ABB reports record Q1 orders, double-digit operating margin

· Orders up 12 percent in local currencies
· Operating margin sharply higher at 11.2 percent
· Net income up 26 percent
· Company speeds up shift to service, industrial IT and eBusiness

Zurich, Switzerland, April 17, 2000 – ABB, the global technology company, today reported a strong increase in earnings, margins and orders in the first three months of 2000. ABB President and CEO Göran Lindahl said the record first quarter shows that “our move into businesses based on knowledge, high-tech, service and industrial IT is paying off and our underlying profitability is growing steadily.”

US$ in millions unless otherwise stated
Jan. – Mar.
2000
Jan. – Mar.
1999
Change in
percent *)
Orders Received
7,156
6,808
+ 5 %
Revenues
5,192
5,520
- 6 %
Operating Earnings after Depreciation
583
528
+ 10 %
Net Income
381
302
+ 26 %
Net Income per Share (US$)
1.27
1.01
+ 26 %
*) In local currencies, orders, revenues and earnings were about 7 percent higher than shown above. The announced divestitures of ABB’s nuclear business and 50-percent share in ABB ALSTOM POWER are expected to close during the second quarter and consequently do not have any impact on the first quarter figures.

Highlights of the results include:
· An increase in the company’s overall operating margin by 1.6 percentage points to 11.2 percent or by 3.5 percentage points when including power generation in 1999.
· Sharply higher operating earnings in Building Technologies and Power Distribution, good improvements in almost all other industrial segments. As forecasted, Oil, Gas and Petrochemicals earnings remained flat as last year’s low order volume flowed through to revenues.
· Higher orders in most business segments, led by a 50-percent rebound in Oil, Gas and Petrochemicals. Bidding, especially in Europe, for products, such as automation systems and lower-end building technologies products, was substantially higher. These typical leading indicators confirm the anticipated upturn in various markets, which should further benefit our results by mid-year.

"This was one of the strongest first quarters in ABB’s history,” Lindahl said. “Our return on equity reached 27.8 percent. We continue to expand into high-growth businesses where we can use our technology strength and global scope. We are now in a good position to take advantage of economic growth in almost every part of the world. Our net income and operating cash flow development shows that we are seeing results from our ongoing efforts to generate more value from our capital base.”
Lindahl confirmed ABB’s earlier full-year outlook that volumes are expected to increase in 2000. Earnings, excluding the capital gain from last year’s creation of ABB ALSTOM POWER, are also expected to increase compared to 1999. Cash flow will grow at least in line with earnings.


The Transformation Continues
ABB moved aggressively during the first quarter in its strategy to increase the share of its business in knowledge, high-tech and service sectors, where profitability and return on equity are higher. In particular, we accelerated our efforts in industrial IT solutions and eBusiness development. Our goal is to combine our core business strengths with advances in IT and eBusiness to create entirely new solutions for our customers, and to revolutionize the way we run our own businesses. We will support the transformation through the listing of our ABB share in the U.S. Preparations are proceeding well and a listing is expected in the second half of this year.

“We have taken some big steps to transform ABB into an efficient company with a lighter asset base,” Lindahl said. “And there is much more we can do to realize our full potential.”

Major developments in the quarter:

· ABB agreed to sell its 50-percent stake in the power generation joint venture, ABB ALSTOM POWER. The future proceeds from the sale, along with those from the agreed divestiture of our nuclear power business announced last December, will be used to further expand into higher growth, higher margin areas. Regulatory approvals are expected during the second quarter. These divestitures do not affect our outlook for this year nor the longer-term targets for volumes, earnings and cash flow. ABB’s share in the earnings of ABB ALSTOM POWER for January through March 2000 amounted to $ 20 million Included in the item “Earnings from equity accounted companies” in the attached income statement..
· ABB acquired a leading U.K.-based power network service company, broadening its service and complete solution capabilities in the dynamic deregulated U.K. power market. This was one of several strategic acquisitions made in the quarter.
· The company formed a partnership with a utility in Sweden to develop a broadband Internet network. ABB expects to apply its know-how in network management and service to tap into this growing market in Europe and beyond.
· The largest order in the quarter was part of a $650-million project to build a greenfield chemical complex in Brazil using ABB’s world-leading chemical process technology.
· ABB stepped up its activities in Industrial IT and eBusiness in the first quarter.


