ABB 2006 net income rises 89% to $1.4 billion

  • 2006 earnings before interest and taxes (EBIT) up 45% at $2.6 billion
  • Full-year EBIT margin advances to 10.6%
  • Strong Q4 helps lift full-year orders by 22%, revenues by 11%
  • 2006 cash flow from operations doubles to $2 billion
  • Board of Directors will propose a dividend of CHF 0.24 per share

Zürich, Switzerland – ABB’s net income rose 89 percent to $1,390 million in 2006 amid strong demand for technology to increase power grid reliability, industrial productivity and energy efficiency.

Revenues for 2006 reached $24,412 million, an increase of 11 percent (10 percent in local currencies) over 2005, while orders were 22 percent higher (22 percent in local currencies) at $28,401 million. The order backlog stood at $16,953 million at the end of 2006, up $5 billion or 42 percent (33 percent in local currencies) compared to a year earlier.

Growing revenues, higher capacity utilization and further cost reductions all contributed to a 45-percent increase in EBIT to a record $2,586 million in 2006. The EBIT margin, or EBIT as a percentage of revenues, increased to 10.6 percent from 8.1 percent in 2005.

"We have the right technology and market positions to take advantage of the growing global demand for reliable power and higher industrial efficiency," said Fred Kindle, ABB President and Chief Executive Officer. "Our order backlog has grown significantly and improved business execution is allowing us to capture more of that growth in our bottom line. We are heading into 2007 in a strong position."

In the fourth quarter ending December 31, 2006, orders rose 36 percent (30 percent in local currencies) while revenues were 21 percent higher (up 16 percent in local currencies) than in the fourth quarter of 2005. Fourth-quarter EBIT increased 43 percent to $744 million, producing an EBIT margin of 10.4 percent. Net income in the quarter was $422 million, up 90 percent from the same period a year ago.

Summary of Q4 and full-year 2006 results

Orders received and revenues
The strong full-year and fourth-quarter order growth was driven by favorable demand in most businesses and regions. Utility customers in OECD countries continued to invest in power grid upgrades and interconnections to increase the efficiency and reliability of their networks. In Asia, utilities invested in building new infrastructure to support economic growth, while in the Middle East, demand was supported by the need for power infrastructure to support growth in the oil and gas sector. Demand from industrial customers in all regions was driven by the need to improve efficiency in the face of high energy and raw materials prices, and was supported by the current strength in the global economy. In the power business, industrial customers increasingly require equipment to reliably manage large power flows in, for example, factories, refineries and marine applications.

The Power Systems and Power Products divisions both benefited from strong demand in the fourth quarter. Large power grid investments, for example in the Middle East and Canada, produced an increase in large orders of more than $800 million in the Power Systems division compared to the same quarter a year earlier. In the Power Products division, volume growth and price increases to offset higher raw materials costs drove the higher order value.

The Automation Products division gained from an increase in large orders from the rail transportation and wind energy sectors in the fourth quarter, and orders were up across all businesses and regions. Price increases related to higher raw material costs also contributed to the increase in the value of orders. Orders in the Process Automation division were up only slightly (flat in local currencies) as large system orders won in the fourth quarter of 2005 could not be repeated in the same quarter in 2006. Orders were higher in the Robotics division in the fourth quarter due to increased demand from the general industry sector.

Large orders (more than $15 million) almost tripled to $1,570 million in the fourth quarter and represented 21 percent of total orders received versus 10 percent in the same quarter in 2005. Base orders (less than $15 million) were up 19 percent (14 percent in local currencies).

The strong fourth-quarter revenue growth reflects both higher product sales during the quarter and the execution of large systems orders won in previous quarters. Full-year 2006 revenues increased on a mix of higher volumes and prices.

Earnings before interest and taxes
The higher EBIT and EBIT margin in both the fourth quarter and full year were achieved through higher revenues and factory loadings, better execution of large projects and further efforts to reduce costs by sourcing production capacity, components and raw material from lower-cost regions. Corporate costs for the full year were $321 million, $80 million lower than in 2005. The company incurred $85 million less in charges associated with consolidation of the transformer business in 2006 compared to 2005, which also contributed to the improved profitability.

