TIDMANN
RNS Number : 2044N
ABB Ltd
12 February 2009
? Solid operational results in a demanding market
* Record revenues, EBIT and cash from operations for the full year 2008
* Q4 EBIT and net income substantially lower on previously announced provisions
* Q4 orders down mainly on fewer large projects
* Cost take-out program to achieve $1.3 billion in savings by 2010
* Board proposes an unchanged dividend of CHF 0.48 per share
Zurich, Switzerland, February 12, 2009 - ABB reported solid operational results
in the fourth quarter on strong revenue growth and steady cash flow, despite
a difficult global market that impacted orders. Earnings before interest and
taxes (EBIT) and net income in the quarter were reduced by previously-announced
provisions, but full-year EBIT nevertheless reached a record $4.6 billion.
Orders decreased 19 percent in the fourth quarter (local currencies: 11 percent)
to $7.2 billion, mainly the result of lower orders for large new power
infrastructure projects, especially in emerging markets, and reduced investments
in new industrial capacity. Orders to upgrade power grids and replace equipment
continued to grow in mature markets. Demand for energy efficient technologies
also increased.
Revenues rose 5 percent (local currencies: 15 percent) to $9.1 billion as the
company continued to successfully execute the order backlog, which included no
significant order cancellations.
EBIT in the quarter was $459 million, a decrease of 60 percent versus the same
quarter a year earlier. Included in EBIT are provisions of approximately $870
million related to ongoing compliance investigations, a value-added tax (VAT)
charge and restructuring-related charges. Fourth-quarter net income amounted to
$213 million. Full-year net income was $3.1 billion.
Cash flow from operations was $1.4 billion in the quarter and reached a record
$4 billion for the full year, while free cash flow for the full year amounted to
$2.9 billion.
"Our solid revenue growth and cash flow in the quarter show the underlying
operational strength of the company," said Joe Hogan, ABB's Chief Executive
Officer. "Orders were down as customers delayed projects or cut capital
expenditures. But the long-term drivers of our business - to increase energy
efficiency, secure reliable power and improve industrial productivity - have not
changed.
"The outlook for 2009 remains uncertain," Hogan said. "We are taking steps now
to ensure that we remain competitive, no matter how the market develops. With
our leading market positions and technology, combined with a flexible global
production base, we aim to come out of this downturn in a stronger competitive
position and we confirm our 2011 targets."
2008 Q4 and full-year key figures
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+-----------+----------+------------------+-----------+----------+-----------------+
| US$ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Orders | 7,183 | 8,868 | -19% | -11% | 38,282 | 34,348 | 11% | 7% |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Order backlog (end | 23,837 | 22,715 | 5% | 14% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Revenues | 9,140 | 8,713 | 5% | 15% | 34,912 | 29,183 | 20% | 16% |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| EBIT | 459 | 1,145 | -60% | | 4,552 | 4,023 | 13% | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| as % of revenues | 5.0% | 13.1% | | | 13.0% | 13.8% | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Net income | 213 | 1,753 | | | 3,118 | 3,757 | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Basic earnings per | 0.09 | 0.76 | | | 1.36 | 1.66 | | |
| share($) | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Dividend per share | | | | | 0.48 | 0.48 | | |
| (CHF)1 | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Cash flow from | 1,395 | 1,469 | | | 3,958 | 3,054 | | |
| operations | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Free cash flow | | | | | 2,888 | 2,429 | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| as % of net income | | | | | 93% | 65% | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| Return on capital | | | | | 30.8% | 35.3% | | |
| employed | | | | | | | | |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
| 1 Proposed by the Board of Directors |
+--------------------------+-----------+----------+--------+---------+-----------+----------+--------+--------+
Dividend and share buy-back
ABB's Board of Directors proposes an unchanged dividend for 2008 of CHF 0.48 per
share. The Board also proposes that the dividend takes the form of a reduction
in the nominal (par) value of the shares from CHF 2.02 to CHF 1.54. The proposal
is subject to approval by shareholders at the company's annual general meeting
on May 5, 2009. If approved, the ex-dividend and payout date in Switzerland is
expected to be at the end of July, 2009.
Given the current market uncertainty, ABB is not actively pursuing new purchases
under the CHF 2.2-billion share buyback program announced last year. The company
has so far spent approximately CHF 650 million on the program, which has not
been active since September 2008.