Growth in Industrial IT and eBusiness
ABB’s Industrial IT solutions are in high demand across several business segments. For example, ABB won an order to upgrade measurement technology at Mexico’s national oil refinery. This order integrates a large scope of ABB control systems and process analyzers and enhances communication within the plant’s instrumentation system.

ABB’s Smart Enterprise – a tool for putting pulp and paper mills on “autopilot” – is being put into a greenfield project in Australia. And a semi-submersible drilling rig using ABB power and automation systems was recently completed off the coast of Norway. ABB is further building Industrial IT applications that will better link manufacturing processes with the needs of eBusiness, like scheduling, production, ordering and delivery.

Technologies under development include products with built-in Web servers, allowing them to be accessed, controlled and serviced over the Internet. We continue to develop wireless solutions to control a variety of industrial processes remotely, even from a handheld device.

In eBusiness, ABB and a number of partners formed a new company called b-business partners with an investment base of Euro 1 billion to boost European business-to-business eCommerce. b-business partners is one step in ABB’s three-pillar strategy for building eBusiness. In this “technology” pillar, minority investment in a number of IT start-ups gives us an overview of the technologies that are available, and deep insight into those that may be of use to ABB or our customers. In the second pillar, ABB will form majority-owned joint ventures to take new application technologies to market. And, in the third pillar, the company will develop and promote additional eCommerce channels to market.

ABB unveiled a Web-based eBusiness portal at the Hanover Fair in Germany late last month. The portal is part of a customer-focused eBusiness platform for key businesses, third party Web portals and online marketplaces. It features the opportunity to purchase ABB products online, specialized customer pages, design and project management tools, solutions banks, and online customer communities. The company aims to have 30 percent of its standard offerings online within the year, and the remaining standard products next year.

In total, ABB intends to invest at least $1 billion in Industrial IT, eBusiness and related activities in 2000 and 2001.


Enhanced Cash Flow and Productivity
Net cash flow from operating activities increased by more than $ 300 million compared to the first quarter 1999, reaching $ 109 million (1999: $ -202 million). This is the first time that ABB reached a positive operating cash flow already in the first quarter of its business year.

The return on capital employed for the first quarter 2000 reached 20.0 percent (1999: 15.7 percent).

The order backlog amounted to $ 15,668 million at the end of March (March 31, 1999: $ 16,668 million).

The number of employees at the end of the quarter was 163,528 (end of March 1999: 171,540). Adjusted for acquisitions and divestitures, the number of employees decreased by 5 percent. As a result, we expect a sharp productivity increase to become visible in the coming quarters.


Segment Review
Earnings rose 35 percent in the Building Technologies segment, reflecting higher demand in Europe and cost improvements. Orders were four percent higher. ABB’s reported figures were negatively affected by exchange rates because the ABB Group reports in U.S dollars and the dollar increased against those currencies (mostly European) in which ABB transacts a large portion of its business. When expressed in local currencies, Building Technologies orders received increased by 13 percent.

Power Distribution also showed a substantial increase in earnings, up 29 percent on improved cost control and higher service content. The segment reported a strong increase in orders, up seven percent, 13 percent in local currencies. Earnings in Power Transmission were 9 percent higher, reflecting selective bidding and its market leadership in this competitive industry. Orders in the segment were lower, reflecting the divestiture of our standard cables business and a large Asian order taken in the first quarter of 1999.

As predicted, Oil, Gas and Petrochemicals reported flat earnings on lower revenues as a result of last year’s reduced order volume. Orders have rebounded strongly in the first quarter of this year and are up 50 percent. Automation earnings were 11 percent higher, including the costs of integrating the Elsag Bailey acquisition. Orders were off four percent following a number of U.S. divestitures. Earnings for Financial Services exceeded last year’s strong first quarter.


Outlook
Volumes are expected to increase in the year 2000. Earnings, excluding the capital gain from last year’s creation of ABB ALSTOM POWER, are also expected to increase compared to 1999. Cash flow will grow at least in line with earnings. The announced power generation divestitures do not affect our outlook for this year nor the longer-term ABB targets of 6-7 percent average annual compound growth during 2000-2003 and an operating margin of 12 percent by 2003.