The fourth-quarter EBIT margin was below the full-year average for several reasons, including the mix of margins in large project orders flowing through revenues. In addition, a higher proportion of costs was recorded in the fourth quarter related to activities under the transformer consolidation program and legacy project costs in ABB Lummus Global.

Finance expense, taxes and discontinued operations
Below the EBIT line, lower debt in 2006 resulted in a reduction in net finance expense(1) for the full year to $153 million from $246 million in 2005. The tax rate for the fourth quarter was 25 percent (Q4 2005: 28 percent) and 29 percent for the full year (full year 2005: 32 percent). The decrease was primarily the result of higher earnings from lower-tax jurisdictions.
(1) Net finance expense is calculated as Interest and other finance expense less Interest and dividend income.

ABB’s remaining Building Systems business was reclassified to discontinued operations in the fourth quarter, reflecting progress made on its divestment. An expected loss on the planned sale was the main contributor to the total $53-million loss in discontinued operations reported in the quarter. For the full year, discontinued operations reported a loss of $167 million, mainly the result of losses related to ABB’s asbestos obligations and the disposal of businesses.

Cash flow
Cash flow from operations in the fourth quarter improved by more than $300 million compared to the same quarter in 2005. Included in cash flow in the 2006 quarter was approximately $100 million in customer advances on large orders received. The improvement in cash flow for the full year versus 2005 reflects in part the approximately $490-million negative impact from reducing the securitization of receivables in 2005.

Free cash flow(2) for the full year increased by 77 percent compared to 2005. The cash conversion ratio(3) amounted to 115 percent in 2006, partly the result of some $460 million in project-related cash advances from customers.
(2) Free cash flow = cash from operating activities adjusted for changes in financing receivables and net investments in property, plant and equipment.
(3) Cash conversion ratio = free cash flow as a percentage of net income.

Balance sheet
Net cash (total cash and marketable securities and short-term investments, less total debt) was $1,508 million at the end of 2006, compared to net debt of $513 million at the end of 2005. Strong cash flows combined with the reduction in total debt from the early conversion of ABB’s previously outstanding $968-million convertible bond, were the main contributors to the higher net cash position.

ABB contributed approximately $665 million to fund its various pension plans during 2006, including discretionary pension contributions of approximately $450 million to local pension funds that were not required to be funded under local laws. This, together with positive asset returns and increasing discount rates were the main factors that allowed ABB to reduce its unfunded pension liability to $291 million at the end of December 2006 from $839 million at the end of 2005.

As the result of changes to U.S. accounting rules regarding defined benefit pension plans, the company took a non-cash charge to stockholders’ equity in the fourth quarter of 2006 of approximately $415 million. The accounting changes have no impact on ABB’s income statement. (Further information in Appendix I – Accounting pronouncements of the complete press release )

Gearing(4) decreased to 34 percent at the end of December 2006, versus 52 percent a year earlier, primarily the result of the early bond conversion mentioned above and the increase in net income in 2006.
(4) Gearing = total debt divided by total debt plus stockholders’ equity (including minority interest).

As a result of ABB’s stronger balance sheet and improved operational performance, the company’s credit ratings were increased several levels during 2006. By the end of the year, the ratings were BBB+ with Standard & Poor’s (up from BB+ at the beginning of 2006) and Baa1 with Moody’s (up from Ba2 at the beginning of 2006).

Dividend and authorized capital
For 2006, ABB’s Board of Directors will propose a dividend of CHF 0.24 per share, double the level of 2005. The proposal is subject to approval by shareholders at the company’s annual general meeting on May 3, 2007 in Zurich, Switzerland. Should the proposal be approved, the ex-dividend date would be May 8, 2007.

ABB’s Board of Directors will also recommend that shareholders approve the replacement of the company’s previously expired authorized capital. The move would allow ABB to issue up to 200 million shares and is intended to optimize the company’s financial flexibility.

