Division results for 2002 Q4

Divisional performance Q4 2002
The Power Technology Products and Automation Technology Products divisions serve their customers through external channel partners and ABB's end-user divisions. More customers are being served directly by channel partners such as wholesalers, systems integrators and distributors. Orders, revenues and earnings associated with these customers are accordingly no longer reflected in the end-user divisions.

As a result, in the end-user divisions, orders and revenues from these "pull-through" products are decreasing correspondingly. Unless otherwise stated, there is no material impact on the EBIT of the end-user divisions. Overall, there is no impact on the Group's consolidated results, since the pull-through effects are offset by reduced internal eliminations (currently presented in Corporate). There is no impact on the product divisions, since for them it remains a sale to the same customer whether products are sold via external channel partners or internal end-user divisions.

For all figures except for EBIT margins, comments refer to the fourth quarter results expressed in local currencies. EBIT excluding capital gains is shown only if the aggregate of such gains for the division is material (in any case, if capital gains represent more than 10 percent of divisional EBIT).

Utilities


Orders dropped by 52 percent compared to the fourth quarter of 2001, mainly due to weak demand in the Americas and delays of some large project awards into 2003. Europe was mixed. A more selective bidding approach to secure future earnings quality also influenced order levels. Orders were down 38 percent, excluding product sales handled via channel partners.

Revenues were 25 percent lower. Excluding the pull-through effect, revenues decreased by 6 percent.

EBIT for the quarter was negative and the EBIT margin for the underlying operational performance (excluding pull-through, restructuring, capital gains in 2001 and 2002, and non-recurring amortization) decreased to 0.6 percent from 3.8 percent. The lower earnings were mainly due to the execution of low-margin systems projects (pre-2001) in Utility Power Systems. Steps have since been taken to improve project management and support higher project margins. In the fourth quarter, Utilities reported a capital gain of US$ 7 million.

Industries


In spite of weak markets, orders increased slightly, driven by demand in two business areas: Petroleum, Chemical and Life Sciences, and Paper Printing, Metals and Minerals. Excluding product sales now handled via channel partners, orders increased by 32 percent.

Revenues were 10 percent lower but up 8 percent excluding the pull-through effect. Revenues were down except in the Petroleum, Chemical and Life Sciences business area.

EBIT decreased primarily as a result of lower revenues and one-time charges. The EBIT margin for the underlying operational performance (excluding restructuring, capital gains, non-recurring amortization and one-time charges) increased from 5.3 percent to 5.8 percent.

Oil, Gas and Petrochemicals

Please refer to the section discontinued operations on page 18.

Power Technology Products


Orders rose by 6 percent compared to the same quarter of 2001, driven mainly by continuing strong demand in Asia, especially China. Higher demand in the Power Distribution business area also contributed to the improvement. Demand in North America was weak but stable. The European market remained mixed. Revenues in the quarter were flat.

Continuing operational improvements and productivity gains significantly lowered the cost base. As a result of this and in the absence of restructuring charges, EBIT more than doubled (up 123 percent) and the EBIT margin for the underlying operational performance (excluding restructuring, capital gains and non-recurring amortization) rose to 8.6 percent from 6.7 percent. The number of employees decreased by 9 percent (excluding acquisitions and divestments).

Automation Technology Products


Orders increased by 15 percent. All business areas contributed to the positive development. Robotics reported a double-digit increase in orders driven by demand in North America and Europe. Low-Voltage Products and Drives and Power Electronics benefited from the high demand in Asia, especially China. Overall, the American and European markets were mixed while Asia showed strong demand. The process automation market stabilized at a low level.

Revenues increased by 8 percent. Lower revenues in Control and Force Measurement and Electrical Machines were more than offset by the positive development in the other business areas.

EBIT increased by 85 percent, reflecting operational improvements and productivity gains from restructuring. The number of employees decreased by 6 percent (excluding acquisitions and divestments). The EBIT margin for the underlying operational performance (excluding restructuring, capital gains and non-recurring amortization) increased from 7.6 percent to 9.5 percent.

Financial Services

ABB divested a large part of its Financial Services division in 2002. In addition, ABB has announced its intention to divest other financial business activities. Therefore, the Financial Services division has been wound down and its results will no longer be separately reported. The fourth quarter 2002 results from the part of Structured Finance sold to GE Commercial Finance can be found in the breakdown of items for discontinued operations on page 19. The EBIT for the remainder of Structured Finance, as well as Equity Ventures and Insurance is shown in Non-core activities, also on page 19.

Last edited 2005-04-08
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