Ladies and Gentlemen, Welcome to our presentation of the Annual Results 2002. It was a difficult year but we’ve put the worst behind us. In 2002, we secured a major new credit facility, which has given us operational stability and flexibility until the end of 2004.
Peter Voser, our chief financial officer, will come back to this in his analysis of our results and overview of our financial strategy. We have made good progress in our efforts to put the asbestos issue to rest. Beat Hess, our chief legal counsel , will tell you more about how we progressed, and what happens next.
In 2002, the disposals of Structured Finance and the Metering Business were completed successfully. We are in talks with several potential buyers to divest the Oil, Gas & Petrochemicals division which is now reported under discontinued operations. And we are on target to sell Building Systems in 2003.
You will have seen the results in the press release so let me just give you a brief overview. I want to highlight our core divisions Power Technologies, and Automation Technologies. For the full year 2002, our core division revenues increased from 15.4 billion dollars to 15.6 billion dollars.
The core divisions’ EBIT went up by 4.3 percent, and the EBIT margin from 5.9 to 6.1 percent.
For the Group as a whole, EBIT increased from 179 million dollars to 336 million dollars, but because of losses of 853 million in discontinued operations, including charges related to asbestos, we posted a net loss of 787 million US dollars.
I also want to point out, that we reached our revised EBIT margin target of 1.5 percent and cut net debt on a comparable basis by 1.5 billion dollars also on target.
Ladies and Gentlemen, the key message here is that as a Group we achieved our targets, but most importantly that our core divisions performed well in the fourth quarter 2002 and also posted higher profitability for the year 2002.
Peter Smits and Dinesh Paliwal will report on the divisions.
If you look at the revenue, EBIT and EBIT margin development for the core divisions you see that ABB has a sound underlying core business.
Comparing the fourth quarter 2002 with the fourth quarter 2001 the core divisions maintained their revenues and significantly increased EBIT and EBIT margin.
Looking at the whole year it is a similar picture.
Core division revenues were up slightly, EBIT increased by 4.3 percent and the EBIT margin was up slightly. Considering the challenges this is a good performance by our two core businesses.
For 2003, I confirm that Power and Automation Technologies will continue to improve their operating margins through increased productivity, slimmer structures and a lower cost base.
To further leverage the strength of the underlying operations in our core businesses, we have set rigorous restructuring measures in motion, as we announced last year.
As you know we are committed to taking 800 million dollars in cost out over the next 18 months, on top of the 500 million dollars of costs taken out since the middle of 2001.
Gary Steel, our Executive Committee member in charge of Human Resources, leads the new cost savings program. Gary will provide a status report and look at the plans for this year and next.
ABB operates in highly competitive markets, with relatively low long-term overall growth rates, but there are always business opportunities - to find profitable growth areas and industries.
Automation Technologies Division has a compound annual revenue growth target of over 3 percent up to 2005, and the corresponding figure for Power Technologies Division is more than 5 percent. Increased productivity as well as targeting the customer segments and areas with the best potentials for profitable growth; that is our route to increased profitability.
The performance of our core businesses in difficult circumstances is a testimony to our technology leadership, our skilled and motivated people, who have built the leading market positions of our core businesses around the world.
The performance also shows that our customers in utilities and industries around the world – and our customers are of course our most important constituency – continue to rely on ABB. It reflects the strength and vitality of the ABB brand.
Ladies and Gentlemen, We do not expect any market improvements in the near term.
So the pressure of change will continue to be high. We will deal with that.
In November we announced targets of 4 percent revenue growth and 4 percent EBIT margin in 2003. We confirm this outlook for 2003.
We also announced a target of an average annual revenue growth rate of 4 percent until 2005 and an EBIT margin of 8 percent.
We confirm this outlook for 2005.