ABB Asea Brown Boveri Group Results 1995 Record Growth in Earnings - Net Income up 73 percent.ZURICH, Switzerland/WARSAW, Poland--(BUSINESS WIRE)--Feb. 28, 1996--Strong demand for industrial products combined with ongoing cost reductions and productivity improvements helped ABB n. 1. Among weavers, yarn for the warp. Hence, Noun 1. ABB - an urban hit squad and guerrilla group of the Communist Party in the Philippines; formed in the 1980s achieve record results in 1995, the international electrical engineering electrical engineering: see engineering. electrical engineering Branch of engineering concerned with the practical applications of electricity in all its forms, including those of electronics. group announced at a press conference today in Warsaw Warsaw (wôr`sô), Pol. Warszawa, city (1993 est. pop. 1,655,700), capital of Poland and of Mazowieckie prov., central Poland, on both banks of the Vistula River. , Poland Poland, Pol. Polska, officially Republic of Poland, republic (2005 est. pop. 38,635,000), 120,725 sq mi (312,677 sq km), central Europe. It borders on Germany in the west, on the Baltic Sea and the Kaliningrad region of Russia in the north, on Lithuania, . Despite continued price pressure in many of its businesses, ABB was able to boost operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before after depreciation by 25 percent to $3,275 on revenues of $33,738 million, up 14 percent over the year before. Income before taxes rose 46 percent to $2,110 million while net income was up 73 percent to $1,315 million. Profits rose in all segments. Continued expansion in Asia and a substantial result improvement in the U.S.A. also contributed to the results. ABB proposed a 1995 dividend of $441 million, up 40 percent from 1994. As reported earlier, ABB entered into a strategic joint venture with Daimler-Benz
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. to Group profit and be an important customer for many Group companies. The merger resulted in a net gain to ABB of $250 million in 1995. The two parent company Boards, ASEA and BBC BBC in full British Broadcasting Corp. Publicly financed broadcasting system in Britain. A private company at its founding in 1922, it was replaced by a public corporation under royal charter in 1927. Brown Boveri, and the ABB Board decided on changes to ABB's governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. structure. Details of these changes are being released separately today. The results in detail Orders Received and Revenues Orders received for the ABB Group increased by 14 percent to $36,224 million (1994: $31,794 million). Expressed in local currencies, orders received were 7 percent higher than last year. The improvement in orders reflects the shift from large power generation projects towards standard and industrial products and capital goods Capital Goods Any goods used by an organization to produce other goods. Notes: Examples of capital goods include office buildings, equipment, and machinery. See also: Capital Expenditure, Disinvestment Capital goods which experienced 20 percent growth over the prior year. Among the largest orders booked in 1995 was $470 million for a gasification gas·i·fy tr. & intr.v. gas·i·fied, gas·i·fy·ing, gas·i·fies To convert into or become gas. gas power plant in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , high-efficiency gas turbines to South Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. , coal-fired Adj. 1. coal-fired - fueled by burning coal; "a coal-fired ship" coal-burning fueled - heated, driven, or produced by burning fuel boilers to Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. , a combined-cycle plant to Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. , and an oil-fired plant to Jordan. Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. awarded ABB a contract to build two power transmission
substations and Qatar selected ABB to expand and upgrade its T&D
network. Railway authorities in Sweden and Norway ordered metro cars,
high-speed trains, and train sets. Oil, gas, and petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. projects
and plants were announced for the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Norway. The order
