• Continued strong demand for reliable power and industrial efficiency
• Record EBIT and EBIT margin (13.2%) on volume growth and operational improvements
• Cash from operations above $300 million
• Oil, gas and petrochemicals business moved to discontinued operations
Zurich, Switzerland, April 26, 2007 – ABB's first-quarter net income rose 163 percent to $537 million from $204 million in the same period of 2006, driven primarily by continued strong market demand and further operational improvements.
Earnings before interest and taxes (EBIT) increased 67 percent from a year earlier, to $822 million. The EBIT margin, or EBIT as a percentage of revenues, increased to a record 13.2 percent from 9.6 percent.
Orders rose 26 percent (20 percent in local currencies), spurred by demand for reliable electricity supplies in both mature and emerging markets, as well as global industrial demand for technologies to improve energy efficiency and productivity. Revenues rose 21 percent (15 percent in local currencies) to $6.2 billion on both high product sales in the quarter and progress on executing the strong order backlog. Not included in the revenue comparison is $237 million in the first quarter of 2007 from the ABB Lummus Global business that was reclassified to discontinued operations (Q1 2006: $208).
“Our operational improvements and global reach are paying off,” said Fred Kindle, ABB President and Chief Executive Officer. “We are positioned to capture the strong worldwide demand for technologies to deliver reliable power, increase productivity and save energy. All five divisions and every region, particularly Europe, contributed to our strong start to the year.”
Summary of Q1 2007 results
Orders received and revenues
The strong order growth in the first quarter was led by continued demand for improved power infrastructure across all regions. Orders in the Power Products and Power Systems divisions grew 41 and 38 percent, respectively (local currencies: 35 and 30 percent) during the quarter compared to the same period in 2006. Demand was strong for transformers and substations. Industrial markets also remained robust in the first quarter, driven mainly by the metals and marine sectors. This resulted in a 24-percent increase in orders (local currencies: 16 percent) in the Automation Products division, especially for energy-saving motors and drives. Orders in the Robotics division also increased, led by demand from general industry.
Regionally, orders in Europe rose 31 percent, reflecting both power infrastructure investments and overall economic strength. Order growth was strongest in Germany, Spain, Italy and Russia. Strong markets in North and South America, especially in the power sector, resulted in a 25-percent increase in orders from the Americas, led by the U.S. and Brazil. Orders in Asia grew 22 percent and continued to benefit from rapid economic development in China and India. High oil prices supported demand in the Middle East and Africa where orders increased 16 percent.
The volume of large orders (more than $15 million) rose 36 percentin the first quarter and base orders (less than $15 million) were up 25 percent. Large orders represented 13 percent of total orders in the first quarter of 2007, slightly higher than the first quarter of 2006 but below the exceptionally high levels seen in the fourth quarter of 2006. The order backlog at the end of March was $5.4 billion higher than at the end of the first quarter of 2006 and $2.6 billion higher than at the end of 2006.
The 21-percent increase in revenues is primarily the result of strong product sales in the quarter as well as the execution of orders from the backlog.
Earnings before interest and taxes
All divisions increased their EBIT and EBIT margins in the first quarter of 2007, mainly through higher volumes and capacity utilization, as well as improved selection and execution of large projects.
Discontinued operations
A small profit was recorded in the first quarter of 2007 in discontinued operations. This includes income from the ABB Lummus Global oil, gas and petrochemicals business, which was reclassified into discontinued operations from Non-core activities. The reclassification reflects ABB’s expectation to sell the business.
Cash flow
Cash flow from operations improved significantly in the first quarter, mainly reflecting earnings growth. Net working capital as a share of revenues increased to 12.2 percent in the first quarter from 11.3 percent in the same quarter a year ago, mainly the result of higher inventories to execute orders received in recent quarters that have not yet flowed through to revenues, as well as higher receivables.
Outlook
The business environment for ABB during the remainder of 2007 is expected to remain in line with the positive market situation seen in 2006 and the first quarter of this year. Demand for power transmission and distribution infrastructure is expected to continue on a high level in all regions. Equipment replacement and improved network efficiency and reliability are forecast to be the drivers of higher demand in Europe and North America.
Automation-related industrial investments are expected to continue in most sectors. Overall, automation-related demand growth is expected to be strongest in Asia and the Americas in 2007, with more modest growth in Europe.
In addition, ABB is well-positioned to benefit from increasing investments to mitigate climate change with energy-efficient products and systems.
Order growth is expected to continue on a high level but to moderate somewhat over the remainder of 2007, compared to the extraordinarily high order growth rates experienced in 2006.
ABB (www.abb.com) is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 108,000 people worldwide. To know more about ABB, visit www.abb.com.cn.