3rd Quarter Results
ABB Ltd
24 October 2002
ABB acts to lower cost base after weak Q3
July-Sep July-Sep Change Change US$ in millions Jan-Sep Jan-Sep Change Change
2002 2001 in local 2002 2001 in local
currencies currencies
4,635 5,050 -8% -13% Orders 16,162 17,362 -7% -8%
5,457 5,609 -3% -7% Revenues 16,042 16,363 -2% -3%
47 132 -64% -72% Earnings before 405 727 -44% -46%
interest and
taxes (EBIT)
-183 23 Net income -82 289
Zurich, Switzerland, October 24, 2002 - ABB today announced measures to lower
its cost base after a fall in orders and earnings before interest and taxes
(EBIT) in the third quarter of 2002. The decline was due to a weakening economic
climate, higher project execution costs, investment write-downs by New Ventures,
and later-than-expected benefits of the restructuring program initiated in July
2001.
'Given the weaker economic climate, many of our businesses performed well, with
three out of five divisions increasing EBIT margins,' said chairman and CEO
Jurgen Dormann. 'But it is clear our overall cost base is still much too high,
and that the benefits from our restructuring program have been slower than
expected.'
Dormann announced a series of measures to increase operational performance and
cash flow, and said ABB will streamline its divisional structures to boost its
leading positions in its core power and automation technologies, secure greater
external focus and build a sustainable lower cost base. The Executive Committee
will be reduced from eight to six members.
The core businesses will be combined into two divisions, Power Technologies and
Automation Technologies. The Oil, Gas and Petrochemicals division is kept as a
separate unit, and will take an active part in the sector consolidation. The
Group Processes division will be dissolved.
In addition to the ongoing program to lower costs by US$ 500 million - which
will have full effect from mid-year 2003 - the Board of Directors decided to
initiate measures to further reduce the cost base by around 4 percent of
revenues, or US$ 800 million over the next 18 months.
'Our organizational measures will allow us to build on our leadership positions
in power and automation technologies, and secure competitive cost and
profitability levels even in a weak market,' Dormann added. 'Achieving a
significantly lower cost base is a key priority.'
Dormann said ABB's financial position had improved considerably since March, and
confirmed that it was on track to reduce net debt by at least US$ 1.5 billion by
year-end 2002 from US$ 4.1 billion at year-end 2001.
Results summary (third quarter 2002 compared to third quarter 2001)
• Orders down 13 percent in local currencies due to weaker markets and
lower large orders (down US$ 508 million)
• Revenues decreased 7 percent in local currencies
• EBIT fell 72 percent due to weaker markets, restructuring costs of US$
54 million, higher project execution costs, and investment write-downs of US$ 17
million
• Net income amounted to US$ -183 million compared to US$ 23 million in
the third quarter of 2001 after US$ -125 million in discontinued operations,
arising from the sale of Structured Finance
• Cash flow from operations was US$ -138 million compared to US$ 202
million in the same period last year, after asbestos cash payments of US$ 54
million (included for the first time in net cash provided from operating
activities in order to simplify the cash flow presentation)
• Net debt was US$ 5.5 billion at the end of September compared to US$
5.2 billion at the end of June, mainly due to higher operational investments
• U.S. subsidiary Combustion Engineering reported a 5 percent increase
in new asbestos claims compared to the second quarter of 2002. Settled claims
(excluding West Virginia) rose 9 percent over the same period. Claims
outstanding stood at 111,000, up from 102,700 at the end of the second quarter.
Cash payments were down slightly at US$ 54 million (second quarter 2002: US$ 55
million)
Organizational and management changes
ABB is realigning its structures from five to three divisions, to further
sharpen its focus on power and automation technologies for utility and industry
customers, simplify the organization, improve efficiency and cut costs.
The two new core divisions are Power Technologies, which combines the Power
Technology Products and Utilities divisions, and Automation Technologies, which
combines the Automation Technology Products and Industries divisions.
The new Power Technologies division, serving utility customers, will be headed
by Peter Smits. It will have about 43,000 employees and around US$ 8.5 billion
in annual revenues.
The Automation Technologies division, focusing on industry customers, will be
headed by Dinesh Paliwal. It will have about 63,000 employees and around US$
9.25 billion in revenues.