Compliance
As has been previously announced, ABB has disclosed to the U.S. Department of
Justice and the U.S. Securities and Exchange Commission various suspect
payments. In addition, ABB has continued to cooperate with various anti-trust
authorities, including the European Commission, regarding certain allegedly
anti-competitive practices in the power transformer business. With regard to one
of the anti-trust matters, ABB received in December 2008 from the European
Commission a Statement of Objections, which is a preliminary assessment of
alleged anti-competitive practices.
In addition, ABB's cables business is under investigation for alleged
anti-competitive practices.
With respect to these matters, there could be adverse outcomes beyond our
provisions.
Cost reductions
ABB announced in December 2008 a cost take-out plan to adjust the company's cost
base to rapidly changing market conditions and protect its profitability. The
program aims to sustainably reduce ABB's costs - comprising both cost of sales
as well as general and administrative expenses - from 2008 levels by a total of
$1.3 billion by the end of 2010. The savings are expected through ongoing
initiatives, such as internal process improvements, low-cost sourcing, and
further measures to adjust ABB's global manufacturing and engineering footprint
to shifts in customer demand.
The total cost of the program is estimated in excess of $600 million, of which
more than $100 million was recorded in 2008. About $300 million is expected to
be taken in 2009 and the remainder in 2010.
Summary of Q4 and full-year 2008 results
Orders received and revenues
ABB's markets were strong through most of 2008 but demand began to weaken
following the global financial crisis that developed during the third quarter.
In the fourth quarter, this trend was reflected primarily by lower large orders
(above $15 million) for major infrastructure and industrial developments
compared to the same quarter in 2007. Base orders (below $15 million) were
steady in the quarter.
In the power divisions, utilities in mature markets continued to invest in grid
upgrades and equipment replacement to improve reliability. This improvement was
offset by lower investments by both utilities and industrial customers, mainly
in emerging markets, for new power infrastructure in response to the rapid
decline in economic growth.
Orders for industrial automation products and systems decreased more quickly
than for power-related technologies in the fourth quarter after a very strong
first half of 2008. Orders for products used to increase efficiency, such as
low-voltage drives, or for renewable energy applications were higher. However,
reduced investments for new capacity in the commodities and marine
sectors resulted in lower large orders. Continued weakness in the construction
industry, as well as the rapid downturn in consumer-related sectors, such as
automotive, further reduced automation-related orders.
Regionally, orders increased in the Americas in local currencies (unchanged in
U.S. dollars) as continued investments in power grid improvements more than made
up for flat to lower orders in automation. Orders were down in Europe as lower
industrial and construction demand offset order increases related mainly to
power generation. Orders in Asia were down in all divisions on a combination of
lower industrial activity, project delays in power infrastructure and the
comparison with the very high growth levels seen last year, especially in China
and India. In the Middle East and Africa, orders were down in a mixed
environment, with lower orders for large power infrastructure projects only
partly offset by increases driven mainly by industrial investments.
Overall, large orders declined by 55 percent in the fourth quarter (local
currencies: 49 percent) and represented 11 percent of total orders received
compared to 19 percent in the same quarter of 2007. Base orders were slightly
lower (down 10 percent in U.S. dollars and 2 percent in local currencies).
For the full year ending Dec. 31, 2008, orders rose 11 percent (local
currencies: 7 percent) to $38.3 billion and were up in all divisions except
Power Systems.
Local-currency revenues were higher in all divisions for the fourth quarter and
full year. Revenues were supported in the fourth quarter by the strong order
backlog, which ended the year at $23.8 billion, up 5 percent (local currencies:
14 percent) compared to the end of 2007. The order backlog decreased 12 percent
in both U.S. dollar and local currency terms versus the end of the third
quarter.
Earnings before interest and taxes
EBIT and EBIT margin in the fourth quarter were negatively impacted by
previously-announced provisions of approximately $870 million. Of these, about
$140 million were related to restructuring measures needed to adapt operations
to weakening demand. The majority of the restructuring-related charges were
recorded in the Robotics and Power Products divisions. The provisions also
included approximately $100 million associated with an adjusted VAT payment and
write-downs.
The negative impact on EBIT expected in the fourth quarter from the
mark-to-market accounting treatment of hedging transactions was not material.