Divestitures
In line with its strategy to focus on power and automation technologies, ABB continued to divest non-core activities in 2006, including power lines businesses and a cables business in Ireland. The remaining Building Systems business was reclassified into discontinued operations in the fourth quarter of 2006 reflecting progress in its divestment. In January, 2007, ABB said it had restarted the process to divest its ABB Lummus Global oil and gas business. In February 2007, the company announced that it had agreed to sell its equity investments in two private power plants, part of its Equity Ventures holdings, for $490 million, and expects the transaction to be closed in the second quarter of 2007.

Senior management appointments
As previously announced, two new members were appointed to ABB’s Executive Committee, effective January 1, 2007. Peter Leupp, previously ABB’s country manager in China, was named head of the Power Systems division, while Diane de Saint Victor, formerly general counsel at EADS (European Aeronautic Defence and Space Company), was appointed head of the Legal and Compliance function.

In addition, ABB announced in December 2006 that Jürgen Dormann, Chairman of the ABB Board of Directors, has decided not to seek re-election to the ABB Board for a further term. As a consequence, he will retire from the ABB Board after completing his current term as Chairman of the board, at the company’s AGM on May 3, 2007.

Asbestos
In 2006, the Plans of Reorganization of ABB’s U.S. subsidiaries Combustion Engineering (CE) and ABB Lummus Global (Lummus) became effective following final court approvals. As a result, any future asbestos personal injury claims against those and other ABB entities related to the operations of CE and Lummus will be channeled to the specially-created Personal Injury Trusts set up under the relevant Plans of Reorganization.

Market outlook for 2007
The business environment for ABB in 2007 is not expected to vary significantly from the positive market situation seen in 2006. Demand for power transmission and distribution infrastructure is expected to continue on a high level in Asia, the Middle East and the Americas. Equipment replacement and improved network efficiency and reliability are forecast to be the drivers of higher demand in Europe and North America.

Automation-related industrial investments are expected to continue in most sectors. Overall, automation-related demand growth is expected to be strongest in Asia and the Americas in 2007, with more modest growth in Europe.

In view of the extraordinarily high order growth rates experienced in 2006, order growth is expected to moderate in 2007.

Employment
ABB employed approximately 108,000 people at the end of December 2006, an increase of 4,000 compared to the end of 2005. Most of the increase was in the fast-growing Asia region. Employment was also higher in eastern and western Europe.

Divisional performance Q4 and full year 2006

Power Products
Order growth remained strong in the fourth quarter, as both base and large orders increased substantially. Orders were higher in all business units, led by Transformers, and in all regions. Revenues also increased in all business units in the quarter, reflecting higher volumes from the strong order backlog and some price increases to compensate for higher raw material costs.

Fourth-quarter EBIT and EBIT margin rose significantly for the division, mainly as the result of higher volumes and factory loadings together with lower costs from the transformer consolidation program announced in 2005. Expenses related to the program were $14 million in the fourth quarter of 2006 (fourth quarter 2005: $43 million). Program costs for the full year 2006 amounted to $38 million (2005: $123 million).

For the full year 2006, higher demand for power infrastructure improvements led to increased orders and revenues in all business units and regions. EBIT increased 56 percent and the EBIT margin rose 3.1 percentage points as the result of higher volumes, better capacity utilization, and lower transformer consolidation costs.

Power Systems
Orders were sharply higher in the fourth quarter of 2006, which was primarily the result of large project wins, including a $450-million order in Qatar and a $180-million order in Canada. Orders were up in all regions by more than 20 percent in both U.S. dollars and local currencies.

Revenues grew in the fourth quarter on increased project execution from the strong order backlog. EBIT increased more than 10 percent compared to the same period in 2005, primarily the result of higher volumes. The EBIT margin decreased versus the fourth quarter of 2005, mainly reflecting a higher proportion of lower-margin projects executed during the quarter compared to the year-earlier period.

For the full year 2006, orders and revenues grew as the demand for power transmission and distribution systems remained strong in all regions. Higher volumes and the resulting increase in capacity utilization, along with improved project selection and execution, were the main drivers of the higher EBIT and EBIT margin compared to 2005.