The Oil, Gas and Petrochemicals division will be maintained as a separate unit.
ABB said it would explore opportunities in the current process of consolidation
among suppliers to the large oil, gas and petrochemicals companies.
ABB has been approached by several companies seeking the division's
participation in the consolidation process. At this time, it is premature to
predict the outcome and timing of further steps, the company said.
The Oil, Gas and Petrochemicals division employs around 12,000 people and had
revenues of US$ 3.5 billion in 2001.
As a further step to simplify the worldwide organization, ABB is dissolving its
Group Processes division, which has led the standardization of processes. The
process areas that have not already been embedded in the businesses will be
integrated into the divisions.
Jan Secher, who led Group Processes, has decided to leave ABB. Dormann thanked
Secher for his contributions to the company in a succession of senior management
positions.
'The new structure will allow us to serve our customers better, enhance the
external focus and more closely integrate our senior managers in local markets
into our global management teams, ' Dormann said. 'We will push out more
responsibility to our business operations so that the front-line managers who
run the operations around the world have accountability for cost control, as
well as for revenue growth.'
ABB said the Executive Committee appointments are effective immediately, and
that the new organizational structures will be implemented in the fourth
quarter. The company will report its financial results according to its present
organizational structure in 2002, and according to the new structure from the
first quarter of 2003.
These measures follow a restructuring program that was announced in July 2001.
At the end of September 2002, excluding acquisitions and divestments, a total of
about 13,100 jobs had been reduced.
The new ABB Executive Committee will comprise:
Jurgen Dormann, chairman and CEO
Peter Voser, Chief Financial Officer
Peter Smits, Power Technologies
Dinesh Paliwal, Automation Technologies
Erik Fougner, Oil, Gas and Petrochemicals (ad interim)
Gary Steel, Human Resources (from Jan. 1, 2003)
Board of Directors update
At its meeting on October 23, the Board of Directors appointed a new chairman of
the Nomination and Compensation Committee, to replace Jurgen Dormann following
his appointment as CEO. The new committee chairman is Hans Ulrich Maerki. The
board also appointed Jacob Wallenberg and Michel de Rosen as new members of the
committee.
Third quarter performance - key figures in detail
US$ in millions July-Sep July-Sep Change Change in local
(except per share data) currencies
2002 2001
Group orders 4,635 5,050 -8% -13%
Utilities 924 1,754 -47% -48%
Industries 1,045 1,023 2% -2%
Oil, Gas & 351 612 -43% -46%
Petrochemicals
Power 1,039 1,138 -9% -11%
Technology Products
Automation 1,218 1,163 5% -1%
Technology
Products
Financial 409 348 18% 12%
Services
Corporate/ -351 -988
Other 1)
Group revenues 5,457 5,609 -3% -7%
Utilities 1,213 1,423 -15% -15%
Industries 1,049 1,194 -12% -16%
Oil, Gas & 911 902 1% -4%
Petrochemicals
Power 1,072 1,063 1% -1%
Technology Products
Automation 1,250 1,242 1% -4%
Technology
Products
Financial 409 348 18% 12%
Services
Corporate/ -447 -563
Other 1)
Group earnings before interest and taxes 47 132 -64% -72%
(EBIT)
Utilities 8 36 -78% -77%
Industries 43 32 34% 34%
Oil, Gas & 33 31 6% 4%
Petrochemicals
Power 76 59 29% 25%
Technology Products
Automation 86 110 -22% -25%
Technology
Products
Financial 40 22 82% 61%
Services
Corporate/ -239 -158
Other 1)
Group EBIT margin 0.9% 2.4%
Utilities 0.7% 2.5%
Industries 4.1% 2.7%
Oil, Gas & 3.6% 3.4%
Petrochemicals
Power 7.1% 5.6%
Technology Products
Automation 6.9% 8.9%
Technology
Products
Financial n.a. n.a.
Services
Corporate/ n.a. n.a.
Other 1)
Net income -183 23
Earnings Per Share
(US$ basic and diluted)
-Income from continuing operations -0.05 0.02
-Net income -0.16 0.02
Net cash provided by operating activities -138 202
1) Includes adjustments to eliminate inter-company transactions
Third quarter 2002
Income statement
Third quarter orders decreased 13 percent in local currencies and 8 percent in
nominal terms compared to the third quarter of last year. All divisions except
Financial Services reported lower third quarter orders expressed in local
currencies.
