Interim Results - Part 1

ABB Ltd
24 July 2002

PART 1



ABB's Q2 orders up - recovery continues

Four divisions increase earnings over Q1

  • Q2 order intake 10 percent and revenues 8 percent above Q1 in local
    currencies
  • First-half EBIT US$ 368 million after US$ 185 million in restructuring
    costs, asset write-downs and charges
  • Net income US$ 101 million, compared to US$ 266 million in first half 2001
  • Financial restructuring and cost reduction program progressing as planned
  • Full-year targets confirmed: EBIT margin of 4 to 5 percent and flat
    revenues

Zurich, Switzerland, July 24, 2002 - ABB said today orders grew 10 percent and
revenues 8 percent in the second quarter, compared to Q1, 2002. ABB took US$ 185
million in restructuring costs, asset write-downs and charges in the first half
to further improve the company's fundamentals and confirmed its full-year target
of a 4 to 5 percent EBIT margin.

First-half orders were US$ 11.9 billion, down 6 percent from US$ 12.6 billion in
the first half of 2001. Three divisions increased first-half orders: Power
Technology Products (8 percent), Automation Technology Products (3 percent) and
Oil, Gas and Petrochemicals (6 percent).

'The early-cycle orders recovery we saw in the first quarter has continued in
the second quarter, and four divisions increased their earnings,' said Jorgen
Centerman, ABB president and CEO. 'The positive order and revenues trend, and
the expected benefits from restructuring, make us confident that we will reach
our 2002 revenue and margin targets, while we continue to take measures to
improve the company's fundamentals. We expect a stronger second half.'

Orders from large customers grew by 16 percent in the first half, in line with
ABB's focus on its core utility and industry customer base.

In local currencies, divisional EBIT in the second quarter increased 42 percent
in Industries, 41 percent in Automation Technology Products, 35 percent in Power
Technology Products and 6 percent in Utilities. In Oil, Gas and Petrochemicals,
EBIT declined 33 percent due to project margin write-downs.

First-half EBIT was US$ 368 million after US$ 185 million in restructuring
costs, asset write-downs and charges. Costs related to the restructuring program
were US$ 106 million. Asset write-downs and charges in New Ventures were US$ 9
million, and US$ 21 million in Building Systems. In Oil, Gas and Petrochemicals,
US$ 49 million were taken in project margin write-downs. The half-year EBIT
margin was 3.4 percent.

First-half net income was US$ 101 million (H1 2001: US$ 266 million), with a
loss of US$ 13 million in the second quarter due to the charges taken. Net cash
from operations amounted to US$ 20 million in the first half 2002 (H1 2001: US$
79 million).

The restructuring program announced last July is progressing as planned. In the
first half, US$ 106 million in costs were taken for the program, putting total
restructuring costs to date at US$ 337 million. Excluding acquisitions and
divestments, a total of 10,900 jobs have been reduced since July 2001, with
1,600 jobs cut in the second quarter, partially through natural attrition.

As of June 30, ABB employed 149,924 people compared to 156,865 at year-end 2001.

Net debt increased from US$ 4.1 billion to US$ 5.2 billion in the first half,
but ABB reiterated its commitment to reducing net debt by at least US$ 1.5
billion in 2002. The net debt reduction will be achieved through improved cash
earnings, asset sales and continuing portfolio management. ABB sold its Swedish
real estate property portfolio in Q2 for US$ 300 million. The announced
divestment of the Structured Finance business is expected to take place in the
third quarter.

In regard to asbestos claims pending against Combustion Engineering, a U.S.
subsidiary, ABB said that about 20,300 claims were settled in the first half of
2002, more than 40 percent without payment. Combustion Engineering is continuing
its efforts to settle valid claims and dispute claims that appear baseless. At
half-year, 102,700 claims were pending, compared to 93,500 at year-end 2001.
Around 29,500 new claims were filed in the first half of 2002, compared to
29,300 in the second half of 2001. Settlement costs prior to insurance
reimbursement were US$ 107 million (US$ 69 million in the second half of 2001).