Finance expense, taxes and discontinued operations
Below the EBIT line, finance net in the fourth quarter was negatively affected
by the accounting treatment of fair value movements on certain securities held
at the end of the year. This temporary effect amounted to approximately $100
million, and will be fully reversed when the securities mature in the first
quarter of 2009.
The benefit from recognition of deferred tax assets in the fourth quarter was
partly offset by income tax provisions related to a pending tax dispute. The
full year tax rate was 25 percent.
Discontinued operations results reflect the net accrual of the last two asbestos
payments of $25 million each, which are due in 2010 and 2011 as ABB expects its
EBIT margin to exceed 9 percent in 2009 and 9.5 percent in 2010.
Cash flow
Cash flow from operations in the fourth quarter amounted to $1.4 billion,
roughly the same as a year earlier. Significant contributors to the development
of cash flow in the quarter were the timing of customer payments on large
projects, higher inventories in some short-cycle businesses, and the reduction
in large orders with a subsequent decrease in customer advance payments.
Included in fourth-quarter cash from operations is an outflow of $25 million
paid as part of ABB's asbestos agreement. For the full year, cash flow from
operations increased to $4 billion, reflecting higher earnings and improved net
working capital management. Full-year cash flow from operations included
asbestos-related payments of $100 million.
Free cash flow for the full year amounted to $2.9 billion compared to $2.4
billion in 2007. Free cash flow as a share of net income amounted to 93 percent,
including the impact of provisions and tax costs. Free cash flow in 2008 also
reflected a 59-percent increase in capital expenditures to $1.2 billion,
supporting the strong backlog and the company's global footprint initiatives.
The share of capital expenditures in emerging economies increased to 43 percent
in 2008 from 37 percent the year before.
Balance sheet
Net cash was $5.4 billion at the end of 2008, compared to net cash of
$4.8 billion at the end of the third quarter and $5.4 billion at the end of
2007. The fourth-quarter increase mainly reflects the growth in cash from
operating activities. Net cash compared to the end of the previous year was
impacted by a shareholder dividend payment of about $1 billion, expenditures of
approximately $650 million for acquisitions, and cash payments of about $620
million related to the ABB share repurchase program.
Gearing remained at low levels, decreasing to 17 percent at the end of December
2008 versus 19 percent a year earlier.
Acquisitions
ABB continued to focus its growth efforts primarily on organic opportunities in
its existing markets, while making small acquisitions to close product or
geographic gaps in its business portfolio. In the fourth quarter of 2008, ABB
acquired Ber-Mac Electrical and Instrumentation Ltd, a Canadian supplier of
industrial automation and field services to the oil and gas sector. The
acquisition had no material impact on ABB's fourth-quarter results.
Employment
ABB employed approximately 120,000 people at the end of December 2008, an
increase of about 8,000 compared to the end of 2007.
Outlook for 2009
Visibility in ABB's markets in 2009 remains limited because of significant
uncertainty surrounding the key demand drivers for the company's products and
systems.
The need for power transmission infrastructure in all regions - both equipment
replacement and new transmission projects - has not changed in recent quarters.
However, the cost and scarcity of project funding have delayed many power
investment decisions, and ABB is unable to forecast when the various government
stimulus programs will have an impact and when the availability of funding will
improve.
Demand in ABB's industrial end markets depends to a large extent on GDP growth
and capital spending, together with commodity prices. Our customers' need to
steadily improve efficiency and productivity to meet increasing competition also
drives orders, along with demand in construction and in general industry.
Therefore, management's priority for 2009 will be to ensure that the company has
the flexibility to respond quickly to changing market conditions, taking
advantage of its global footprint, strong balance sheet and leading technologies
to improve its cost competitiveness while simultaneously tapping further
opportunities for profitable growth.
ABB also confirms its previously published targets for the period 2007 to 2011.
Divisional performance
Power Products
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+------------+----------+-----------------+------------+----------+-----------------+
| $ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Orders | 2,615 | 2,751 | -5% | 2% | 13,627 | 11,320 | 20% | 15% |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Order backlog (end | 7,977 | 6,932 | 15% | 24% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Revenues | 3,208 | 2,910 | 10% | 19% | 11,890 | 9,777 | 22% | 18% |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| EBIT | 444 | 466 | -5% | | 2,100 | 1,596 | 32% | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| as % of revenues | 13.8% | 16.0% | | | 17.7% | 16.3% | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Cash flow from | 578 | 635 | | | 1,575 | 1,279 | | |
| operations | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
Orders received remained steady in the fourth quarter versus the same period in
2007 as project delays and reductions in power utility spending in Asia and
Europe were offset by increases in the Americas and the Middle East and Africa.