Base orders (orders below US$ 15 million), representing 95 percent of third
quarter orders, went down by 2 percent in local currencies, while large orders
(orders above US$ 15 million) declined by 72 percent compared to last year. The
decline in large orders was mainly in Oil, Gas and Petrochemicals and Utilities.
Third quarter revenues declined by 7 percent in local currencies and by 3
percent in nominal terms. All divisions except Financial Services reported lower
revenues compared to the third quarter of 2001, expressed in local currencies.
The order backlog was US$ 14,295 million at the end of September, 6 percent
lower in local currencies since the end of June, reflecting weak order intake in
the third quarter.
EBIT margin was 0.9 percent, compared to 2.4 percent for the third quarter of
last year. Lower margins were recorded in Utilities as a result of increased
execution costs in some legacy projects, and in Automation Technology Products,
mainly due to weaker process automation markets. Industries and Power Technology
Products reported significantly higher margins for the third quarter of 2002,
while the Oil, Gas and Petrochemicals margin was slightly up.
EBIT decreased 72 percent in local currencies and 64 percent in nominal terms,
after US$ 54 million in restructuring charges (Q3 2001: US$ 13 million). Third
quarter EBIT for the operational businesses (before Corporate/Other costs)
decreased by only US$ 4 million to US$ 286 million from the comparable period in
2001, so the drop in EBIT is mainly due to higher Corporate/Other costs at US$
239 million (Q3 2001: US$ 158 million). Corporate/Other costs included US$ 17
million in write-downs of investments by New Ventures, as a result of weak
equity markets.
EBIT included Other Expense of US$ -43 million (Q3 2001: US$ 26 million). It
comprises:
- Restructuring charges of US$ 54 million (Q3 2001:
US$ 13 million)
- Capital gains of US$ 9 million (Q3 2001: US$ 11
million)
- Write-downs of assets US$ 24 million (Q3 2001: US$
2 million), mainly investments in New Ventures
- Income from equity accounted companies, licenses
and other of US$ 26 million (Q3 2001: US$ 30 million).
Net financial expense was US$ 63 million compared with US$ 56 million in the
third quarter of 2001.
Income from discontinued operations was US$ -125 million compared to zero in the
third quarter of last year. This amount mainly comprises the expected capital
loss and fees related to the Structured Finance activities to be sold to GE
Commercial Finance and the operational income from the Metering business to be
sold to Ruhrgas Industries GmbH.
Net income was US$ -183 million, compared to US$ 23 million in the same period
last year.
Cash flow and balance sheet
Net cash used in operating activities was US$ 138 million in the third quarter,
after asbestos cash payments of US$ 54 million, which were recorded for the
first time in this item to simplify the cash flow presentation. The movement in
'other assets and liabilities, net' (US$ -108 million) was mainly due to large
project execution, as customer advances were consumed and sales in excess of
invoicing (value-added work performed but not yet billed) built up. Trade
receivables (US$ 161 million) and inventories (US$ 67 million) both contributed
cash while the change in trade payables was negative (US$ -131 million).
Cash and marketable securities totaled US$ 3,855 million at September 30, 2002
(US$ 4,557 million at June 30, 2002). Net debt (defined as short-, medium- and
long-term debt less cash and marketable securities) amounted to US$ 5,499
million compared to US$ 5,239 million three months ago. The increase is mainly
operational (net cash used in operating activities, excluding marketable
securities, of US$ -173 million and net purchases of property, plant and
equipment of US$ -100 million) and was only partially offset by non-cash
currency movements.
Long-term debt at September 30, 2002 as a percentage of total debt was 61
percent compared to 60 percent at the end of June. This is in line with ABB's
2002 target to extend the maturity of its debt to two-thirds long-term and
one-third short-term debt. ABB is on track to reduce its net debt by at least
US$ 1.5 billion by year-end 2002, from US$ 4.1 billion at year-end 2001.