US$ in millions, except per share data  Jan - June 2002  Jan-June 2001           Change   Change in LC       Change LC
                                                                                          (local
                                                                                          currencies)        Q2 vs. Q1
Orders                                            11,867           12,648             -6%            -6%             10%
Revenues                                          10,930           11,099             -2%            -1%              8%
Earnings before interest and taxes                   368              626            -41%           -41%            -48%
(EBIT)
Income from continuing operations                    101              329            -69%
Income (loss) from extraordinary items                 0              -63
and accounting changes
Net income                                           101              266            -62%
Earnings per share (US$)
                                                    0.09             0.29
Income from continuing operations,                                   0.23
basic and diluted:                                  0.09

Net income, basic and diluted:
EBITDA                                               659            1,010            -35%
Net cash provided by operating                        20               79
activities



Organizational and management changes

Gorm Gundersen, head of the Oil, Gas and Petrochemicals division and a member of
the ABB Group executive committee, is leaving the company. The manager of the
Upstream business area, Erik Fougner, assumes Gundersen's duties on an interim
basis, in addition to his business area manager role.



Key figures in detail

Orders in the first half decreased by 6 percent in both local currencies and
nominal terms compared to the first half of 2001.

Base orders (orders below US$ 15 million), representing 82 percent of first-half
orders, declined by 11 percent in both local and nominal currencies compared to
the same period last year. First-half large orders increased 25 percent in both
local and nominal currencies, mainly due to large projects awarded to the Oil,
Gas and Petrochemicals division in the second quarter.

First-half Group revenues were flat in local and nominal currencies, at US$
10,930 million.

The order backlog increased by 14 percent to US$ 15,338 million, or 6 percent in
local currencies since year-end, reflecting increased order intake in the second
quarter.

EBIT margin in the first half of 2002 was 3.4 percent (5.6 percent in the first
half of 2001). Lower margins were recorded in Utilities due to a weaker market
environment and cost overruns, and in Automation Technology Products, reflecting
restructuring costs and lower margins in Q1, 2002. Project margin write-downs
and execution of low-margin projects led to a significant margin drop in Oil,
Gas and Petrochemicals.

Corporate/Other amounted to US$ -367 million compared with US$ -202 million last
year, mainly the result of asset write-downs in participations by New Ventures,
asset write-downs and restructuring charges in the Building Systems business
area, and development costs in Group Processes that are now expensed rather than
capitalized.

Other income in the first half was US$ -3 million (H1 2001: US$ 81 million)
comprising:

  • Restructuring charges of US$ -106 million (H1 2001: US$ -20 million)
  • Capital gains of US$ 69 million (H1 2001: US$ -4 million)
  • Write-down of assets US$ -40 million (H1 2001: US$ -2 million)
  • Income from equity accounted companies, licenses and other of US$ 74
    million (H1 2001: US$ 107 million)

Net financial expenses were US$ 155 million in the first half of 2002 compared
to US$ 129 million in the same period last year, reflecting lower interest and
dividend income.

Net income was US$ 101 million in the first half, compared to US$ 266 million in
the same period last year.

Cash flow, balance sheet and liquidity

In the first half, net cash from operating activities was US$ 20 million
compared to US$ 79 million last year. Cash from the sale of marketable
securities was US$ 462 million, while there was a US$ 952 million outflow for
other assets and liabilities.

The latter is mainly a result of large project execution, as customer advances
were consumed and sales in excess of invoicing (value-added work performed but
not yet billed) built up during the period. Increased non-trade receivables also
contributed to the movement in other assets and liabilities.

As a result of continued working capital discipline, trade receivables,
inventories and trade payables contributed US$ 89 million to the operational
cash flow.

Cash and marketable securities totaled US$ 4,608 million at June 30, 2002. Net
debt (defined as short-, medium- and long-term debt less cash and marketable
securities) increased to US$ 5,235 million from US$ 4,077 million at the end of
2001. About 40 percent of the increase came from unrealized non-cash currency
movements, which were offset by balance sheet positions not included in the net
debt definition. The balance came from debt assumed in connection with the
acquisition of a financing receivables portfolio, and to finance operational
investments.

Long-term debt as a percentage of total debt was 60 percent compared to 51
percent at year-end, in line with ABB's 2002 target of two-thirds long-term and
one-third short-term debt.

In May, ABB issued a US$ 968 million convertible bond and a straight bond
consisting of 500 million euro and 200 million pound sterling.



Outlook 1

The outlook remains unchanged. 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.

1Assumes no major currency effects and excludes major acquisitions and
divestments.



Technology

Industrial IT is ABB's patented concept for linking products and services
together with the information needed to run, service, and maintain them. Open
standard software allows production line operators or energy systems managers to
effectively access the information needed to make operational decisions.

