographical location of large orders. In 2016, the share of orders from Asia, Middle East and Africa increased from 36 percent to 46 percent, helped by strong order intake in China and India. Although the share of orders from the Americas was steady, orders from the Americas were lower, resulting from market challenges particularly in the U.S. and Brazil. The share of orders from Europe decreased to 27 percent, compared with 37 percent in 2015, mainly due to the high amount of large orders received from Europe in 2015.

In 2015, Europe benefited from a higher level of large orders compared with 2014, supported by the large HVDC awards. The share of orders from Asia, Middle East and Africa increased to 36 percent, supported by large orders. Orders in the Americas were significantly lower, partly due to a significant large HVDC order received in Canada in 2014.

Order backlog

Order backlog at December 31, 2016, decreased 1 percent (increased 3 percent in local currencies). The local currency increase in order backlog was mainly driven by the Transformers business, resulting from a significantly higher share of large orders with long leadtimes.

Order backlog at December 31, 2015, decreased 1 percent (increased 7 percent in local currencies) compared with December 31, 2014. The local currency increase in order backlog reflects the impact of the high levels of large orders, which typically have execution times stretching over several years.

Revenues

Revenues in 2016 decreased 6 percent (3 percent in local currencies) compared with 2015. The revenue volume in 2016 mainly reflected the scheduled execution of the order backlog. The revenue decrease was mainly attributable to the Grid Systems business as the offshore wind projects which contributed strongly to the revenues in 2015 were either finalized or nearing completion. A lower level of revenues in the Transformers business primarily resulted from order weakness in the U.S. whereas revenues in the Grid Integration business were negatively impacted by the exit from the EPC Solar business and the wind-down of the plant electrification business.

Revenues in 2015 decreased 7 percent (increased 3 percent in local currencies) compared with 2014. The increase in local currencies was mainly driven by steady execution of the order backlog, led by growth in the Grid Systems business, supported by the execution of offshore wind projects. In local currencies, revenues were also higher in the business units Grid Automation, Transformers and High Voltage Products. These positives more than offset a lower level of revenues in the Grid Integration business, which was partly caused by our exit from the EPC Solar business in 2014.

The geographic distribution of revenues for our Power Grids division was as follows:

(in %)

2016

2015

2014

Europe

30

32

34

The Americas

29

30

28

Asia, Middle East and Africa

41

38

38

Total

100

100

100

The regional distribution of revenues partly reflects the geographical end-user markets of the projects executed during the year, and consequently varies over time. In 2016, the share of revenues from Asia, Middle East and Africa increased to 41 percent, supported by significantly higher revenues from the Transformer business in China. The share of revenues from Europe decreased to 30 percent, mainly due to a lower level of revenues from the Grid Systems business, related to lower revenues in the offshore wind projects described above. The share of revenues from the Americas was lower, mainly driven by lower revenue volumes from the U.S. and Brazil.

In 2015, revenues decreased in all regions. In Europe the share of revenues decreased due mainly to lower revenues in the Transformers and High Voltage businesses. The steady execution in the Americas resulted in a proportional increase of revenues from that region, while the revenues in Asia, Middle East and Africa decreased proportionally, mainly due to the Grid Integration business.

Income from operations

In 2016, income from operations increased by $275 million to $888 million compared with $613 million in 2015. The impact from lower revenues was more than offset by a higher gross margin, driven by solid project execution, improved productivity and continued cost savings. Restructuring and restructuring-related expenses in 2016 of $101 million were $59 million lower than in 2015 and included additional charges for the White Collar Productivity program, as well as initiatives to align the cost structure and footprint of certain operations to reflect changing market conditions. We had lower research and development expenses and lower acquisition-related amortization in 2016 compared to 2015. In addition, changes in foreign currencies, including the changes in FX/commodity timing differences in income from operations decreased the division’s income from operations by 2 percent compared to 2015.

In 2015, income from operations increased by $356 million to $613 million compared with $257 million in 2014, mainly due to benefits from the ongoing measures taken in the ‘step change’ program (implemented in the former Power Systems division) and continued cost reduction initiatives. Restructuring-related expenses in 2015 of $160 million were higher than in 2014 and included charges for the new company-wide White Collar Productivity program and ongoing costs for the previously-announced initiatives to align the cost structure of certain operations to reflect changing market conditions. Continued cost savings, primarily related to supply chain management and operational excellence, helped to mitigate higher research and development spending as well as the negative effects from price pressures. Acquisition-related amortization also decreased in 2015 compared to 2014. In addition, changes in the amount of FX/commodity timing differences in income from operations increased the division’s income from operations by $124 million compared to 2014.

Operational EBITA

The reconciliation of income from operations to Operational EBITA for the Power Grids division was as follows:

($ in millions)

2016

2015

2014

(1)

Amounts also include the incremental implementation costs in relation to the White Collar Productivity program.

Income from operations

888

613

257

Acquisition-related amortization

35

52

89

Restructuring and restructuring-related expenses(1)

101

160

106

Non-operational pension cost

(2)

3

12

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

(2)

39

9

FX/commodity timing differences in income from operations

1

10

134

Operational EBITA

1,021

877

607

In 2016, Operational EBITA increased by 16 percent (19 percent excluding the impacts from changes in foreign currencies) compared to 2015, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2015, Operational EBITA increased by $270 million. This was primarily driven by the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

Corporate and Other

Income (loss) from operations for Corporate and Other was as follows:

($ in millions)

2016

2015

2014

Corporate headquarters and stewardship

(380)

(355)

(343)

Corporate research and development

(133)

(144)

(174)

Corporate real estate

47

50

44

White Collar Productivity program costs

(199)

(130)

Divested businesses

2

547

Misappropriation loss

(73)

Other

(29)

(32)

(79)

Total Corporate and Other

(767)

(609)

(5)

In 2016, Corporate headquarters and stewardship costs increased due to the launch of the new ABB brand and other costs related to the implementation of the Next Level Strategy program. In 2015, Corporate headquarters and stewardship costs were effectively at the same level of the prior year.

Corporate real estate primarily includes the income from property rentals and gains from the sale of real estate properties. In 2016, 2015 and 2014, income from operations in Corporate real estate included gains of $33 million, $26 million and $17 million, respectively, from the sales of real estate property in various countries.

In 2016, ABB recorded a total of $199 million in “Corporate and Other” for both restructuring and related expenses as well as program implementation costs for the White Collar Productivity program. These costs relate mainly to employee severance costs and both external and internal costs relating to the execution of the program. In 2015, costs incurred in connection to the White Collar Productivity program amounted to $130 million. For further information on the White Collar Productivity program see “Restructuring and other cost savings initiatives” below.

The historical results of operations for certain divested businesses have been presented in “Corporate and Other”. In 2014, the amount primarily represents gains recorded on the divestments of these businesses of $543 million.

In 2016, we recorded a loss of $73 million, net of expected insurance recoveries, for the misappropriation of cash by the treasurer of our subsidiary in South Korea.

“Other” consists of operational costs of our Global Treasury Operations, operating income or loss in other non-core businesses and certain other charges such as costs and penalties associated with legal cases, environmental expenses and impairment charges related to investments. In 2016, “Other” included the impact of a reduction in certain insurance-related provisions for self-insured risks offset by amounts recorded for certain pension curtailment costs. In 2015, “Other” declined primarily due to a reduction of insurance-related provisions for self-insured risks. In 2014, “Other” included primarily lower charges in connection with legal compliance cases and lower environmental expenses compared to 2013.