Nine-month performance - key figures in detail
US$ in millions Jan.-Sep Jan-Sep Change Change in local
(except per share data) currencies
2002 2001
Group orders 16,162 17,362 -7% -8%
Utilities 3,653 4,816 -24% -24%
Industries 3,448 3,794 -9% -10%
Oil, Gas & 2,471 2,602 -5% -6%
Petrochemicals
Power 3,323 3,272 2% 1%
Technology
Products
Automation 3,768 3,633 4% 2%
Technology
Products
Financial 1,034 1,251 -17% -19%
Services
Corporate/ -1,535 -2,006
Other 1)
Group revenues 16,042 16,363 -2% -3%
Utilities 3,543 3,974 -11% -11%
Industries 3,093 3,632 -15% -16%
Oil, Gas & 2,887 2,450 18% 15%
Petrochemicals
Power 3,220 2,876 12% 12%
Technology Products
Automation 3,672 3,590 2% 1%
Technology
Products
Financial 1,034 1,251 -17% -19%
Services
Corporate/ -1,407 -1,410
Other 1)
Group earnings before interest and taxes 405 727 -44% -46%
(EBIT)
Utilities 74 122 -39% -38%
Industries 128 132 -3% -4%
Oil, Gas & 109 119 -8% -11%
Petrochemicals
Power 241 192 26% 25%
Technology Products
Automation 274 315 -13% -14%
Technology
Products
Financial 177 204 -13% -18%
Services
Corporate/ -598 -357
Other 1)
Group EBIT margin 2.5% 4.4%
Utilities 2.1% 3.1%
Industries 4.1% 3.6%
Oil, Gas & Petrochemicals 3.8% 4.9%
Power 7.5% 6.7%
Technology Products
Automation 7.5% 8.8%
Technology
Products
Financial n.a n.a
Services
Corporate/ n.a n.a
Other 1)
Net income -82 289
Earnings per share
(US$ basic and diluted)
-Income from continuing operations 0.04 0.30
-Net income -0.07 0.25
Net cash provided by operating activities -234 187
1) Includes adjustments to eliminate inter-company transactions
Nine months 2002
Income Statement
Orders in the first nine months decreased by 7 percent in U.S. dollars, or 8
percent in local currencies. Order growth from early-cycle products in the first
two quarters of 2002 has not continued into the third quarter, although Power
Technology Products and Automation Technology Products still recorded slightly
higher orders for the first nine months of 2002 compared with the same period
last year. All other divisions showed lower order growth for the first nine
months. Orders in Asia declined, due to a lower volume of large orders compared
with the first nine months of last year. Higher orders in Europe were offset by
lower demand in the Americas, Middle East and Africa.
As a result of the weak order development in some key markets, revenues in the
first nine months declined overall by 2 percent in U.S. dollars or 3 percent in
local currencies. However, Power Technology Products and Oil, Gas and
Petrochemicals recorded double-digit revenue growth and Automation Technology
Products was slightly up. All other divisions reported revenue declines.
EBIT margin in the first nine months was 2.5 percent compared with 4.4 percent
in the first nine months of 2001. Industries and Power Technology Products
reported higher margins as a result of productivity gains, while Utilities and
Oil, Gas and Petrochemicals margins were reduced mainly due to execution of low
margin projects and higher project costs. Automation Technology Products margins
suffered from the weakness in process automation markets.
EBIT declined 46 percent in local currencies and 44 percent in nominal terms,
after US$ 148 million in restructuring charges (first nine months 2001: US$ 33
million). Third quarter EBIT for the operational businesses (before Corporate/
Other costs) was about 7 percent lower at US$ 1,003 million, so the decline was
mainly due to increased Corporate/Other costs at US$ 598 million (first nine
months 2001: US$ 357 million).
EBIT includes Other Expense of US$ 33 million, comprising:
• Restructuring charges of US$ 148 million (first nine months 2001: US$ 33
million)
• Capital gains of US$ 79 million (first nine months 2001: US$ 7 million)
• Write-downs of assets of US$ 63 million (first nine months 2001: US$ 4
million)
• Income from equity accounted companies, licenses and other of US$ 99
million (first nine months 2001: US$ 137 million)
Net financial expense was US$ 212 million compared with US$ 176 million for the
first nine months of 2001.
ABB posted a net loss of US$ 82 million compared with net income of US$ 289
million for the same period last year, after a loss from discontinued operations
of US$ 126 million (first nine months of 2001: income of US$ 14 million).