The number of ABB products certified to its Industrial IT standards passed the
10,000 mark in the second quarter of 2002. ABB is on track to certify all
relevant products and product lines - a total of 40,000 - by the end of 2002.

ABB opened a research and development center in Singapore to concentrate on
software development and Industrial IT. ABB opened a similar center in India
earlier this year, as part of its strategy to make its research and development
capability even more global. A further technology center is scheduled to open in
China in 2003.



Sustainability

ABB launched its annual Sustainability Report in June, using for the first time
the internationally approved 'triple-bottom-line' approach to present its
economic, environmental and social achievements.

Among the successes detailed in the report: the environmental management
standard ISO 14001 has been implemented in 98 percent of ABB's 550 manufacturing
and service sites worldwide. Environmental Product Declarations, detailing the
eco-efficiency of ABB products and services, are helping customers benchmark
their environmental performance against competition.

ABB said it is well ahead of its target, set in 1999, to reduce greenhouse gas
emissions from its own activities by a rate of one percent per year over five
years.



Division reviews

The divisions Power Technology Products and Automation Technology Products 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.

All figures reflect the first six months' activity and, except for EBIT margins,
comments refer to local currency figures.

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, except where     Jan - June 2002  Jan - June 2001          Change   Change                 Change LC
indicated                                                                            in local
                                                                                     currencies             Q2 vs Q1
Orders                                       2,729            3,062            - 11%            - 10%             -15%
Revenues                                     2,330            2,551             - 9%             - 8%             +14%
EBIT                                            66               86            - 23%            - 22%              +6%
EBIT margin                                   2.8%             3.4%

Europe and Asia remained flat, except for good growth in China. The business
climate in the Middle East and Africa continued to be positive. In the U.S.,
substantially reduced investments in new power generation plants led to lower
demand for plant control systems, but investments remained strong for upgrading
existing transmission capacity and grid interconnections.

Highlights of the quarter included large transmission orders in the U.S. and
Mexico. The strategy to grow business with water utilities was reinforced by a
key order for the Changi Water Reclamation plant, part of the deep tunnel sewage
system in Singapore, a major infrastructure project designed to meet the island
state's needs through the 21st century. ABB will supply the instrumentation,
control and electrical distribution system for the plant.

First-half orders and revenues decreased, mainly because Power Technology
Products is serving more customers via channel partners. Excluding products sold
on behalf of Power Technology Products division, orders were 5 percent lower but
revenues were up 5 percent.

EBIT was 22 percent lower (9 percent lower, excluding the pull-through effect),
reflecting lower revenues, restructuring and cost overruns in legacy projects.
The EBIT margin for the underlying operational performance (excluding
restructuring, capital gains and non-recurring amortization) decreased from 3.7
percent to 3 percent.

For the second quarter, good order growth was recorded for Utility Automation
and Utility Partner, offset by Power Systems. The increase in revenues led to
EBIT growth of 6 percent in the quarter.




Industries
US$ in millions, except where     Jan - June 2002  Jan- June 2001            Change  Change                 Change LC
indicated
                                                                                     in local               Q2 vs. Q1
                                                                                     currencies
Orders                                       2,403            2,771             -13%             -13%              -2%
Revenues                                     2,044            2,438             -16%             -16%             +12%
EBIT                                            85              100             -15%             -16%             +42%
EBIT margin                                   4.2%             4.1%



In April, ABB merged its Process Industries and Manufacturing and Consumer
Industries divisions to form the Industries division, consisting of the
following business areas: Automotive Industries; Manufacturing, Electronics and
Consumer Industries; Marine and Turbocharging; Paper, Printing, Metals and
Minerals; and Petroleum, Chemicals and Life Sciences.

Growth in Asia, the Middle East and Africa was strong, driven largely by
spending in petroleum and mining. There were few signs of an overall economic
upturn in Europe and the Americas. Demand for manufactured goods remained weak
worldwide.

Highlights of the quarter included signing long-term Industrial IT partnership
agreements with liquid packaging supplier Tetra Pak, marine supplier Kongsberg
Simrad and pharmaceutical group Aventis.

Half-year orders decreased 13 percent as more customers were served by channel
partners. Excluding ABB product sales now handled via channel partners orders
decreased by 4 percent. Revenues excluding pull-through effects decreased by 6
percent.