Automation Products
Orders from industrial customers to further increase operational efficiency continued to grow in all businesses and regions during the fourth quarter. Large orders from the rail transportation sector for traction motors and from wind energy customers for generators and low-voltage systems contributed to the strong increase.

Revenues increased in the quarter mainly due to higher volumes. Higher prices to offset raw materials cost increases also contributed to the revenue growth. Increased revenues, high factory loadings and further migration to lower-cost countries were the prime drivers of an increase in EBIT and EBIT margin versus the same quarter in 2005.

Full-year order and revenue growth reflect the strong market demand seen across most end user segments and in all regions. EBIT and EBIT margin increased as the result of higher volumes and factory loadings, and continuing cost migration efforts.

Process Automation
Base orders increased 21 percent in the fourth quarter (15 percent in local currencies), but large orders received in the fourth quarter of 2005 in South Korea and Singapore could not be repeated, which offset the base order increase. Base order growth was driven by demand for process automation systems across most of ABB’s industrial end markets, such as oil and gas, pulp and paper, and minerals.

Higher revenues in the fourth quarter reflect primarily the ongoing execution of large project orders awarded in earlier quarters, as well as increased product sales during the fourth quarter of 2006. EBIT and EBIT margin increased substantially over the fourth quarter of 2005, mainly due to higher volumes and improved project management.

Orders for the full-year 2006 achieved a record level, reflecting continued strong demand in most sectors. Revenues increased mainly due to the growing systems business, especially in the minerals and marine sectors, and the products business. Full-year EBIT increased as the result of higher volumes, better pricing, improved project management, and ongoing cost migration initiatives.

Robotics
Orders received increased in the fourth quarter, primarily from the general industry sector, such as packaging, consumer electronics and food processing. Order growth was led by North America and Asia, mainly China. Revenues fell in the quarter, however, reflecting the declining order backlog that has resulted from the generally sluggish demand from U.S. and European automotive manufacturers and their major suppliers in recent quarters.

The division continued to take steps to improve project execution, reduce costs and refocus the product offering. Costs associated with these actions, combined with lower revenues and special charges related to a large project, resulted in a decline in EBIT and EBIT margin in the fourth quarter.

Full-year 2006 orders and revenues were significantly lower than the year before as demand remained weak in ABB’s key automotive end markets in North America and Europe. Service revenues and sales to general industry in the year were higher which partly mitigated the costs associated with the division’s operational improvement program, resulting in a breakeven EBIT for the year.

Non-core activities
With the reclassification of Building Systems to discontinued operations in the fourth quarter of 2006, ABB’s Non-core activities now comprise the ABB Lummus Global oil, gas and petrochemicals business, a portfolio of equity investments in power and other infrastructure projects, and ABB’s real estate management activities. (Further information on the impact of reclassifications of activities to discontinued operations in 2006 in Appendix IIof the complete press release )

Non-core activities reported an EBIT loss of $5 million in the fourth quarter on revenues of $359 million, primarily the result of costs related to outstanding claims on an ABB Lummus Global project.

Income from the Equity Ventures portfolio and gains from real estate activities comprised most of the full-year Non-core EBIT of $72 million. ABB Lummus Global reported a breakeven EBIT for the full year.

Corporate
Corporate costs decreased in the fourth quarter of 2006, mainly reflecting continued focus on the reduction of corporate costs in the countries and in the Headquarters. For the full year 2006, Corporate costs amounted to $321 million compared to $401 million in 2005.

ABB
ABB www.abb.com is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 108,000 people.

Important notice about forward-looking information
This press release includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including 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, the amount of revenues we are able to generate from order backlogs and orders received, raw materials prices, market acceptance of new products and services, changes in governmental regulations and costs associated with compliance activities, 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, 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.