Cash flow and balance sheet
Net cash used in operating activities amounted to US$ -234 million (first nine
months of 2001: US$ 187 million of net cash provided), after asbestos cash
payments of US$ 161 million, which is included for the first time in this item
in order to simplify the cash flow presentation. A negative effect came mainly
from 'other assets and liabilities, net' (increase of US$ 852 million, mainly
due to net consumption of customer advances in large project execution, higher
sales in excess of invoicing and reduced non-trade payables).
Net debt increased from US$ 4.1 billion at the end of 2001 to US$ 5.5 billion at
the end of September 2002. The main components of the increase were cash used in
operations, non-cash currency movements (about 40 percent of the total
increase), and debt acquired with the Xerox portfolio in the second quarter (to
be divested as part of Structured Finance, subject to customary regulatory
approvals).
Asbestos
As announced on October 21, 2002 the ABB Group says it is likely that the
expected asbestos-related costs of its U.S. subsidiary Combustion Engineering,
Inc. (CE) now exceed the value of CE's assets, if CE's historical settlement
policies are continued into the future. The book value of CE's assets as of
September 30, 2002 was US$ 812 million.
CE and the ABB Group are considering various options for resolving the asbestos
liability, including the possible reorganization of CE under Chapter 11 of the
U.S. Bankruptcy code.
Regarding asbestos claims pending against CE, ABB said that 27,900 claims were
settled in the first nine months of 2002, 30 percent more than in the same
period last year. More than 35 percent were settled without payment. Around
45,400 new claims were filed in the first nine months of 2002, compared to
39,700 in the first three quarters of last year. Settlement costs prior to
insurance reimbursement were US$ 161 million (US$ 103 million in the first nine
months of 2001).
The third quarter asbestos development is in line with previous quarters. New
claims (15,900) increased by 5 percent over the second quarter of 2002, while
claims settled (7,600) went up by 9 percent. At the end of September 2002,
111,000 claims were pending (102,700 end of June 2002).
Group outlook
The outlook has changed.1
As announced on Monday, October 21, 2002 ABB revised downward its earnings
outlook, as a result of lingering market weakness and slower-than-expected
benefits from its cost reduction program. Given the uncertainty surrounding the
strength and timing of an economic recovery, the company has not given any
updated earnings outlook. The company's medium-term targets are under review.
ABB has confirmed its target of reducing net debt by at least US$ 1.5 billion by
year-end 2002, from US$ 4.1 billion at year-end 2001.
1The company's previous outlook was as follows: for 2002, revenues are expected
to be flat in comparison with 2001. EBIT margin for the full year 2002 is
expected to be in the range of 4 to 5 percent. EBIT and net cash from operations
are expected to be stronger in the second half of 2002 than in the first half.
ABB's target is to grow revenues on average by 6 percent annually in the period
2001-2005. EBIT margin is expected to reach 9 to 10 percent by 2005.
The outlook assumes no major currency effects and excludes major acquisitions
and divestments.
Divisional performance in the third quarter
The Power Technology Products and Automation Technology Products divisions serve
their customers through external channel partners and ABB's end-user divisions.
As part of ABB's customer-centric strategy, more customers are being served
directly by channel partners such as wholesalers, systems integrators and
distributors. Orders, revenues and earnings associated with these customers are
accordingly no longer reflected in the end-user divisions.
As a result, in the end-user divisions, orders and revenues from these '
pull-through' products are decreasing correspondingly. Unless otherwise stated,
there is no material impact on the EBIT of the end-user divisions. Overall,
there is no impact on the Group's consolidated results, since the pull-through
effects are offset by reduced internal eliminations (currently presented in the
line item Corporate/Other). There is no impact on the product divisions, since
for them it remains a sale to the same customer whether products are sold via
external channel partners or internal end-user divisions.
For all figures except for EBIT margins, comments refer to the third quarter
results expressed in local currencies. EBIT excluding capital gains is shown
only if the aggregate of such gains for the division is material (in any case,
if capital gains represent more than 10 percent of divisional EBIT).
Utilities
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Orders 924 1,754 -47% - 48%
Revenues 1,213 1,423 - 15% - 15%
EBIT 8 36 - 78% - 77%
EBIT margin 0.7% 2.5%
Restructuring costs -7 -1
Orders dropped by 48 percent. Orders excluding product sales handled via channel
partners were 50 percent lower in the third quarter. There was a lack of large
orders, in contrast to the third quarter of 2001 when a US$ 350 million order
was won in China. A weaker U.S. market and delayed
investments in South America contributed to the shortfall. In addition, a
selective bidding approach was taken to secure earnings quality.