ABB Group

Consolidated Income Statement

(US$ in millions)
Note
Year to date
January - March
2000
1999 1)
1999 2)
Revenues
5,192
5,520
6,891
Material expenses
-2,050
-2,237
-3,103
Personnel expenses
-1,799
-1,973
-2,388
Other expenses
-746
-884
-1,134
Changes in work in progress

and finished goods

136
261
488
Depreciation of fixed assets
-192
-207
-256
Unusual items
42
48
36
Operating Earnings after Depreciation
583
528
534
Earnings from the defined power generation business
5
5
Earnings from equity accounted companies
20
-2
-2
Dividend income
3
3
3
Interest income
105
81
76
Interest expense
-167
-189
-184
Exchange differences
0
3
2
Income before Taxes
544
429
429
Income taxes
-160
-126
-126
Net Income before Minority Interests
384
303
303
Minority interests
-3
-1
-1
Net Income
381
302
302
Basic and diluted earnings per share, in US$ 3)
1.27
1.01
1.01

1) Reflecting the current ABB composition, excluding the defined power generation business as described in Notes 1 and 5.
2) Includes the defined power generation business as described in Notes 1 and 5.
3) Calculation based on 300,002,358 registered shares.


ABB Group

Condensed Consolidated Balance Sheet

(US$ in millions)
Notes
March 31, 2000
March 31, 1999
Dec. 31, 1999
Assets
Cash and cash equivalents
6,212
7,625
6,288
Other current assets
11,803
15,896
11,778
Total current assets
18,015
23,521
18,066
Fixed assets
11,168
11,125
11,450
Total Assets
29,183
34,646
29,516
Liabilities and Equity
Current liabilities
3
15,912
21,204
15,921
Non-current liabilities
3
7,612
8,732
7,670
Minority interests
299
292
317
Stockholders’ equity
5,360
4,418
5,608
Total Liabilities and Equity
29,183
34,646
29,516




Condensed Statement of Changes in Equity

(US$ in millions)
Note
January – March
2000
1999
Equity as of December 31, previous year

(1999 and 1998, respectively)

5,608
5,959
Changes in accounting principles and other items 1)
-29
-921
Dividend payments
-432
-498
Translation differences
4
-168
-424
Net income (3 months)
381
302
Equity as of March 31
5,360
4,418

1) Introduction in 1999 of revised IAS 19 on employee benefits.

ABB Group

Condensed Consolidated Statement of Cash Flows

(US$ in millions)
Year to date
January – March
2000
1999 1)
1999 2)
Cash Flow from Operating Activities
Income before taxes 3)
544
429
429
Adjustments of earnings to operating cash
-76
-81
-94
Changes in operating assets and liabilities
-259
-463
-561
Taxes paid
-100
-87
-90
Net Cash Flow from Operating Activities
109
-202
-316
Cash Flow related to Investing Activities -240-1,195-1,171
Cash Flow related to Financing Activities1661,3001,526
Effects of translation differences on cash and cash equivalents-111-165-204
Net Change in Cash and Cash Equivalents-76-262-165
Cash and cash equivalents - beginning of year6,2887,2757,790
Cash and cash equivalents - end of interim period6,2127,0137,625

1) Reflecting the current ABB composition, excluding the defined power generation business as described in Notes 1 and 5.
2) Includes the defined power generation business as described in Notes 1 and 5.
3) Actual interest received/paid does not differ materially from "Interest Income/Expenses" as included in income before taxes and is thus not explicitly shown in the above presentation.


Selected Notes to the Consolidated Financial Statements

Note 1, General and Scope of Consolidation

The Group's accounting principles, based on International Accounting Standards (IAS) and applied in the interim report for the first three months of 2000, are described in the 1999 year-end Financial Statements of ABB. The interim report and notes are unaudited.

1999 column reflecting the current ABB composition
As a consequence of the contribution of the ABB power generation business (except nuclear, some renewable power and distributed power businesses) hereinafter called “the defined power generation business” on June 30, 1999 to the ABB ALSTOM POWER joint venture (refer to Note 5), the following changes have been effected to reflect the current ABB composition:
- The Income Statement excludes the defined power generation business from all positions except for Income before Taxes, Income taxes, Net Income before Minority interests and Net Income.
- The Statement of Cash Flows excludes all cash flows relating to the operations of the defined power generation business.


Note 2, Geographic and Segment Information

All figures exclude the defined power generation business (see Notes 1 and 5).