The complete press release including appendices is available at www.abb.com

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Auteur: Redactie Infrasite

Bron: ABB Ltd

ABB 2006 net income rises 89% to $1.4 billion | Infrasite

ABB 2006 net income rises 89% to $1.4 billion

  • 2006 earnings before interest and taxes (EBIT) up 45% at $2.6 billion
  • Full-year EBIT margin advances to 10.6%
  • Strong Q4 helps lift full-year orders by 22%, revenues by 11%
  • 2006 cash flow from operations doubles to $2 billion
  • Board of Directors will propose a dividend of CHF 0.24 per share

Zürich, Switzerland – ABB’s net income rose 89 percent to $1,390 million in 2006 amid strong demand for technology to increase power grid reliability, industrial productivity and energy efficiency.

Revenues for 2006 reached $24,412 million, an increase of 11 percent (10 percent in local currencies) over 2005, while orders were 22 percent higher (22 percent in local currencies) at $28,401 million. The order backlog stood at $16,953 million at the end of 2006, up $5 billion or 42 percent (33 percent in local currencies) compared to a year earlier.

Growing revenues, higher capacity utilization and further cost reductions all contributed to a 45-percent increase in EBIT to a record $2,586 million in 2006. The EBIT margin, or EBIT as a percentage of revenues, increased to 10.6 percent from 8.1 percent in 2005.

"We have the right technology and market positions to take advantage of the growing global demand for reliable power and higher industrial efficiency," said Fred Kindle, ABB President and Chief Executive Officer. "Our order backlog has grown significantly and improved business execution is allowing us to capture more of that growth in our bottom line. We are heading into 2007 in a strong position."

In the fourth quarter ending December 31, 2006, orders rose 36 percent (30 percent in local currencies) while revenues were 21 percent higher (up 16 percent in local currencies) than in the fourth quarter of 2005. Fourth-quarter EBIT increased 43 percent to $744 million, producing an EBIT margin of 10.4 percent. Net income in the quarter was $422 million, up 90 percent from the same period a year ago.

Summary of Q4 and full-year 2006 results

Orders received and revenues
The strong full-year and fourth-quarter order growth was driven by favorable demand in most businesses and regions. Utility customers in OECD countries continued to invest in power grid upgrades and interconnections to increase the efficiency and reliability of their networks. In Asia, utilities invested in building new infrastructure to support economic growth, while in the Middle East, demand was supported by the need for power infrastructure to support growth in the oil and gas sector. Demand from industrial customers in all regions was driven by the need to improve efficiency in the face of high energy and raw materials prices, and was supported by the current strength in the global economy. In the power business, industrial customers increasingly require equipment to reliably manage large power flows in, for example, factories, refineries and marine applications.

The Power Systems and Power Products divisions both benefited from strong demand in the fourth quarter. Large power grid investments, for example in the Middle East and Canada, produced an increase in large orders of more than $800 million in the Power Systems division compared to the same quarter a year earlier. In the Power Products division, volume growth and price increases to offset higher raw materials costs drove the higher order value.

The Automation Products division gained from an increase in large orders from the rail transportation and wind energy sectors in the fourth quarter, and orders were up across all businesses and regions. Price increases related to higher raw material costs also contributed to the increase in the value of orders. Orders in the Process Automation division were up only slightly (flat in local currencies) as large system orders won in the fourth quarter of 2005 could not be repeated in the same quarter in 2006. Orders were higher in the Robotics division in the fourth quarter due to increased demand from the general industry sector.

Large orders (more than $15 million) almost tripled to $1,570 million in the fourth quarter and represented 21 percent of total orders received versus 10 percent in the same quarter in 2005. Base orders (less than $15 million) were up 19 percent (14 percent in local currencies).

The strong fourth-quarter revenue growth reflects both higher product sales during the quarter and the execution of large systems orders won in previous quarters. Full-year 2006 revenues increased on a mix of higher volumes and prices.

Earnings before interest and taxes
The higher EBIT and EBIT margin in both the fourth quarter and full year were achieved through higher revenues and factory loadings, better execution of large projects and further efforts to reduce costs by sourcing production capacity, components and raw material from lower-cost regions. Corporate costs for the full year were $321 million, $80 million lower than in 2005. The company incurred $85 million less in charges associated with consolidation of the transformer business in 2006 compared to 2005, which also contributed to the improved profitability.