Revenues were 15 percent lower. Excluding the pull-through effect, revenues
decreased by 4 percent.
EBIT was 77 percent lower. The EBIT margin for the underlying operational
performance (excluding restructuring, pull-through, capital gains and
non-recurring amortization) decreased from 4.4 percent to 1.8 percent, mainly
due to US$ 15 million in costs related to the execution of low-margin legacy
projects (pre-2001) in Utility Power Systems.
Industries
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Orders 1,045 1,023 + 2% - 2%
Revenues 1,049 1,194 - 12% - 16%
EBIT 43 32 + 34% + 34%
EBIT margin 4.1% 2.7%
Restructuring costs -6 -2
Orders decreased slightly as more customers were served by channel partners.
Excluding product sales now handled via channel partners, orders increased by 21
percent. Led by Asia, all markets showed signs of recovery, including automotive
in the U.S. and metals in Europe.
Revenues were 16 percent lower (2 percent lower, excluding the pull-through
effect).
EBIT increased strongly because of productivity gains coupled with a workforce
reduction of 11 percent (excluding acquisitions and divestments). A focused
service strategy propelled growth in volume and margins, especially in
petroleum, chemicals, paper, marine and turbocharging. The EBIT margin for the
underlying operational performance (excluding pull-through, restructuring,
capital gains, and non-recurring amortization) increased from 3.3 percent to 5
percent.
Oil, Gas & Petrochemicals
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Orders 351 612 - 43% - 46 %
Revenues 911 902 + 1% - 4%
EBIT 33 31 + 6% + 4%
EBIT margin 3.6% 3.4%
Restructuring costs 0 -6
Orders dropped by 46 percent. In this quarter, Upstream and Downstream received
mostly base orders in contrast to the third quarter of last year when several
large orders were booked. Most markets in Downstream were flat in the third
quarter while demand in Upstream weakened. In particular, Upstream projects in
West Africa have been delayed.
Revenues decreased by 4 percent. Revenues remained at a high level, reflecting
the strong order backlog.
EBIT increased by 4 percent and EBIT margin improved from 3.4 to 3.6 percent.
The EBIT margin for the underlying operational performance (excluding
restructuring, capital gains and non-recurring amortization) decreased from 4.9
percent to 3.6 percent. The decrease was mainly due to the continuing execution
of low-margin fixed-price contracts and higher project execution costs (US$ 14
million in the third quarter).
Power Technology Products
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Orders 1,039 1,138 - 9% - 11%
Revenues 1,072 1,063 + 1% - 1%
EBIT 76 59 + 29% +25%
EBIT margin 7.1% 5.6%
Restructuring costs -8 -1
Orders decreased by 11 percent compared to the same period last year, when there
was a particularly high large order intake, including one from China for US$ 120
million for Power Transformers. Low demand in North America, in particular for
Distribution Transformers, was offset by strong demand in High- and
Medium-Voltage Technology, reflecting continued strong demand in Asia, the
Middle East and Africa. Europe remained mixed.
Revenues were flat, as shipment timing differences masked underlying strong
growth in the transmission business.
EBIT increased strongly by 25 percent, reflecting productivity gains and further
operational improvements, coupled with a workforce reduction of 9 percent
(excluding acquisitions and divestments). The EBIT margin for the underlying
operational performance (excluding restructuring, capital gains, and
non-recurring amortization) increased from 5.7 percent to 7.8 percent.
Automation Technology Products
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Orders 1,218 1,163 + 5% - 1%
Revenues 1,250 1,242 + 1% - 4%
EBIT 86 110 - 22% - 25%
EBIT margin 6.9% 8.9%
Restructuring costs -5 -4
Orders declined by 1 percent. Nearly all business areas showed a flat or
slightly positive development except Electrical Machines which declined due to
the weak market in Europe. Robotics reported a double-digit increase in order
intake, mainly driven by higher demand in North America while demand for process
automation generally remained low. Low-Voltage Products and Drives and Power
Electronics benefited from the higher demand in Europe and Asia.