backlog BacklogThe total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at the end of 1995 increased to $33.5 billion compared to $31.5 billion at year end 1994. Revenues increased by 14 percent to $33,738 million (1994: $29,718 million). Expressed in local currencies revenues were 6 percent higher than last year. Earnings Operating earnings after depreciation increased by 25 percent to $3,275 million (1994: $2,619 million). Expressed in local currencies, operating earnings were 18 percent higher than last year. Operating earnings margin for 1995 reached 9.7 percent compared to 8.8 percent in 1994. This profit and margin improvement was achieved despite a very competitive pricing environment for new power plants, higher average world market prices for raw materials, and higher research and development costs. Productivity gains, establishment of low-cost manufacturing bases in developing markets, global sourcing, and prior restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). efforts enabled ABB to grow in this competitive global environment. Unusual items showed a positive net of $246 million. Unusual income, primarily capital gains from divestitures and real estate sales, reached $442 million. The largest gain, $250 million, came from the transfer of the ABB Transportation business to the ABB Daimler-Benz joint venture. Net unusual costs of $196 million consisted primarily of costs for discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and restructuring expenses spread out over many ABB companies. Industrial and Building Systems reported a 35 percent improvement in earnings reflecting higher sales volumes for standard products in most markets and regions, productivity improvements, and the impact of continuous cost-cutting. Earnings from Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. increased 43 percent and achieved a record level of $260 million in 1995. Transportation again increased profits, by 48 percent as rationalization rationalization, in psychology: see defense mechanism. and restructuring started in prior years are now having an increasing impact. Despite a very competitive environment, Power Generation was able to improve earnings 4 percent in 1995 due to its cost reduction efforts, the build up of capacity in Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. and Asia, and success in the service and retrofit ret·ro·fit v. ret·ro·fit·ted or ret·ro·fit, ret·ro·fit·ting, ret·ro·fits v.tr. 1. To provide (a jet, automobile, computer, or factory, for example) with parts, devices, or equipment not in market. Power Transmission and Distribution reported profits that were somewhat above last year's level. On a comparable basis the largest contributors to operating earnings were Sweden, Germany, the United States, Switzerland, Norway, Finland, and Italy. Earnings in Sweden, Finland, and Norway increased, helped by exports, stronger domestic industrial demand, and positive effects from customer focus programs and efficiency improvements. Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. contributed positively to Group results, especially Poland and the Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. . Earnings from North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. increased substantially in 1995, reflecting improved industrial markets and gains in operational efficiency in industry and power generation. Profits from emerging countries in Asia increased, despite start up costs in several markets. German results were down from the prior year, reflecting a slowing economy and a strong D- Mark. Middle East and Sub-Sahara Africa regions also showed some result decline. Regional operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , based upon domestic and export revenues within a region, developed as follows in 1995: Europe 9.9 percent (1994: 9.3 percent), Americas 7.9 percent (1994: 5.8 percent), and Asia/Pacific and India 7.4 percent (1994: 7.2 percent). Income before taxes increased by 46 percent to $2,110 (1994: $1,447 million). Expressed in local currencies income before taxes was 38 percent higher than last year. Total taxes for the ABB Group amounted to $749 million (1994: $652 million), corresponding to an overall tax rate of 36 percent. Net income for 1995 was $1,315 million (1994: $760 million). Return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). increased to 22.6 percent (1994: 17.6 percent) and return on equity increased to 28.4 percent (1994: 20.2 percent). Investments, Divestitures and Capital Expenditure Acquisitions amounted to $315 million in 1995. Divestitures totaled $1,140 in 1995 and included the transfer of ABB s transportation business to 50 percent owned ABB Daimler- Benz Transportation GmbH at year end. Capital expenditure for tangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → rose to $1,171 million, compared