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Strong order growth for ABB

Hydrocarbon Engineering,


Due to ABB focusing on profitable organic growth and the related strategic initiatives, there was a strong increase in orders across all regions in Q3. Total orders rose to US$ 11.2 billion. This was boosted by large orders, over US$ 15 million, which included a mining automation project in the Americas and a gas treatment pant in Africa. Base orders, below US$ 15 million, saw an increase in every region. Continued successful implementation of ABB’s service strategy resulted in a 10% increase in service orders for the quarter.

In line with a lower order backlog at the start of this year, revenues were down 6% to US$ 9.8 billion. The operational EBITDA margin was 14.3% in Q3 versus 15.7% last year. The margin reflected lower revenues and the result in Power Systems. Net income was US$ 734 million and basic earnings per share was US$ 0.32. Targeted net working capital management measures supported cash from operations, which increased 29% in the first nine months. ABB initiated the US$ 4 billion share buyback program announced in September and purchased shares with a value of approximately US$ 350 million during the quarter.

Comments

Ulrich Spiesshofer, CEO, ABB said, ‘our program for profitable organic growth has successfully created healthy order momentum across all regions. I am encouraged to see attractive large project wins and five consecutive quarters of base order growth.

‘In PS, we achieved significant milestones in project execution, continued to derisk the portfolio and implement a new business model for offshore wind projects. The division broke even in the quarter. We continue to drive our focused action program to complete the turnaround and address the remaining challenges ahead. Overall, our efforts on relentless execution, including our cost savings program, are on track.

‘We are driving profitable growth through penetration, innovation and expansion, aimed at growing through penetration, innovation and expansion, aimed at growing ahead of the global economy. We will carefully manage costs and cash as the short term outlook for the global economy is increasingly uncertain. The entire management team is taking decisive actions in line with our Next Level strategy, which was announced at our Capital Markets Day in September.’

Outlook

ABB has said that the long term business demand for its businesses remains clearly positive. The company has said that the need for reliable and efficient electricity transmission and distribution will continue to increase, driven by many factors. At the same time, ABB has said demand for industrial automation solutions will grow as customers strive to improve productivity, efficiency, product quality and safety. These trends are also expected to drive demand in ABB’s infrastructure and transportation markets. ABB has said that it is well positioned to tap these opportunities for long term profitable growth with its strong market presence, broad geographic and business scope, technology leadership and financial strength.

In the short term, macroeconomic and geopolitical developments are signalling a mixed picture and there is increased uncertainty. Some early cycle macroeconomic signs in the US remain positive and growth in China is expected to continue. At the same time however, the market remains impacted by slow growth in Europe, political tensions in various parts of the world as well as the health situation in Africa.

In the current market, ABB’s management team is aiming to continue to outgrow its market in major customer segments by systematically driving profitable organic growth through increased market penetration, generating more revenues from the pipeline of new product innovations, and expanding into new attractive market segments. Also, ABB management is intending to accelerate business led collaboration, such as further developing the service business, driving the successful integration of acquired businesses and increasing productivity by focusing more so on the customer needs. A third priority is relentless execution, especially in the areas of cost savings, cash flow generation and returning the Power Systems division to higher and more consistent returns.


Edited from press release by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/23102014/abb-q3-2014-financial/


 

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