Revenues declined by 4 percent. The positive development in Robotics and Drives
and Power Electronics was offset by revenue declines in Electrical Machines,
Instrumentation, and Control and Force Measurement, as a result of lower orders.
EBIT decreased by 25 percent mainly due to the weak process automation markets
which led to lower profitability in Instrumentation, and Control and Force
Measurement, as well as Electrical Machines. The EBIT margin for the underlying
operational performance (excluding restructuring, capital gains and
non-recurring amortization) decreased from 10.4 to 7.3 percent.
On September 18, ABB announced it had sold its metering business to Ruhrgas,
Germany. The results exclude the metering business, which was booked in
discontinued operations.
Financial Services
US$ in millions July-Sep July-Sep Change Change in local
currencies
(except where indicated) 2002 2001
Revenues 409 348 + 18% +12%
EBIT 40 22 +82% +61%
Restructuring -3 0
Revenues increased by 12 percent due to improved Insurance results.
EBIT increased by 61 percent compared to the third quarter last year. However,
last year's EBIT included a US$ 50 million provision for potential net
reinsurance claims following September 11, 2001. Excluding this provision, this
year's EBIT decreased due to lower earnings in Treasury Centers following the
halt of proprietary trading, and Equity Ventures.
On September 4, ABB announced the sale of most of its Structured Finance
business to GE Commercial Finance (subject to customary regulatory approvals).
The division's results exclude the earnings related to the sale. ABB has stopped
developing and investing in new Equity Ventures projects and will only manage
the existing portfolio.
Corporate/Other
US$ in millions July-Sep July-Sep
(except where indicated) 2002 2001
EBIT -239 -158
Other Activities -71 -62
Group Processes -15 -16
Corporate R&D -19 -25
Real Estate -3 12
Elimination of AFS -40 -36
interest income
Other Corporate -76 -38
Capital Gains 10 6
Restructuring -25 1
Other Activities, which mainly comprises New Ventures and Building Systems,
reported increased costs of US$ 9 million compared to the third quarter last
year. Weak equity markets required New Ventures to write down US$ 17 million in
investments.
As a result of streamlining its activities, corporate Research and Development
cost decreased to US$ 19 million although higher restructuring costs contributed
to the increase in total corporate restructuring costs for the quarter. The
balance of restructuring charges was taken for Building Systems.
Real estate sales reduced due to lower rental income for the third quarter of
2002.
Further information
The company will host a conference call for analysts and investors to discuss
its Q3 results today at 16:00 Central European Time. Teleconference callers
should dial +41 91 610 4111 in Europe and +1 412 858 4600 in the U.S. and
Canada. The facility is also available to the media on a 'listen only' basis.
The 2002 Q3 results press release and presentation slides are available from
October 24 on the ABB Investor Relations homepage at www.abb.com/
investorrelations
The audio playback of the conference call will be available for 72 hours after
the call commencing 2 hours after the conference call on +41 91 612 4330
(Europe) and +1 412 858 1440 in the U.S. and Canada. The PIN number is 687#.
Reporting dates in 2003 are February 12 (annual results), April 29 (Q1), July 29
(Q2), and October 28 (Q3). The annual general meeting will be held on Friday,
May 16 with an information meeting for shareholders in Sweden on Monday, May 19.
ABB (www.abb.com) is a leader in power and automation technologies that enable
utility and industry customers to improve performance while lowering
environmental impacts. The ABB Group of companies operates in more than 100
countries and employs about 146,000 people.
This press release includes forward-looking information and statements that are
subject to risks and uncertainties that could cause actual results to differ.
These statements are based on current expectations, estimates and projections
about global economic conditions, the economic conditions of the regions and
industries that are major markets for ABB Ltd and ABB Ltd's lines of business.
These expectations, estimates and projections are generally identifiable by
statements containing words such as 'expects', 'believes', 'estimates' or
similar expressions. Important factors that could cause actual results to differ
materially from those expectations include, among others, economic and market
conditions in the geographic areas and industries that are major markets for
ABB's businesses, market acceptance of new products and services, changes in
governmental regulations, interest rates, fluctuations in currency exchange
rates and such other factors as may be discussed from time to time in ABB's
filings with the U.S. Securities and Exchange Commission. 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.
The Q3 report is unaudited.
This information is provided by RNS
The company news service from the London Stock Exchange
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