to $935 million in 1994. Group expenditure for research and development increased about $300 million to $2,627 million but in relative terms continued to represent about eight percent of revenues. In 1995, costs primarily for discontinued operations and restructuring of $196 million (1994: $199 million) are included in the Consolidated Income Statement consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. under Unusual Items. In addition, activities associated with the restructuring provision recorded in 1993 have been completed. The benefit of these streamlining and cost reduction actions is reflected in the improved results of the Group. Annual restructuring costs for ABB in the future are expected to be between one-half and one percent of revenues. Financial Position At the end of 1995, the Group's net cash position (defined as cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has minus short-, medium-, and long-term loans) was about $2 billion, an improvement of about $300 million. The key reason for the improvement this year was the creation of the 50/50 owned transportation joint venture with Daimler-Benz which led to a net cash improvement of some $775 million. At the same time the global volume growth and the build up of local presence in emerging markets led to increased working capital. Over the last five years, ABB s net cash position has improved by over $4 billion. Personnel At the end of 1995 ABB had 209,637 employees, compared to 207,557 in 1994. Employment increased in Asia by 7,000 and also increased in other emerging markets. In Central and Eastern Europe there were net increases. Employment went down somewhat in the Western industrialized in·dus·tri·al·ize v. in·dus·tri·al·ized, in·dus·tri·al·iz·ing, in·dus·tri·al·iz·es v.tr. 1. To develop industry in (a country or society, for example). 2. countries. Major reduction of employees, about 4,000, took place in 1995 in Germany, the United Kingdom, Portugal, Venezuela, and Switzerland. On a comparable scope -- excluding the impact of new ventures and acquisitions/divestitures -- the number of employees was about unchanged reflecting increased productivity during the recent economic upturn. Personnel costs as a percentage of adjusted revenues, continued to decline, falling below 30 percent of revenues for the first time in the history of ABB. Just a few years ago it was 34 percent of adjusted revenues. Personnel cost reduction has been one of the main contributors to ABB's improvement in operating margin. Outlook for 1996 and beyond The market for new power plants is forecast to expand in the developing countries, but is expected to remain low in the industrialized nations. Demand growth for standard products and capital goods in OECD OECD: see Organization for Economic Cooperation and Development. countries has started to slow and some construction related markets are experiencing lower growth. As ABB is late in the cycle, demand for industrial investment goods In economics, investment goods are the plant, machinery, and equipment that enable production, and are the main input into new installed capital. External sources Earnings for the Power Generation segment in 1996 are forecast to be at or above the 1995 level. In Power Transmission and Distribution good growth will continue in the emerging markets and orders and earnings are expected to increase in 1996. The outlook for 1996 in the Industrial and Building Systems segment remains positive. Expansion in emerging markets will continue in a focused and profitable way and increased order backlog and continued productivity gains are expected to contribute to higher earnings. With the transportation merger, additional opportunities to reduce costs and improve margins will come from eliminating overlaps in manufacturing and development. The positive benefit of these actions will come primarily in 1997 and 1998. The long-term outlook for this joint venture with Daimler-Benz is very good, for both growth and profit potential. Financial Services earnings for 1996 are expected to be somewhat below the record performance of 1995. On a comparable basis, a continued increase in net income for the Group is expected in 1996. Based on ABB's strategy for profitable growth in both developing and industrialized countries we have set new objectives for the turn of the century. We aim to achieve some 6 percent average growth over the next full business cycle, reduce relative working capital and continue to raise result margins substantially. Dividends On February 27,1996 the ABB Annual General Meeting declared a dividend for 1995 of SFr.520 million to its two parent companies, ASEA AB and BBC Brown Boveri Ltd (1994: SFr. 370 million). Translated into dollars at the time of the dividend decision, it represented an increase of 40 percent over the 1994 dividend. This corresponds to 33.5 percent of Group net income for 1995. -0