The fourth-quarter EBIT margin was below the full-year average for several reasons, including the mix of margins in large project orders flowing through revenues. In addition, a higher proportion of costs was recorded in the fourth quarter related to activities under the transformer consolidation program and legacy project costs in ABB Lummus Global.

Finance expense, taxes and discontinued operations
Below the EBIT line, lower debt in 2006 resulted in a reduction in net finance expense(1) for the full year to $153 million from $246 million in 2005. The tax rate for the fourth quarter was 25 percent (Q4 2005: 28 percent) and 29 percent for the full year (full year 2005: 32 percent). The decrease was primarily the result of higher earnings from lower-tax jurisdictions.
(1) Net finance expense is calculated as Interest and other finance expense less Interest and dividend income.

ABB’s remaining Building Systems business was reclassified to discontinued operations in the fourth quarter, reflecting progress made on its divestment. An expected loss on the planned sale was the main contributor to the total $53-million loss in discontinued operations reported in the quarter. For the full year, discontinued operations reported a loss of $167 million, mainly the result of losses related to ABB’s asbestos obligations and the disposal of businesses.

Cash flow
Cash flow from operations in the fourth quarter improved by more than $300 million compared to the same quarter in 2005. Included in cash flow in the 2006 quarter was approximately $100 million in customer advances on large orders received. The improvement in cash flow for the full year versus 2005 reflects in part the approximately $490-million negative impact from reducing the securitization of receivables in 2005.

Free cash flow(2) for the full year increased by 77 percent compared to 2005. The cash conversion ratio(3) amounted to 115 percent in 2006, partly the result of some $460 million in project-related cash advances from customers.
(2) Free cash flow = cash from operating activities adjusted for changes in financing receivables and net investments in property, plant and equipment.
(3) Cash conversion ratio = free cash flow as a percentage of net income.

Balance sheet
Net cash (total cash and marketable securities and short-term investments, less total debt) was $1,508 million at the end of 2006, compared to net debt of $513 million at the end of 2005. Strong cash flows combined with the reduction in total debt from the early conversion of ABB’s previously outstanding $968-million convertible bond, were the main contributors to the higher net cash position.

ABB contributed approximately $665 million to fund its various pension plans during 2006, including discretionary pension contributions of approximately $450 million to local pension funds that were not required to be funded under local laws. This, together with positive asset returns and increasing discount rates were the main factors that allowed ABB to reduce its unfunded pension liability to $291 million at the end of December 2006 from $839 million at the end of 2005.

As the result of changes to U.S. accounting rules regarding defined benefit pension plans, the company took a non-cash charge to stockholders’ equity in the fourth quarter of 2006 of approximately $415 million. The accounting changes have no impact on ABB’s income statement. (Further information in Appendix I – Accounting pronouncements of the complete press release )

Gearing(4) decreased to 34 percent at the end of December 2006, versus 52 percent a year earlier, primarily the result of the early bond conversion mentioned above and the increase in net income in 2006.
(4) Gearing = total debt divided by total debt plus stockholders’ equity (including minority interest).

As a result of ABB’s stronger balance sheet and improved operational performance, the company’s credit ratings were increased several levels during 2006. By the end of the year, the ratings were BBB+ with Standard & Poor’s (up from BB+ at the beginning of 2006) and Baa1 with Moody’s (up from Ba2 at the beginning of 2006).

Dividend and authorized capital
For 2006, ABB’s Board of Directors will propose a dividend of CHF 0.24 per share, double the level of 2005. The proposal is subject to approval by shareholders at the company’s annual general meeting on May 3, 2007 in Zurich, Switzerland. Should the proposal be approved, the ex-dividend date would be May 8, 2007.

ABB’s Board of Directors will also recommend that shareholders approve the replacement of the company’s previously expired authorized capital. The move would allow ABB to issue up to 200 million shares and is intended to optimize the company’s financial flexibility.