Uncertainty in the lending environment contributed to project delays and the
general global economic slowdown resulted in weakened industrial and
construction-related demand. Many utilities, however, continued to invest in
equipment replacement and grid upgrades. These trends were reflected in a
decrease in distribution sector orders in the quarter that was offset by higher
demand for transmission sector orders.
Regionally, orders grew in the Americas, led by North America, where orders
increased by 17 percent (local currencies: 23 percent). The acquisition of
Kuhlman Electric in the U.S. contributed 10 percentage points to this increase.
Orders were also higher in the Middle East as investments continued in both
power infrastructure and industrial development. Orders decreased in Asia,
largely in response to the economic downturn, reduced industrial investments and
the absence of a large order booked in China in the same period of the previous
year. In Europe, project delays and some reductions in utility capital
expenditures, primarily in eastern Europe, resulted in lower orders.
Revenues increased in all businesses in the quarter, reflecting higher volumes
from the strong order backlog. Fourth-quarter EBIT was lower than a year
earlier, mainly the result of the previously-announced provisions amounting to
approximately $100 million associated with an adjusted VAT charge and related
write-downs. EBIT also included restructuring charges of $35 million, of which
$33 million was related to the transformer consolidation program announced in
2005. The total cost of the program, which has now been completed, amounted to
approximately $240 million.
Power Systems
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+------------+----------+-----------------+------------+---------+------------------+
| $ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Orders | 1,456 | 1,902 | -23% | -14% | 7,408 | 7,744 | -4% | -8% |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Order backlog (end | 7,704 | 8,209 | -6% | 4% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Revenues | 1,902 | 1,977 | -4% | 7% | 6,912 | 5,832 | 19% | 16% |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| EBIT | 181 | 179 | 1% | | 592 | 489 | 21% | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| as % of revenues | 9.5% | 9.1% | | | 8.6% | 8.4% | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Cash flow from | 98 | 245 | | | 424 | 409 | | |
| operations | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
Orders declined in the fourth quarter on lower large orders, while the base
business remained steady. Orders increased strongly in the U.S. as utilities
continued to invest in grid upgrades. Western European utilities also increased
spending in power generation-related systems, resulting in higher orders in
Europe compared to the same quarter in 2007. Delays in large new infrastructure
projects resulted in lower orders in Asia and the Middle East and Africa.
Revenues in the fourth quarter, which were down 4 percent in U.S. dollar
terms but 7 percent higher in local currencies, were driven by the execution of
projects in the order backlog. The EBIT margin was supported mainly by improved
project execution.
The reduction in cash from operations reflects the timing of project payments
and a lower level of customer advances as the result of fewer large orders.
Automation Products
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+------------+----------+-----------------+------------+----------+-----------------+
| $ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Orders | 2,094 | 2,360 | -11% | -3% | 10,872 | 9,314 | 17% | 11% |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Order backlog (end | 3,863 | 3,490 | 11% | 18% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Revenues | 2,484 | 2,396 | 4% | 13% | 10,250 | 8,644 | 19% | 13% |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| EBIT | 422 | 410 | 3% | | 1,908 | 1,477 | 29% | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| as % of revenues | 17.0% | 17.1% | | | 18.6% | 17.1% | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
| Cash flow from | 299 | 451 | | | 1,343 | 1,256 | | |
| operations | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+----------+--------+--------+
Fourth-quarter orders were down 11 percent in U.S. dollar terms and 3 percent in
local currencies as demand weakened across most regions and industry segments.
Orders for low-voltage drives, machines and low-voltage systems increased in the
quarter, driven by energy-efficiency requirements in industry and demand from
the renewable energy sector, mainly wind. Demand for standard industrial and
building products declined, reflecting the general global economic downturn.
Overall, orders were slightly lower in Europe and in the Middle East and Africa
while the Americas increased. Orders in Asia were lower than the high levels in
the fourth quarter of 2007, which included a large order in India.
