ABB Group Results - First Nine Months 1996

ABB continues double-digit profit improvement
  • Net income increased 24 percent
  • Income before taxes increased 18 percent
  • 12 consecutive quarters of double-digit profit rise

Zurich, Switzerland, October 22, 1996 - ABB, the international electrical engineering group, today announced its results for the first nine months of 1996. Demand has slowed in Western Europe but showed continued good growth in emerging markets and Central and Eastern Europe.

Order intake was up slightly at US$ 25 billion. On a comparable basis, excluding transportation, orders increased by 7 percent. Revenues increased 3 percent (7 percent excluding transportation/Adtranz).

ABB Group profits improved at all levels based on productivity gains, increasing low cost manufacturing in emerging markets, and other cost-cutting programs.

As stated previously, on a comparable basis, net income for the full year of 1996 is expected to increase over 1995.

Group Review

Orders received for the ABB Group in the first nine months of 1996 were US$ 25,442 million, up slightly compared to last year (first nine months 1995: US$ 25,295 million).

ABB's 1996 income statement reflects its 50-percent ownership of the transportation joint venture established last year with Daimler-Benz. The 50-percent share of the new venture represents a smaller business than the former 100-percent owned ABB Transportation segment and thus affects prior year comparisons. On a comparable basis (excluding the transportation activities in both years), orders received increased 7 percent.

This increase in orders received was led by the booking of several large power generation awards in the first half of this year, increased activity in oil, gas, and petrochemical, and growth in emerging markets. The large Bakun hydroelectric projet recently awarded to ABB Power Transmission and Distribution is not yet reflected in the Group's orders received.

The order backlog at the end of September, 1996, was US$ 33.9 billion, up slightly compared to yearend (December 31, 1995: US$ 33.5 billion).

Revenues for the first nine months totaled US$ 24,083 million, an increase of 3 percent compared to the same period last year (US$ 23,322 million). Excluding the transportation activities in both years, revenues increased 7 percent, with the Industrial and Building Systems and Power Transmission and Distribution segments reporting the most significant increases.

Operating earnings after depreciation for the ABB Group increased by 4 percent to US$ 2,101 million (first nine months 1995: US$ 2,021 million). Productivity gains, establishment of low-cost manufacturing bases in emerging markets, prior years' restructuring, and other cost-cutting programs enabled ABB to improve operating earnings and hold the operating margin. The improvement in operating earnings was achieved despite a competitive environment for new power equipment, higher material costs, and lower contribution from its transportation activities. Reduced imputed interest income on customer advances negatively affected Group operating earnings after depreciation, but had no impact on pretax or net income.

Income before taxes in the first nine months increased 18 percent to US$ 1,365 million (first nine months of 1995: US$ 1,154 million).

Net income of US$ 809 million in the first nine months of 1996 represents an increase of 24 percent over the same period last year (first nine months 1995: US$ 651 million).

The tax rate for the first nine months of 1996 was 40 percent, compared to a 42 percent rate for the same period last year.

ABB's net cash position at the end of September 1996, was lower when compared to the same date last year due to higher relative working capital levels in new ventures in some emerging markets.

The economic slowdown in Western Europe appears to be leveling off. However, as many ABB investment goods are late in the business cycle, improved demand is not foreseen within the next twelve months.

Demand from emerging markets continues to expand and ABB's cost-reduction programs will continue to influence results positively.

As stated previously, on a comparable basis, net income for the full year of 1996 is expected to increase over 1995.

Comments on the Business Segments

Power Generation orders received for the first nine months of 1996 remain above the comparable period of 1995, with revenues at about the same level. Operating earnings for this segment for the first nine months were well below the level reported for the comparable period last year and are expected to remain so for the full year. This reflects continuing competitive market conditions and lower imputed interest income on customer advances.

Operating earnings for the Power Transmission and Distribution segment in the first nine months of 1996 continued to be substantially above the same period of 1995, with most business areas contributing to this improved result.

Industrial and Building Systems orders received for the first nine months of 1996 were higher than the comparable period in 1995, reflecting increased activity in the petrochemical industry and demand from emerging markets. Recent startups, acquisitions, and service activities also contributed to the improvement. Continued productivity gains, cost-reduction programs, and increased volume have enabled Industrial and Building Systems to improve operating earnings substantially.

Adtranz operating earnings for the first nine months of 1996, while positive and in line with expectations, were below that of the ABB Transportation segment in the comparable period last year. The positive benefits of restructuring and elimination of duplicate costs will mostly come in 1997 and 1998.

Earnings of Finacial Services continued to increase substantially, reflecting higher Treasury Center earnings and a better result in Insurance.

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    Contact us

    • Mr. John Fox
      ABB Corporate Communications, Zurich
      Tel. +41 1 317 7371
      Fax. +41 1 317 7958
    • Ms. Ann-Sophie Joensson
      ABB Investor Relations
      Tel: +41 1 317 7338
      Fax: +41 1 311 9817
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