Data per Region
(US$ in millions)
Orders Received
January – March
Revenues
January – March
2000
1999
2000
1999
Europe
3,642
3,788
2,868
3,128
The Americas
1,961
1,315
1,312
1,307
Asia
634
1,151
600
610
Middle East and Africa
919
554
412
475
Total
7,156
6,808
5,192
5,520
Data per Business Segment
(US$ in millions)
Orders Received
January – March
Revenues
January – March
2000
1999 (2
2000
1999 2)
Power Transmission
1,022
1,127
757
870
Power Distribution
930
866
656
602
Automation
2,155
2,251
1,760
1,815
Oil, Gas and Petrochemicals
1,205
802
523
680
Building Technologies
1,821
1,746
1,387
1,471
Financial Services
178
161
178
161
Various Activities/Corporate 1)
644
624
531
566
Sub-total
7,955
7,577
5,792
6,165
Intra-Group Transactions
-799
-769
-600
--645
Total
7,156
6,808
5,192
5,520

1) Various Activities include the remaining nuclear business in all periods.
2) The Distributed Power business has been moved from Various Activities to the Power Distribution segment; 1999 figures are restated accordingly.


Data
Per Business Segment
(US$ in millions)
Operating Earnings after Depreciation
January – March
EBITDA 2)

January – March
2000
1999 (3
2000
1999 3)
Power Transmission
76
70
98
97
Power Distribution
40
31
55
45
Automation
126
114
192
167
Oil, Gas and Petrochemicals
36
37
50
50
Building Technologies
105
78
136
114
Financial Services
91
89
98
94
Various Activities/Corporate 1)
109
109
143
167
Total
583
528
772
734

1) Various activities include the remaining nuclear business in all periods.
2) Earnings before Interest, Taxes, Depreciation and Amortization.
3) The Distributed Power business has been moved from Various Activities to the Power Distribution segment; 1999 figures are restated accordingly.


Note 3, Short-, medium-, long-term loans
(US$ in millions)
March 31, 2000
March 31, 1999
Dec. 31, 1999
Loans
Short-term loans
3,620
6,704
2,822
Medium- and long-term loans
3,567
2,542
3,137
Total loans
7,187
9,246
5,959

Note 4, Main Exchange Rates
Average
January- March
As of
March 31
As of
December 31
2000
1999
2000
19991999
Euro US$ 1.00 = EUR
1.02
0.89
1.05
0.931.00
German markUS$ 1.00 = DEM
2.00
1.75
2.05
1.821.95
Swedish kronaUS$ 1.00 = SEK
8.68
8.08
8.67
8.248.53
Swiss francUS$ 1.00 = CHF
1.64
1.43
1.67
1.481.60

For the first three months of 2000, changes in exchange rates had a negative effect of about 7 percent on the reported Income Statement items compared to the same period last year. The balance sheet figures were reduced on average approximately by 3 percent due to the strengthening of the dollar when compared to December 31, 1999 and 6 percent when comparing to March 31, 1999.
Note 5, Transfer of the ABB power generation business and formation of ABB ALSTOM POWER N.V.

On June 30, 1999, ABB transferred its power generation business (excluding the businesses described in Note 1 to ABB ALSTOM POWER. Explanation to the presentation and accounting treatment of the divested power generation business are given in Note 1. Summarized below are the figures of the defined power generation business used for the re-statement 1999 (period January-March) in the presentation reflecting ABB's new composition of the Consolidated Income Statement.

Income Statement
Year to date
(US$ in millions)
January - March
1999
Revenues
Revenues
1,490
Expenses, changes in work in progress, depreciation
-1,472
Unusual items
-12
Operating Earnings after Depreciation
6
Finance net
-1
Income/loss before Taxes
5
Taxes and minority interests
-2
Net Income
3

Note 6, Agreement to sell ABB's share in ABB ALSTOM POWER

ABB and ALSTOM announced on March 31, 2000 that ALSTOM is acquiring ABB's share in their 50-50 joint company ABB ALSTOM POWER. The sale is subject to the customary regulatory approvals. The closing of ALSTOM's acquisition is expected in the second quarter of 2000.

Note 7, Agreement to sell nuclear activities
ABB and the nuclear technology company BNFL of the United Kingdom announced as at December 29, 1999 that BNFL will purchase ABB's nuclear power business. The sale is subject to the customary regulatory approvals. This business remains fully consolidated in ABB's financial statements in the first quarter of 1999 and 2000. The closing of BNFL's acquisition is expected in the second quarter of 2000.

ABB's nuclear business is headquartered in the United States, with main operations in the United States, Sweden, France and Germany. The divested businesses also include nuclear control systems. The total businesses to be transferred employ about 3,000 people and reported revenues in 1999 of about US$ 500 million.

_____________________________________________

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, and fluctuation in currency exchange rates. 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.
(END)

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