Revenues increased in the quarter supported by higher volumes from execution of
the order backlog. Service revenues grew significantly faster than total
revenues. EBIT increased versus the same quarter in 2007 on the combination of
higher revenues and continued operational improvements.
Lower cash from operations was the result of an increase in working capital,
mainly due to higher inventories of standard products.
Process Automation
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+------------+----------+-----------------+------------+---------+------------------+
| $ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Orders | 1,452 | 2,343 | -38% | -30% | 8,657 | 7,935 | 9% | 4% |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Order backlog (end. | 6,111 | 5,951 | 3% | 12% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Revenues | 2,088 | 1,939 | 8% | 20% | 7,815 | 6,420 | 22% | 18% |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| EBIT | 240 | 220 | 9% | | 926 | 683 | 36% | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| as % of revenues | 11.5% | 11.3% | | | 11.8% | 10.6% | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
| Cash flow from | 282 | 456 | | | 1,034 | 766 | | |
| operations | | | | | | | | |
+--------------------------+------------+----------+--------+--------+------------+---------+---------+--------+
Orders decreased across most customer segments and regions in the fourth quarter
due to a significant reduction in large orders compared to last year. Customer
investments were delayed due to reduced commodity prices, limited access to
project financing and increased uncertainty regarding future demand. The
reduction in new investments was most pronounced in the mineral and metals
sectors as customers were unable to obtain financing for their projects or
commodity prices made investments in new production unattractive. Orders also
declined in the marine business, reflecting uncertainty in the demand outlook
related to oil prices as well as comparisons with record order levels in recent
quarters. Service and turbocharger orders remained steady while orders were
lower in oil and gas and pulp and paper.
Revenues increased strongly in the fourth quarter as the result of the execution
of the large order backlog as well as strong revenues in both service and
products, reflecting the less cyclical nature of those businesses. EBIT and EBIT
margin increased versus the fourth quarter of 2007 on higher volumes and
improved project execution.
Earnings were higher than a year ago but cash flow from operations was lower,
mainly reflecting the timing of project payments.
Robotics
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
+--------------------------+----------+----------+-------------------+----------+----------+-------------------+
| $ millions unless | | | US$ | Local | | | US$ | Local |
| otherwise indicated | | | | | | | | |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| Orders | 299 | 348 | -14% | -10% | 1,658 | 1,488 | 11% | 5% |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| Order backlog (end | 545 | 529 | 3% | 6% | | | | |
| Dec.) | | | | | | | | |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| Revenues | 407 | 419 | -3% | 3% | 1,642 | 1,407 | 17% | 11% |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| EBIT | -73 | 25 | n/a | | 9 | 79 | -89% | |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| as % of revenues | -17.9% | 6.0% | | | 0.5% | 5.6% | | |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
| Cash flow from | 18 | 27 | | | 49 | 120 | | |
| operations | | | | | | | | |
+--------------------------+----------+----------+---------+---------+----------+----------+---------+---------+
Orders declined in the fourth quarter as demand weakened in both the automotive
and general industry sectors and across all regions, reflecting the general
global economic downturn, especially in the shorter-cycle industries served by
the Robotics division.
Revenues were down 3 percent in U.S. dollars and up 3 percent in local
currencies on execution of the order backlog. EBIT and EBIT margin were down as
the result of restructuring-related charges and asset write-downs of
approximately $70 million for shifting manufacturing and engineering to low-cost
emerging countries as well as adapting capacity to the rapid market downturn.
More information
The full 2008 Q4 results press release with financial statements and
presentation slides are available on the ABB News Center at www.abb.com/news and
on the Investor Relations homepage at www.abb.com/investorrelations.
ABB will host a press conference today starting at 10:00 a.m. Central European
Time (CET). U.K. callers should dial +44 207 107 06 11. From Sweden, the number
is +46 8 5069 21 05, and from the rest of Europe, +41 91 610 56 00. Lines will
be open 15 minutes before the start of the conference. Audio playback of the
call will start one hour after the call ends and will be available for one week:
Playback numbers: +44 20 7108 6233 (U.K.), +41 91 612 4330 (rest of Europe) or
+1 866 416 2558 (U.S./Canada). The code is 15211, followed by the # key.