Divestitures
In line with its strategy to focus on power and automation technologies, ABB continued to divest non-core activities in 2006, including power lines businesses and a cables business in Ireland. The remaining Building Systems business was reclassified into discontinued operations in the fourth quarter of 2006 reflecting progress in its divestment. In January, 2007, ABB said it had restarted the process to divest its ABB Lummus Global oil and gas business. In February 2007, the company announced that it had agreed to sell its equity investments in two private power plants, part of its Equity Ventures holdings, for $490 million, and expects the transaction to be closed in the second quarter of 2007.

Senior management appointments
As previously announced, two new members were appointed to ABB’s Executive Committee, effective January 1, 2007. Peter Leupp, previously ABB’s country manager in China, was named head of the Power Systems division, while Diane de Saint Victor, formerly general counsel at EADS (European Aeronautic Defence and Space Company), was appointed head of the Legal and Compliance function.

In addition, ABB announced in December 2006 that Jürgen Dormann, Chairman of the ABB Board of Directors, has decided not to seek re-election to the ABB Board for a further term. As a consequence, he will retire from the ABB Board after completing his current term as Chairman of the board, at the company’s AGM on May 3, 2007.

Asbestos
In 2006, the Plans of Reorganization of ABB’s U.S. subsidiaries Combustion Engineering (CE) and ABB Lummus Global (Lummus) became effective following final court approvals. As a result, any future asbestos personal injury claims against those and other ABB entities related to the operations of CE and Lummus will be channeled to the specially-created Personal Injury Trusts set up under the relevant Plans of Reorganization.

Market outlook for 2007
The business environment for ABB in 2007 is not expected to vary significantly from the positive market situation seen in 2006. Demand for power transmission and distribution infrastructure is expected to continue on a high level in Asia, the Middle East and the Americas. Equipment replacement and improved network efficiency and reliability are forecast to be the drivers of higher demand in Europe and North America.

Automation-related industrial investments are expected to continue in most sectors. Overall, automation-related demand growth is expected to be strongest in Asia and the Americas in 2007, with more modest growth in Europe.

In view of the extraordinarily high order growth rates experienced in 2006, order growth is expected to moderate in 2007.

Employment
ABB employed approximately 108,000 people at the end of December 2006, an increase of 4,000 compared to the end of 2005. Most of the increase was in the fast-growing Asia region. Employment was also higher in eastern and western Europe.

Divisional performance Q4 and full year 2006

Power Products
Order growth remained strong in the fourth quarter, as both base and large orders increased substantially. Orders were higher in all business units, led by Transformers, and in all regions. Revenues also increased in all business units in the quarter, reflecting higher volumes from the strong order backlog and some price increases to compensate for higher raw material costs.

Fourth-quarter EBIT and EBIT margin rose significantly for the division, mainly as the result of higher volumes and factory loadings together with lower costs from the transformer consolidation program announced in 2005. Expenses related to the program were $14 million in the fourth quarter of 2006 (fourth quarter 2005: $43 million). Program costs for the full year 2006 amounted to $38 million (2005: $123 million).

For the full year 2006, higher demand for power infrastructure improvements led to increased orders and revenues in all business units and regions. EBIT increased 56 percent and the EBIT margin rose 3.1 percentage points as the result of higher volumes, better capacity utilization, and lower transformer consolidation costs.

Power Systems
Orders were sharply higher in the fourth quarter of 2006, which was primarily the result of large project wins, including a $450-million order in Qatar and a $180-million order in Canada. Orders were up in all regions by more than 20 percent in both U.S. dollars and local currencies.

Revenues grew in the fourth quarter on increased project execution from the strong order backlog. EBIT increased more than 10 percent compared to the same period in 2005, primarily the result of higher volumes. The EBIT margin decreased versus the fourth quarter of 2005, mainly reflecting a higher proportion of lower-margin projects executed during the quarter compared to the year-earlier period.