ABB Asea Brown Boveri Group
Consolidated Income Statement
Year ended December 31
(US$ in millions)
1995 1994
Revenues 33,738 29,718 Material expenses -14,604 -12,110 Personnel expenses -10,246 -9,006 Other expenses -5,410 -4,707 Changes in work in progress and finished goods 572 -399 Depreciation of fixed assets -1,021 -893 Unusual items 246 16 Operating Earnings after Depreciation 3,275 2,619 Earnings from equity accounted companies 12 11 Dividend income 14 10 Interest income 509 401 Interest on advances -987 -960 Interest expense -694 -618 Exchange differences -19 -16 Income before Taxes 2,110 1,447 Taxes -749 -652 Net Income before Minority Interest 1,361 795 Minority interest -46 -35 Net Income 1,315 760 Note: Exchange rates used in the above income statement are average for the periods shown. The average exchange rates for the Swiss franc, Swedish krona, and German mark are stated below:
Averages for 1995 Averages for 1994
1.00 U.S. dollar = SFr.: 1.18 1.37 1.00 U.S. dollar = SKr.: 7.11 7.71 1.00 U.S. dollar = DM.: 1.43 1.62
ABB Asea Brown Boveri Group
Consolidated Balance Sheet
Year ended December 31
(US$ in millions)
1995 1994
ASSETS
Current Assets
Cash and marketable
securities 6,831 7,612
Trade receivables 6,254 5,472
Other current receivables 4,541 2,844
Inventories 4,642 4,032
Total current assets 22,268 19,960
Fixed Assets
Financing receivables 1,595 1,371
Shares and participations 452 306
Intangible assets 1,985 2,178
Construction in progress 248 169
Machinery and equipment 2,711 2,462
Land and buildings 2,817 2,609
Total Fixed Assets 9,808 9,095
Total Assets 32,076 29,055
LIABILITIES AND EQUITY Current Liabilities Trade payables 4,681 3,682 Provisions 5,309 4,336 Other current liabilities 5,122 4,563 Short-term loans 2,190 2,877 Total Current Liabilities 17,302 15,458 Advances from Customers 3,576 3,417 Medium- and Long-term Loans 2,644 3,049 Employee Share Ownership Debentures - 372 Pension Liabilities 2,062 1,780 Deferred Taxes 909 580 Minority Interest 340 382 Stockholders' Equity Share capital 2,087 1,750 Restricted reserves 922 711 Other reserves and retained earnings 919 796 Net income 1,315 760 Total Stockholders' Equity 5,243 4,017 Total Liabilities and Equity 32,076 29,055 Note: Exchange rates used in the above balance sheets are year-end rates. For the Swiss franc, Swedish krona and German mark, these rates are stated below:
Year end 1995 Year end 1994
1.00 U.S. dollar = SFr.: 1.15 1.31 1.00 U.S. dollar = SKr.: 6.67 7.45 1.00 U.S. dollar = DM: 1.43 1.55
Business Segment Figures
Year ended December 31
(US$ in millions)
Orders Received Revenues
1995 1994 1995 1994
Power Generation 10,533 10,115 10,308 8,909 Power Transmission and Distribution 8,810 7,731 8,144 7,030 Industrial and Building Systems 16,029 13,344 14,931 12,820 Transportation 3,305 3,181 2,882 2,921 Financial Services 428 307 428 307 Various Activities/Corporate 3,361 2,855 3,179 2,828 Total 42,466 37,533 39,872 34,815 Intra-Group transactions -6,242 -5,739 -6,134 -5,097 Net Total 36,224 31,794 33,738 29,718
Operating Earnings Number of
after Depreciation Employees
1995 1994 1995 1994
Power Generation 914 878 46,014 41,568 Power Transmission and Distribution 675 658 46,827 46,457 Industrial and Building Systems 1,099 815 89,987 89,023 Transportation 207 140 10,717(1) 15,760 Financial Services 260 182 817 777 Various Activities/Corporate 120 -54 15,275 13,972 Total 3,275 2,619 209,637 207,557
Regional Figures
(US$ in millions)
Revenues(a) Employees
1995 1994 1995 1994
Europe 19,731 16,741 141,553 144,600 Americas 5,775 5,850 32,257 33,146 Asia/Australasia/ Africa 8,232 7,127 35,827 29,811 TOTAL 33,738 29,718 209,637 207,557 (a) Total third-party revenues in each region, excluding exports, which are accounted for in the revenue figures of the importing region. (1) 50% of ABB Daimler-Benz Transportation GmbH at the end of 1995. CONTACT: Karen Armour armour or body armour Protective clothing that can shield the wearer from weapons and projectiles. By extension, armour is also protective covering for animals, vehicles, and so on. Prehistoric warriors used leather hides and helmets. , 203-750-2217 (office) |
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