The year end results from ABB will be of interest to automation professionals especially that on “Descrete Motion and Automation” and “Process Automation.” The company has reported strong order growth in the fourth quarter of 2010 and higher revenues driven by strong industrial demand for energy efficiency and improved productivity as well as recovering investments into power infrastructure.
Discrete automation and motion: this division saw an increase in orders during the fourth quarter as industrial customers continued to invest in automation solutions to increase productivity and energy efficiency.The revenue increase was driven primarily by execution of the strong order backlog in the shorter-cycle businesses such as robotics, low-voltage motors and drives.
EBIT (Earnings before interest and taxes) and EBIT margin increased substantially due in part to a return to profitability in robotics, which reported an EBIT loss in the same period last year, mainly due to restructuring-related costs of some $110 million. Successful operational cost reduction measures and footprint changes towards the emerging markets during the year also contributed to the improved earnings.
Orders increased in the fourth quarter as industrial customers continued to invest in automation solutions to increase productivity and energy efficiency. Orders increased in all business units and were particularly strong in robotics and in the mid- to later-cycle businesses, such as power electronics, medium-voltage drives and generators. Orders for low-voltage drives also grew strongly. Regionally, orders grew at a strong double-digit pace in Europe, the Americas and Asia. Orders in China were up more than 40 percent compared to the same quarter in 2009.
Process Automation: Growth in large orders continued in the fourth quarter, especially in minerals, marine and oil, gas and petrochemicals, reflecting ongoing investments in the energy and commodity sectors. Orders for products such as turbochargers and measurement products also grew. Lifecycle services – including installation and commissioning, spare parts, retrofit and replacement and training – saw higher orders, driven by oil, gas and petrochemicals, metals, and pulp and paper.
Regionally, order growth was strong in South America – led by minerals investments in Chile and Peru – and Asia, where demand increased from the minerals sector in China and the marine sector in South Korea. Orders were also up at a double-digit pace in Europe and North America.
The revenue increase was driven by stronger product volumes and lifecycle services, as well as the ongoing execution of projects from the order backlog, especially in the oil, gas and petrochemicals and pulp and paper businesses.
Higher EBIT and EBIT margin reflect the successful implementation of cost reduction measures and the higher share of revenues from product and service sales compared to the same quarter a year earlier. Included in fourth quarter EBIT is approximately $30 million in restructuring-related costs compared to some $80 million in the same quarter of 2009.
“We are satisfied with the 2010 results as ABB is today in a stronger position than before the financial crisis,” said Chief Executive Officer Joe Hogan on the full results. “Demand from industry and utility clients for short-cycle products gained momentum, contributing to the fastest base order growth in the past two years. Revenue growth accelerated compared to the third quarter, driven by strong industrial demand for energy efficiency and higher productivity. We achieved profitability well within our target range by leveraging our lower cost base. That allowed us to benefit from the ongoing recovery in automation and to successfully counter demand and price weakness in our longer-cycle businesses.
“The proposed dividend increase shows our confidence in the business. We see plenty of growth opportunities as we head into 2011 in both the short-term industry-driven businesses as well as later in the year when we expect utility spending on power equipment to begin a recovery,” Hogan said. “Long term trends for increased energy efficiency and flexible, more reliable power infrastructure remain very strong. ABB will seize these opportunities with a leaner cost base, an enhanced product portfolio and a more customer-focused organization.”