ABB Group Results - First Three Months 1999

Net income stronger, outlook maintained for 1999

· Net income up 17 percent
· Revenues up 11 percent
· Earnings per share up 17 percent for ABB AB and 12 percent for ABB AG

Zurich, Switzerland, April 21, 1999 - ABB, the international engineering and technology group, said today its first-quarter net income rose to $ 302 million, up 17 percent compared to the same period last year supported by increased revenues and a stronger operating margin.

US$ in millions unless otherwise statedJan – Mar
1999
Jan – Mar
1998
% change
Orders Received
8,823
8,447
+ 4 %
Revenues
6,891
6,206
+ 11 %
Operating Earnings
after Depreciation
534
454
+ 18 %
Net Income
302
258
+ 17 %
ABB AB
Net Income per share
SEK 1.29
SEK 1.10
+ 17 %
ABB AG
Net Income per bearer share
CHF 23.55
CHF 21.10
+ 12 %

First quarter operating earnings after depreciation reached $ 534 million, an increase of 18 percent compared to the same period last year (1998: $ 454 million). The higher earnings reflect both increased revenues and continued success in lowering ABB’s cost base. Power Transmission, Power Distribution and Products and Contracting contributed with the strongest percentage increases. Oil, Gas and Petrochemicals also increased its earnings and Financial Services reached the same high level as last year. Automation showed overall higher operating earnings with a neutral impact on earnings from Elsag Bailey.

"This result confirms our strategy to transform ABB into a company delivering more knowledge- and service-based solutions, with fewer heavy assets, higher operating margins and a better return on investments," said ABB President and CEO, Göran Lindahl. "Based on what we see in the first quarter, we confirm our full-year outlook with net income expected to exceed the level of 1998."

ABB's parent companies’ net income per share were higher, up 17 percent for ABB AB to SEK 1.29 and 12 percent higher for ABB AG bearer shares to CHF 23.55. ABB started the process to establish a new single-class share structure for the Group to replace the present four classes of shares.

Orders received for the first quarter increased by 4 percent to $ 8,823 million (1998: $ 8,447 million11) Note: Unless stated otherwise, all references to 1998 figures refer to the first three months. 1998 figures are adjusted to reflect the sale of ABB’s 50-percent share in Adtranz, see Note 7 to the Financial Statements. 1999 figures include Elsag Bailey Process Automation acquired in January 1999.

Almost all segments reported increased orders compared to the previous year. Demand for standard products (base orders) was in line with expectations and 4 percent lower compared to last year. Large orders received in the first quarter increased by 13 percent, including a high-voltage power transmission link in China and gas-fired combined-cycle power plants in the U.K., Japan and Australia. Orders received increased by 70 percent in Asia compared to the first quarter of last year. Orders received in the Americas also developed strongly. In Europe, orders were on the same level as last year. As expected, orders received in the first quarter did not reach the previous year’s exceptionally high level in the Middle East and Africa.

Overall, growth in industrial production continued to be slow in several industrialized and emerging countries. Europe showed some demand growth in certain industries, but only to a limited extent in the area of industrial products. Industrial demand remained mixed in North America for sectors such as automotive, pulp and paper, chemical, petrochemical, steel, and oil mainly due to low commodity prices. On the other hand, industries such as power generation and distribution benefited from deregulation. Economies in South America softened and infrastructure projects were postponed. Some Southeast Asian countries showed signs of improvement and markets in the Middle East and Africa continued to develop positively.

Revenues for the first quarter increased by 11 percent to $ 6,891 million (1998: $ 6,206 million). Practically all segments contributed to that increase.

The order backlog – an indicator of future revenues - at the end of March reached $ 27,523 million (March 31, 1998: $ 27,267 million).

In spite of higher interest expense related to the financing of the Elsag Bailey acquisition, income before taxes for the first three months improved to $ 429 million (1998: $ 380 million), an increase of 13 percent.

Net income for the first three months increased by 17 percent to $ 302 million compared to the same period last year (1998: $ 258 million). Following the financing of Elsag Bailey Process Automation, return on capital employed reached 15.7 percent (March 31, 1998: 16.7 percent).

ABB’s net cash position (defined as cash and cash equivalents minus short-, medium-, and long-term loans) at the end of the first quarter of 1999 was $ -1,621 million (March 31, 1998: $ 715 million). This figure includes the effects of the acquisition of Elsag Bailey Process Automation, dividend payments to ABB’s parent companies earlier than last year and cash compensation from DaimlerChrysler for the 50-percent-stake in Adtranz.

ABB’s shift into businesses with higher knowledge and service content continued with major transactions during the first quarter. The acquisition of Elsag Bailey Process Automation was completed after receiving all of the necessary approvals and is reflected in this report. ABB also divested its stake in Adtranz and last year’s figures have been adjusted for this transaction.

ABB and ALSTOM announced the intention to merge their power generation businesses in a 50-50 joint company to be called ABB ALSTOM POWER, subject to the customary approvals. The first quarter is not affected by this planned transaction.

As of March 31, 1999, ABB employed 209,353 people compared to 199,232 at yearend 1998, including 11,000 employees from Elsag Bailey Process Automation.

ABB has adopted the revised International Accounting Standard (IAS) related to pension accounting as from the beginning of 1999. A total amount of $ 1,006 million has been directly reflected in the balance sheet as pension liabilities. The equivalent amount after consideration of deferred taxes, amounting to $ 889 million, has been charged to equity. As a result of higher net income and the mentioned accounting changes, return on equity reached 23.3 percent (March 31, 1998: 19.3 percent).

ABB, with its focus on industrial solutions, is typically late in the business cycle and therefore the general market environment for ABB’s products and systems is not expected to improve until next year. For the full year of 1999, net income is expected to exceed the level of 1998.




The full press release is in the attachment below:


99_1Q.doc 99_1Q.pdf

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    • John Fox
      ABB Corporate Communications, Zurich
      Tel: +41 1 317 7371
      Fax: +41 1 317 79 58
    • Manfred Ebling
      ABB Investor Relations, Zurich
      Tel: +41 1 317 73 13
      Fax: +41 1 311 98 17
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