ABB Reports Record Revenues of US$38 Billion

ABB reported an increase in profitability in the fourth quarter of 2011 on a combination of strong revenue growth and cost savings. Operational EBITDA, the measure of profitability tracked by management, rose 18 percent from the fourth quarter a year earlier, to $1.6 billion, on a 16-percent increase in revenues (10 percent organic) savings.  

And for 2011, the company reached US$40 billion in orders for the first time ever and reported record revenues of $38 billion. Full year operational EBITDA rose 25 percent to hit $6 billion.

Net cash at the end of the fourth quarter was $1.8 billion compared with $1 billion at the end of the previous quarter. Cash flow from operations amounted to $1.7 billion, close to the record levels reported in the same quarter in 2010 and 2009. The good performance reflects solid working capital management, mainly reduced inventories and improved receivables collection, partly offset by higher tax payments.

“We continued to execute well in the fourth quarter, especially on our cost savings and project execution, allowing us to report record revenues and solid earnings in a volatile market environment,” said ABB chief executive officer Joe Hogan. “We saw good demand for energy efficiency solutions in industry and for grid expansions and refurbishment, and we expect that to continue.

“At the same time, an unfavorable business mix and ongoing price pressure out of the order backlog will likely weigh on profit margins in the first quarter (of 2012), but we are more optimistic about the rest of the year and will continue to aggressively pursue growth while retaining our uncompromising approach to cost control.”

ABB says demand for its products and solutions continued to grow as industrial and utility customers focused on energy efficiency, industrial productivity and power reliability. In particular, orders improved in the oil, gas and petrochemicals and power utility sectors. Orders increased in the fourth quarter compared to the year earlier due to a significant jump in large orders (above $15 million), including a $900-million Ultra High Voltage Direct Current (UHVDC) power transmission order in India and a $160-million underground HVDC link in Sweden.

The Discrete Automation and Motion division reported the largest growth in orders, up 49 percent in local currencies, thanks in large part to demand for high-efficiency electrical motors from Baldor. (On an organic basis, orders in Discrete Automation and Motion grew 11 percent.)

The Process Automation division saw orders up seven percent as commodity prices continued to drive customer investment in new capacity and services to improve the productivity of existing assets, especially in the oil and gas sector.

The Power Systems division had a very strong quarter in orders and revenues, confirming longer term trends to interconnect power grids and strengthen power transmission infrastructure in both mature and emerging markets. Power Products orders increased across all businesses, mainly the result of demand from the power distribution and industrial sectors.  And orders were six percent higher in the Low Voltage Products division, mainly on increased demand for low-voltage systems to improve electrical efficiency in industry.

Regionally, orders rose by 61 percent in Asia on the large power order in India and strong order increases in Australia and Singapore, as well as a six-percent increase in China. In the Americas, orders grew by 41 percent (11 percent organic), with higher demand in both automation and power. Orders declined eight percent in Europe while Orders in the Middle East and Africa were down 18 percent on fewer large orders compared to the same period in 2010.

Going forward, the long-term outlook remains positive, says ABB, with utilities continuing to invest in grid upgrades and industries spending more on automation solutions to increase energy efficiency and productivity.

From the perspective of ABB's short-term business development, management expects low single-digit growth in most of its early-cycle businesses until confidence in the macroeconomic outlook improves. Price pressure is expected to continue in parts of the power business, in line with the company's previous guidance. The unfavorable business mix seen in most divisions in the fourth quarter of 2011 is expected to continue into the first quarter of 2012, weighing on margins. However, this trend is not expected to continue over the rest of the year. ABB says it will continue to drive further improvements in cost and productivity going forward.

At the same time, the company's strong order backlog and continued customer investments in areas such as power distribution and oil and gas, as well as its exposure to fast-growing emerging markets, are expected to provide ample opportunities for profitable growth in 2012 and the company will continue to expand sales forces and accelerate product development in order to capture these opportunities.