A meeting for analysts and investors is scheduled to begin today at 2:00 p.m.
CET (8:00 a.m. EST). Callers should dial +1 412 858 4600 (from the U.S./Canada),
+44 207 107 0611 (from the U.K.), or +41 91 610 56 00 (the rest of the world).
Callers are requested to phone in 10 minutes before the start of the call. The
audio playback of the call will start one hour after the end of the call and be
available for two weeks. Playback numbers: +1 866 416 2558 (U.S./Canada) or +41
91 612 4330 (Europe and the rest of the world). The code is 10268, followed by
the # key.
Investor calendar 2009
Q1 2009 results April 23, 2009
ABB Ltd Annual General
Meeting May 5, 2009
Q2 2009 results July 23, 2009
Q3 2009 results
October 29, 2009
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 120,000 people.
Zurich, February 12, 2009
Joe Hogan, CEO
Important notice about forward-looking information
This press release includes forward-looking information and statements including
the sections entitled "Cost reductions," "Outlook for 2009", "Dividend,"
"Compliance", as well as other statements concerning the outlook for our
business. These statements are based on current expectations, estimates and
projections about the factors that may affect our future performance, including
global economic conditions, the economic conditions of the regions and
industries that are major markets for ABB Ltd. These expectations, estimates and
projections are generally identifiable by statements containing words such as
"expects," "believes," "estimates," "targets," "plans" or similar expressions.
However, there are many risks and uncertainties, many of which are beyond our
control, that could cause our actual results to differ materially from the
forward-looking information and statements made in this press release and which
could affect our ability to achieve any or all of our stated targets. The
important factors that could cause such differences include, among others,
business risks related to the financial crisis, costs associated with compliance
activities, the amount of revenues we are able to generate from backlog and
orders received, raw materials prices, market acceptance of new products and
services, changes in governmental regulations and currency exchange rates and
such other factors as may be discussed from time to time in ABB Ltd's filings
with the U.S. Securities and Exchange Commission, including its Annual Reports
on Form 20-F. 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.
For more information please contact: information please contact:
Media Relations:
Thomas Schmidt, Wolfram Eberhardt
(Zurich,
Switzerland)
Tel: +41 43 317 6568
media.relations@ch.abb.com
Investor Relations:
Switzerland: Tel. +41 43 317 7111
Sweden: Tel. +46 21 325 000
USA: Tel. +1 203 750 7743
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
CH-8050 Zurich,Switzerland
Appendix I
ABB fourth-quarter (Q4) and full-year 2008 key figures
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| $ millions unless otherwise | Q4 08 | Q4 07 | Change | 2008 | 2007 | Change |
| indicated | | | | | | |
+-----------------------------------+---------+---------+------------------+---------+--------+----------------+
| | | | | US$ | Local | | | US$ | Local |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| Orders | Group | 7'183 | 8'868 | -19% | -11% | 38'282 | 34'348 | 11% | 7% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Products | 2'615 | 2'751 | -5% | 2% | 13'627 | 11'320 | 20% | 15% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Systems | 1'456 | 1'902 | -23% | -14% | 7'408 | 7'744 | -4% | -8% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Automation Products | 2'094 | 2'360 | -11% | -3% | 10'872 | 9'314 | 17% | 11% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Process Automation | 1'452 | 2'343 | -38% | -30% | 8'657 | 7'935 | 9% | 4% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Robotics | 299 | 348 | -14% | -10% | 1'658 | 1'488 | 11% | 5% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Corporate and other | -733 | -836 | | | -3'940 | -3'453 | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| Revenues | Group | 9'140 | 8'713 | 5% | 15% | 34'912 | 29'183 | 20% | 16% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Products | 3'208 | 2'910 | 10% | 19% | 11'890 | 9'777 | 22% | 18% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Systems | 1'902 | 1'977 | -4% | 7% | 6'912 | 5'832 | 19% | 16% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Automation Products | 2'484 | 2'396 | 4% | 13% | 10'250 | 8'644 | 19% | 13% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Process Automation | 2'088 | 1'939 | 8% | 20% | 7'815 | 6'420 | 22% | 18% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Robotics | 407 | 419 | -3% | 3% | 1'642 | 1'407 | 17% | 11% |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Corporate and other | -949 | -928 | | | -3'597 | -2'897 | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| EBIT | Group | 459 | 1,145 | -60% | | 4'552 | 4'023 | 13% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Products | 444 | 466 | -5% | | 2'100 | 1'596 | 32% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Systems | 181 | 179 | 1% | | 592 | 489 | 21% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Automation Products | 422 | 410 | 3% | | 1'908 | 1'477 | 29% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Process Automation | 240 | 220 | 9% | | 926 | 683 | 36% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Robotics | -73 | 25 | n.a. | | 9 | 79 | -89% | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Corporate and other | -755 | -155 | n.a. | | -983 | -301 | n.a. | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| EBIT margin | Group | 5.0% | 13.1% | | | 13.0% | 13.8% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Products | 13.8% | 16.0% | | | 17.7% | 16.3% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Power Systems | 9.5% | 9.1% | | | 8.6% | 8.4% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Automation Products | 17.0% | 17.1% | | | 18.6% | 17.1% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Process Automation | 11.5% | 11.3% | | | 11.8% | 10.6% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
| | Robotics | -17.9% | 6.0% | | | 0.5% | 5.6% | | |
+-------------+---------------------+---------+---------+---------+--------+---------+--------+--------+-------+
Appendix I (cont'd)
Q4 and full-year 2008 orders received and revenues by region
Q4 2008
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| $ millions | Orders received | Change | Revenues | Change |
+----------------------+---------------------+-----------------+--------------------+-------------------+
| | Q4 08 | Q4 07 | US$ | Local | Q4 08 | Q4 07 | US$ | Local |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Europe | 2,887 | 3,506 | -18% | -8% | 3,872 | 3,840 | 1% | 13% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Americas | 1,722 | 1,734 | -1% | 9% | 1,843 | 1,552 | 19% | 29% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Asia | 1,882 | 2,792 | -33% | -29% | 2,394 | 2,275 | 5% | 12% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Middle East and | 692 | 836 | -17% | -7% | 1,031 | 1,046 | -1% | 8% |
| Africa | | | | | | | | |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Group total | 7,183 | 8,868 | -19% | -11% | 9,140 | 8,713 | 5% | 15% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
Full year 2008
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| | 2008 | 2007 | US$ | Local | 2008 | 2007 | US$ | Local |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Europe | 16,633 | 15,655 | 6% | -1% | 15,815 | 13,322 | 19% | 13% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Americas | 7,235 | 6,013 | 20% | 19% | 6,428 | 5,247 | 23% | 22% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Asia | 10,242 | 9,186 | 11% | 7% | 8,967 | 7,480 | 20% | 16% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Middle East and | 4,172 | 3,494 | 19% | 17% | 3,702 | 3,134 | 18% | 16% |
| Africa | | | | | | | | |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
| Group total | 38,282 | 34,348 | 11% | 7% | 34,912 | 29,183 | 20% | 16% |
+----------------------+----------+----------+--------+--------+----------+---------+---------+---------+
Appendix II - Notes
Taxes
Certain entities have deferred tax assets with a valuation allowance related to
net operating loss carry-forwards and other items, primarily related to
operations in the U.S. In the fourth quarter of 2008, recognition of some of
these deferred tax assets met the more likely than not standard as outlined in
the applicable accounting interpretation literature. Therefore, ABB recognized
in North America deferred tax assets of $330 million in the fourth quarter.
Furthermore, a corporate income tax charge of approximately $140 million was
recorded relating to a pending tax dispute. In addition, an expense of
approximately $100 million was recorded due to the change in tax basis, because
costs of previously disclosed investigations by U.S. and European authorities
into suspect payments and alleged anti-competitive practices were not tax
deductible. As a result of these one time items, ABB's effective tax rate for
the full year 2008 was reduced to 24.8 percent.
Debt and equity securities transactions
On February 13, 2008, the Company announced a share-buyback program up to a
maximum value of CHF 2.2 billion (equivalent to $2 billion at then-current
exchange rates) with the intention of completing the buyback program prior to
the Annual General Meeting of Shareholders in 2010 and of proposing the
cancellation of the shares at that meeting. A total of 22.675 million shares
were repurchased under the program up to the end of December 2008, at a total
cost of CHF 652 million ($619 million, using exchange rates effective at the
respective repurchase dates). The repurchased shares are included in treasury
stock in the consolidated balance sheet at December 31, 2008. Given the current
market uncertainty, ABB is not actively pursuing new purchases under the CHF
2.2-billion share buyback program.