For the full year 2006, orders and revenues grew as the demand for power transmission and distribution systems remained strong in all regions. Higher volumes and the resulting increase in capacity utilization, along with improved project selection and execution, were the main drivers of the higher EBIT and EBIT margin compared to 2005.

Automation Products
Orders from industrial customers to further increase operational efficiency continued to grow in all businesses and regions during the fourth quarter. Large orders from the rail transportation sector for traction motors and from wind energy customers for generators and low-voltage systems contributed to the strong increase.

Revenues increased in the quarter mainly due to higher volumes. Higher prices to offset raw materials cost increases also contributed to the revenue growth. Increased revenues, high factory loadings and further migration to lower-cost countries were the prime drivers of an increase in EBIT and EBIT margin versus the same quarter in 2005.

Full-year order and revenue growth reflect the strong market demand seen across most end user segments and in all regions. EBIT and EBIT margin increased as the result of higher volumes and factory loadings, and continuing cost migration efforts.

Process Automation
Base orders increased 21 percent in the fourth quarter (15 percent in local currencies), but large orders received in the fourth quarter of 2005 in South Korea and Singapore could not be repeated, which offset the base order increase. Base order growth was driven by demand for process automation systems across most of ABB’s industrial end markets, such as oil and gas, pulp and paper, and minerals.

Higher revenues in the fourth quarter reflect primarily the ongoing execution of large project orders awarded in earlier quarters, as well as increased product sales during the fourth quarter of 2006. EBIT and EBIT margin increased substantially over the fourth quarter of 2005, mainly due to higher volumes and improved project management.

Orders for the full-year 2006 achieved a record level, reflecting continued strong demand in most sectors. Revenues increased mainly due to the growing systems business, especially in the minerals and marine sectors, and the products business. Full-year EBIT increased as the result of higher volumes, better pricing, improved project management, and ongoing cost migration initiatives.

Robotics
Orders received increased in the fourth quarter, primarily from the general industry sector, such as packaging, consumer electronics and food processing. Order growth was led by North America and Asia, mainly China. Revenues fell in the quarter, however, reflecting the declining order backlog that has resulted from the generally sluggish demand from U.S. and European automotive manufacturers and their major suppliers in recent quarters.

The division continued to take steps to improve project execution, reduce costs and refocus the product offering. Costs associated with these actions, combined with lower revenues and special charges related to a large project, resulted in a decline in EBIT and EBIT margin in the fourth quarter.

Full-year 2006 orders and revenues were significantly lower than the year before as demand remained weak in ABB’s key automotive end markets in North America and Europe. Service revenues and sales to general industry in the year were higher which partly mitigated the costs associated with the division’s operational improvement program, resulting in a breakeven EBIT for the year.

Non-core activities
With the reclassification of Building Systems to discontinued operations in the fourth quarter of 2006, ABB’s Non-core activities now comprise the ABB Lummus Global oil, gas and petrochemicals business, a portfolio of equity investments in power and other infrastructure projects, and ABB’s real estate management activities. (Further information on the impact of reclassifications of activities to discontinued operations in 2006 in Appendix IIof the complete press release )

Non-core activities reported an EBIT loss of $5 million in the fourth quarter on revenues of $359 million, primarily the result of costs related to outstanding claims on an ABB Lummus Global project.

Income from the Equity Ventures portfolio and gains from real estate activities comprised most of the full-year Non-core EBIT of $72 million. ABB Lummus Global reported a breakeven EBIT for the full year.

Corporate
Corporate costs decreased in the fourth quarter of 2006, mainly reflecting continued focus on the reduction of corporate costs in the countries and in the Headquarters. For the full year 2006, Corporate costs amounted to $321 million compared to $401 million in 2005.

ABB
ABB www.abb.com is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 108,000 people.

Important notice about forward-looking information
This press release includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including 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, the amount of revenues we are able to generate from order backlogs and orders received, raw materials prices, market acceptance of new products and services, changes in governmental regulations and costs associated with compliance activities, 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, 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.

The complete press release including appendices is available at www.abb.com

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Auteur: Redactie Infrasite

Bron: ABB Ltd