ABB Group 2002: Strong performance by core businesses

Core businesses: Q4 2002 EBIT up 38 percent; full-year 2002 EBIT up 4.3 percent; 2003 EBIT expected to increase more than 20 percent

Discontinued operations, asbestos provisions result in net loss

* Earnings before interest and taxes
1 Restated to reflect the move of businesses to discontinued operations, which do not contribute to revenues or EBIT

Zurich, Switzerland, February 27, 2003 - ABB's core divisions, Power Technologies and Automation Technologies, showed a strong performance in 2002, but the ABB Group reported a net loss for the full-year today as a result of asbestos charges and losses in discontinued operations.

  • Net debt reduced by US$ 1.5 billion - on target
  • Group EBIT margin at 1.8 percent - above 1.5 percent target
  • Full-year loss (US$ 787 million) and weaker cash flow (US$ 126 million) on asbestos provisions and losses in discontinued operations

    The core divisions, created last year to sharpen the company's focus, showed a strong fourth quarter, with combined earnings before interest and taxes (EBIT) growing 38 percent.

    For the full-year 2002, the ABB Group posted EBIT of US$ 336 million, up from US$ 179 million the year before. As a percentage of revenue, the EBIT margin reached 1.8 percent, above the target of 1.5 percent for the year. On a comparable basis, the company cut its net debt by US$ 1.5 billion in 2002.

    "It has been a difficult year, but we've put the worst behind us," said Jürgen Dormann, ABB chairman and CEO. "In 2002, we secured a new credit facility that gives us financial flexibility until the end of 2004. We are putting the asbestos issue to rest and divesting non-core businesses. Our core businesses are performing well. I'm confident we can deliver on our growth targets and return to profitability in 2003."

    For the full-year 2002, the core divisions' orders were down 2 percent, while revenues edged 1 percent higher. The two divisions reported full-year revenues of US$ 15.6 billion and EBIT of US$ 946 million. Power Technologies division increased revenues 3 percent and EBIT 9 percent. Automation Technologies division had flat revenues and saw a slight rise in EBIT (up 1 percent).

    ABB Group orders for the full year, including non-core activities and corporate, were down 8 percent in nominal terms, at US$ 18.1 billion, and revenues decreased 6 percent to US$ 18.3 billion. Losses in ABB's non-core businesses and discontinued operations offset the core divisions' improved performance, resulting in a net loss for the Group of US$ 787 million.

    Interest and other finance expense for 2002 included a gain of US$ 215 million, arising from the accounting treatment of the convertible bonds that ABB issued in May 2002.

    The net loss was mainly due to asbestos provisions, the disposal loss on the sale of Structured Finance in 2002, and operational losses in businesses to be sold in 2003, including the Oil, Gas and Petrochemicals division (all included in discontinued operations). The Building Systems business (reported in non-core activities) also showed a loss.

    Net debt
    ABB cut net debt by US$ 1.5 billion on an adjusted basis. Before adjusting for the transfer of Oil, Gas and Petrochemicals to discontinued operations, and accounting for the asbestos settlement, net debt was cut to about US$ 2.6 billion from the previously reported US$ 4.1 billion at the end of 2001. After these adjustments, net debt was US$ 3.3 billion at December 31, 2002, compared to US$ 4.3 billion a year earlier.

    ABB sold most of its Structured Finance business in 2002 to GE Commercial Finance and realized cash proceeds of about US$ 2.3 billion. The company also sold its metering business and a number of other smaller operations. Dormann said ABB was in talks with several potential buyers to sell the Oil, Gas and Petrochemicals division and remained on target to sell most of the Building Systems business in 2003. The company has also said it plans to sell its Equity Ventures participations and the remaining parts of the Structured Finance business. The businesses to be divested employ some 30,000 people.

    Cost reduction
    ABB said more than 1,300 projects to reduce costs had been identified in its "Step Change" program to lower the cost base by an amount equivalent to 4 percent of revenues - about US$ 800 million - by mid-year 2004.

    The cost savings projects, including 10,000-12,000 job reductions, are underway in all countries. As a result of these job reductions and 30,000 employees leaving ABB in connection with divestments, ABB is expected to employ fewer than 100,000 people by mid-2004, down from 139,000 today.

    Cash flow and equity
    For the full-year 2002, cash flow from operations was US$ 126 million, as strong cash flow in the core businesses was offset by asbestos payments and weaker cash flow from businesses in discontinued operations.

    Equity was down to US$ 1,052 million, mainly as a result of fourth quarter asbestos provisions and other losses from discontinued operations.

    The company expects a small decrease in under-funded pension liabilities for 2002.

    Group outlook
    From 2002 through 2005, ABB expects a compound average annual revenue growth of about 4 percent.

    For 2003, ABB aims to achieve an EBIT margin of 4 percent. By December 31, 2003, total debt is expected to be reduced to about US$ 6.5 billion, and gearing (total debt divided by total debt plus stockholders equity) to be about 70 percent.

    For 2005, the Group's target EBIT margin is 8 percent. Total debt is expected to be reduced to about US$ 4 billion, and gearing to be approximately 50 percent.

    All targets exclude major acquisitions and divestments, as well as foreign currency movements.

    More information
    A presentation of ABB's results will take place today at ABB's Corporate Research Center in Daettwil, Switzerland starting at 1000 CET. Journalists can call in at +1 412 858 4600 (U.S.), +44 207 866 4111 (U.K.), or +41 91 610 5600 (other countries). The company will also present the results to analysts and investors at the same location starting at 1500 CET. Participants can join by phone by calling the above numbers. Lines will be open 15 minutes before the start of the conferences. Both events will be Webcast on

    Where to look
    Further information

    The 2002 Q4 and full-year results press release and presentation slides are available from February 27, 2003 on the ABB Investor Relations homepage at

    The audio playback of the conference call will be available for 72 hours after the call. Further reporting dates in 2003 are April 29 (Q1), July 29 (Q2), and October 28 (Q3). The annual general meeting will be held on Friday, May 16 in Switzerland with an information meeting for shareholders in Sweden on Monday, May 19.

    ABB ( is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impacts. The ABB Group of companies operates in more than 100 countries and employs about 139,000 people.

    This press release includes forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for ABB Ltd and ABB Ltd’s lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects,” “believes,” “estimates” or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are major markets for ABB’s businesses, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in ABB’s filings with the U.S. Securities and Exchange Commission. 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

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