EBIT decreased 16 percent mainly due to a drop in revenues in Paper, Printing,
Metals and Minerals and Automotive Industries. EBIT margin increased slightly to
4.2 percent. Under the restructuring program, the workforce (excluding
acquisitions and divestitures) was reduced by 11 percent, compared to the same
period 2001.

The EBIT margin for the underlying operational performance (excluding
restructuring, capital gains and non-recurring amortization) decreased from 4.9
percent to 4.5 percent.


Overall, demand in the second quarter increased in Paper, Printing, Metals and
Minerals, and Petroleum, Chemical and Life Sciences. Productivity improvements
supported EBIT growth of 42 percent in the second quarter.




Oil, Gas and Petrochemicals

US$ in millions, except where     Jan - June 2002  Jan - June 2001        Change           Change       Change LC Q2 vs.
indicated                                                                                                   Q1
                                                                                           in local
                                                                                           currencies
Orders                                       2,120            1,990              +7%              +6%            +134%
Revenues                                     1,976            1,548            + 28%            + 26%                0
EBIT                                            76               88            - 14%            - 15%             -33%
EBIT margin                                   3.8%             5.7%

Investment levels for onshore and offshore oil and gas projects remained stable.
In the markets for refineries and petrochemicals, low levels of activity
continued into the second quarter of 2002.

The performance in the first half was affected by project margin write-downs in
two legacy fixed-price contracts. ABB has set up tools and measures to reduce
the risk profile in the project portfolio, including more selective criteria in
the bidding process. ABB is also focusing on projects with higher engineering
content, with a higher proportion of reimbursable rather than fixed-price
contracts.

An example of this is the US$ 987 million Sakhalin I contract with Exxon Mobil
to build an oil and gas processing plant in the Russian Far East, received in
the second quarter.

Orders increased 6 percent, exceeding last year's high order intake.

First half revenues increased 26 percent overall, mainly as a result of
Upstream's high order backlog. Downstream revenues also increased, but more
modestly given its lower backlog.

EBIT decreased 15 percent compared to first half 2001, and EBIT margin decreased
to 3.8 percent. The lower EBIT margin in the first half mainly reflects
execution of low-margin fixed-price contracts and project margin write-downs of
US$ 49 million. The EBIT margin for the underlying operational performance
(excluding restructuring, capital gains and non-recurring amortization)
decreased from 6.7 percent to 3.8 percent.



Power Technology Products

US$ in millions, except where     Jan - June 2002  Jan - June 2001           Change  Change            Change LC Q2 vs.
indicated                                                                                              Q1
                                                                                     in local
                                                                                     currencies
Orders                                       2,284            2,134              +7%               +8%               -2%
Revenues                                     2,148            1,814             +18%              +19%              +13%
EBIT                                           157              132             +19%              +19%              +35%
EBIT margin                                   7.3%             7.3%

Asian markets, in particular China, continued to show strong demand. Europe
remained mixed while investments for Power Technology Products in North America
decreased. Latin America, the Middle East and Africa continued to show good
momentum.

One of the quarter's highlights was the delivery of the first Industrial
IT-enabled power transformers equipped with a new type of electrical control
system, which optimizes the efficiency of transformers and the grid through key
control, monitoring and diagnostic functions.

Orders increased by 8 percent compared to the same period in 2001, mainly due to
strong growth in the Asian markets, particular in China. Order growth was fueled
by Power Transformers, while Medium- and High-Voltage Technology showed modest
growth. Distribution Transformers was flat due to a market decline in the U.S.

Revenues were up 19 percent for the first half of 2002. The substantial top line
growth was achieved despite a 10 percent reduction (excluding acquisitions and
divestitures) in the division's workforce since June 2001, indicating good
progress on productivity programs.

Despite significantly higher restructuring charges, EBIT increased by 19 percent
and the EBIT margin remained at 7.3 percent. The EBIT for the underlying
operational performance (excluding restructuring, capital gains and
non-recurring amortization) increased by 31 percent, with an EBIT margin
improvement from 7.9 percent to 8.8 percent.

Order intake in the second quarter reflected the continued high activity level
in base business. The increase in EBIT over Q1 of 35 percent was due to ongoing
productivity improvements.