In July 2008, the bank holding call options (related to Management Incentive
Plan launches during 2003 and 2004) which had been issued at fair value and with
strike prices of CHF 7.00 and CHF 7.50, respectively, exercised a portion of the
calls held. As a result, in the third quarter, approximately 6.8 million shares
were issued and there was an increase in capital stock and additional paid-in
capital of approximately $49 million.
Accounting pronouncements
On December 30, 2008, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position Financial Accounting Standard 132(R)-1, Employer's
Disclosures about Postretirement Benefit Plan Assets (FSP 132(R)-1). FSP
132(R)-1 amends Statement of Financial Accounting Standards No. 132 (Revised
2003), Employers' Disclosures about Pensions and Other Postretirement Benefits,
to provide guidance on an employer's disclosures about plan assets of a defined
benefit pension or other postretirement plan. The disclosures about plan assets
required by FSP 132(R)-1shall be provided for fiscal years ending after December
15, 2009. Upon initial application, the provisions of FSP 132(R)-1are not
required for earlier periods that are presented for comparative purposes.
In May 2008, the Financial Accounting Standards Board issued FASB Staff Position
(FSP) on APB 14-a Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (including Partial Cash Settlement). The FSP
requires the issuer to separately account for the liability and equity
components of the convertible instrument in a manner that reflects the issuer's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. The FSP requires bifurcation of a component of the debt,
classification of that component in equity, and then accretion of the resulting
discount on the debt as part of interest expense being reflected in the income
statement. As of December 31, 2008 and 2007, the Company does not have any debt
instruments outstanding which contain the features outlined in this guidance.
However, in 2009, the Company will be required to implement the guidance on a
retroactive basis to 2007 as it relates to the CHF 1 billion convertible bonds
converted in 2007. The Company is currently assessing the impact on its 2007
Consolidated Financial Statements from the implementation of this FSP.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161).
SFAS 161 amends and expands the disclosure requirements of SFAS 133 and requires
additional qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of gains and
losses on derivative instruments and credit-risk-related contingent features in
derivative agreements. SFAS 161 will be effective for the Company in 2009. The
statement encourages but does not require disclosures for earlier periods
presented for comparative purposes at initial adoption.
In February 2008, the Financial Accounting Standards Board issued FSP 157-2,
which delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
FSP 157-2 delays the effective date of SFAS 157 for certain items until January
1, 2009. The Company does not believe that FSP 157-2 will have a material impact
on its Consolidated Financial Statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51 (SFAS 160) and revised Statement of Financial Accounting
Standards No. 141, Business Combinations (SFAS 141(R)). Among other things, the
statements change the accounting for transactions with noncontrolling interest
holders, require noncontrolling interests (previously referred to as minority
interests) to be reported as a component of equity and require most assets,
liabilities, noncontrolling interests, and goodwill acquired in a business
combination to be recorded at full fair value. Both statements are effective for
periods beginning on or after December 15, 2008, and earlier adoption is
prohibited. The Company will apply SFAS 141(R) to business combinations
occurring after the effective date. SFAS 160 will be applied prospectively upon
adoption in 2009, with the exception of the presentation and disclosure
requirements which will be made on a retrospective basis, to all noncontrolling
interests. After adoption, noncontrolling interests of $612 and $592 million in
2008 and 2007, respectively, will be classified as a part of stockholders'
equity. Income attributable to noncontrolling interests of $260 million, and
$244 million in 2008 and 2007, respectively, will be included in net income,
although such income will continue to be deducted to calculate earnings per
share.
Employee benefits funding
During 2008, ABB made contributions of $300 million to its pension plans and $16
million to its other postretirement plans. These contributions included
additional discretionary contributions of $18 million and $36 million made to
the Company's German and U.S. pension plans, respectively, during the fourth
quarter of 2008.
Local currencies
The results of operations and financial position of many of ABB's subsidiaries
are recorded in the currencies of the countries in which those subsidiaries
reside. The Company refers to these as "local currencies." However, ABB reports
its operational and financial results in U.S. dollars. Differences in our
results in local currencies as compared to U.S. dollars are caused exclusively
by changes in currency exchange rates.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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