Automation Technology Products
US$ in millions, except where     Jan - June 2002  Jan - June 2001           Change  Change            Change LC Q2 vs
indicated                                                                                              Q1
                                                                                     in local
                                                                                     currencies
Orders                                       2,771            2,687              +3%              + 3%               +5%
Revenues                                     2,640            2,572              +3%               +3%              +11%
EBIT                                           198              219            - 10%              - 9%              +41%
EBIT margin                                   7.5%             8.5%

Europe was mixed with some markets showing increased activity. U.S. markets
remained slow, while Asia, particularly China, continued to grow. Demand for
most automation products increased during the second quarter.

Highlights of the quarter included large converter orders for Drives and Power
Electronics for Stadler Rail in Switzerland and for an aluminum smelter for
Dubai. An innovation breakthrough was the introduction and market launch of a
new wireless sensor and fieldbus plug.

Orders were up 3 percent in the first half-year, mainly reflecting higher demand
in Robotics and a slight increase in Low-Voltage Products. Order intake for
Drives and Power Electronics was flat while all other business areas showed a
lower order intake.

Revenues grew 3 percent driven by higher volume in the Robotics business area.

The EBIT margin for the underlying operational performance (excluding
restructuring, capital gains and non-recurring amortization) for the first half
decreased from 9.6 percent to 8.5 percent, mainly reflecting adverse business
conditions in Q1.

For the second quarter, orders increased by 5 percent - largely driven by strong
growth in Drives and Power Electronics, Low-Voltage Products and Robotics. The
second quarter increase of EBIT by 41 percent is mainly the result of higher
revenues and productivity improvements from the cost reduction program.



Financial Services
US$ in millions, except where     Jan - June 2002  Jan - June 2001          Change   Change            Change LC Q2 vs.
indicated                                                                                              Q1
                                                                                     in local
                                                                                     currencies
Revenues                                       764            1,019            - 25%             - 25%              +24%
EBIT                                           153              203            - 25%             - 25%              -19%

During the second quarter, interest rates remained low while the dollar weakened
further against major currencies. High-quality insurance companies continued to
benefit from higher insurance premiums while investment results were impacted by
adverse development in capital markets.

As expected, revenues for Financial Services decreased by 25 percent primarily
due to the run-off in Scandinavian Re. Treasury Centers ceased proprietary
trading in June and will now focus primarily on treasury services for companies
within the ABB Group.

EBIT decreased by 25 percent in line with the decrease in revenues.
Restructuring charges of US$ 19 million were booked in the second quarter in
connection with the refocus of Treasury Centers. Structured Finance reported
higher earnings while other business areas showed lower results.



Corporate/Other

US$ in millions, except where indicated                   Jan - June 2002        Jan - June 2001
EBIT                                                              - 367                  - 202
Other Activities                                                   - 84                   + 24
Group Processes                                                    - 51                   - 2
Corporate R & D                                                    - 40                   - 39
Real estate                                                        +14                    + 30
Elimination of AFS interest income                                 - 85                   - 59
Other Corporate                                                    -176                   -156
Capital Gains                                                      + 69                   +13
Restructuring                                                      - 14                   - 13

Other activities, which mainly comprises New Ventures, Air Handling and Building
Systems, reported increased costs at US$ 84 million in the first half of 2002.
This was a result of a combined US$ 30 million in asset write-downs in New
Ventures and Building Systems, as well as the impact of adverse market
conditions on operations for both businesses.

Group Processes also reported increased costs at US$ 51 million, due to higher
amortization from development costs capitalized in previous years coupled with
the ongoing expense of current costs. In addition, the costs for common group
processes and infrastructure - IT, shared services, e-business, etc. - are now
reported at the Group rather than at the divisional level.

Capital gains were US$ 69 million for the first half, mainly reflecting the
capital gain from the sale of the Air Handling business area in the first
quarter.



Reporting dates

The remaining quarterly reporting date in 2002 for ABB Ltd is scheduled for
October 24. 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.

The company will host a conference call for analysts and investors to discuss
its half-year results today at 16:30 Central European Time. Teleconference
callers should dial [phone] in Europe and [phone] in the U.S.
and Canada. The facility is also available to the media on a 'listen only'
basis.

The 2002 half-year results press release and presentation slides will be
available from the morning of Wednesday, July 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 [phone]
(Europe) and [phone] in the U.S. and Canada. The PIN number is 650#.

ABB (www.abb.com) is a global 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 150,000 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.






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