ABB Group Results - First Six Months 1999.

ZURICH, Switzerland--(BUSINESS WIRE)--

July 21, 1999

Continued Earnings Growth

- Net income up 32 percent including power generation gain - Revenues up 10 percent, operating margin increases

ABB, the international engineering and technology group, said today its net income for the first six months of 1999 amounted to $ 839 million, 32 percent higher than the same period last year. The company attributed the improvement to increased revenues, stronger operating margins and gains from forming the power generation joint venture. -0-

US$ in millions unless     Jan. - June    Jan. - June       Percentage
otherwise stated;

Excl. transferred power
generation businesses            1999           1998        change (1)

-------------------------------------------------- ---------------
-------------- ----------------
Orders Received                13,119         13,178              0 %
Revenues                       11,778         10,697           + 10 %

Operating Earnings after
Depreciation                    1,301            939           + 39 %

Net Income                        839            638           + 32 %
Net Income per Share (US$)       2.80           2.13           + 32 %
    --------------------------------------------------- ---------------
-------------- ----------------

(1)  In local currencies, orders, revenues and earnings are
     approximately 2 percent higher.

     Operating earnings after depreciation reached $ 1,301 million, 39
percent higher compared to the same period last year (1998: $ 939
million). All business segments showed higher or stable earnings. The
transfer of most of ABB's power generation businesses to the new joint
venture ABB ALSTOM POWER resulted in a net capital gain of $ 124
million after taxes ($ 200 million in operating earnings) and after
provisions for restructuring and exposures. Additionally, a minor gain
from this transaction is expected to be booked in the fourth quarter.
     "Our results are encouraging, especially considering that
industrial demand in many markets is growing only slowly," said ABB
President and CEO, Goran Lindahl. "Our second-quarter net income is up
37 percent compared to the first quarter, excluding the gain from the
formation of our new power generation joint venture. I expect our
profitability will continue to improve as we build up higher margin
knowledge- and service-based businesses in all of our segments. We
expect 1999 revenues as well as operating earnings, excluding capital
gains from the power generation joint venture, to increase compared to
the year before," Lindahl said.
     The transfer of ABB's power generation businesses into the new
joint venture ABB ALSTOM POWER N.V. is reflected in this report and in
the pro forma 1998 figures. Businesses related to nuclear activities,
distributed power, renewable energy (excluding hydropower) and the
Powerformer(TM) remain with ABB. Earnings from the transferred power
generation business (see Notes 1 and 9) reached half of last year's
level, reflecting mainly the oversupply in the steam power industry
and costs associated with the reduction of some 800 employees in the
transferred businesses since the beginning of the year. The gas
turbine business, particularly in North America, continued to develop
positively.
     Orders received for the first half-year reached $ 13,119 million,
about the same as last year (1998: $ 13,178 million (1)). Power
Transmission orders reached last year's level, supported by an order
for a high-voltage direct current (HVDC) power link in China and
increased service business volume. Power Distribution increased its
orders received by 23 percent, including an airport electrification
order in Germany. Automation orders increased, but varied by customer
industry with good demand in the petrochemical and consumer goods
sectors. The integration of Alfa Laval Automation resulted in better
than expected synergies and volume improvements. The business segment
Oil, Gas and Petrochemicals has not yet benefited from the recent
increase in oil prices and orders received were some 40 percent lower
compared to the exceptionally high level of the previous year. This
segment's 1999 orders received are not expected to reach last year's
level. Products and Contracting increased orders received by 2
percent. Its service business volume increased while the demand for
low-voltage products in Europe was flat.
     The order backlog at the end of June reached $ 15,841 million, up
6 percent with improved margins compared to the previous year
(December 31, 1998: $ 14,934 million). Base orders were 4 percent
higher compared to the first half last year (2). After transferring the
power generation business, large orders now represent about one-fifth
of the total orders received. As a result of lower order intake in
Oil, Gas and Petrochemicals, large orders did not reach last year's
level.
     In ABB's main markets, European industrial demand continued to
grow slowly, with Germany showing reduced industrial production. Signs
from the European economies do not yet indicate sustained improvement.
ABB orders received in Europe increased slightly. North America was
still affected by low commodity prices in the automotive, pulp and
paper, steel, chemical and petrochemical sectors, whereas deregulation
continued to have a positive influence on the power transmission and
distribution industries. Industrial production in Latin America has
only partly recovered following the recent financial turbulence. As a
result, orders received in the Americas did not meet the high level of
the previous year. In Asia, the business climate improved somewhat and
several countries continued to show increased industrial production.
Orders in the region rose by 31 percent. Markets in the Middle East
and Africa developed positively, particularly in the oil producing
countries, and orders were up 3 percent.
     Revenues in the first six months increased by 10 percent to
$ 11,778 million (1998: $ 10,697 million) with increases in all
industrial business segments.
     Operating margin excluding the gain related to ABB ALSTOM POWER
was 9.3 percent (1998: 8.8 percent) as a result of the successful cost
base reduction initiated in 1997. Power Transmission reached its
highest operating margin ever with 10.5 percent. Both Power
Distribution as well as Products and Contracting showed an operating
margin increase to almost 7 percent. With the lower added value in the
invoicing related to large projects of previous years, Oil, Gas and
Petrochemicals showed a lower operating margin. During the second
quarter, all measures relating to the integration of Elsag Bailey
Automation were initiated, leading to a lower operating margin of 6.6
percent in this segment. The integration is proceeding slightly ahead
of schedule and the positive effects will be realized from the year
2000 onwards to reach $ 200 million in annual synergies by the year
2002.
     The net interest expense amounted to $ -161 million (1998: $ -131
million) as a consequence of the acquisition of Elsag Bailey. Income
before taxes for the first six months amounted to $ 1,205 million
(1998: $ 926 million), an increase of 30 percent. Excluding the gain
related to ABB ALSTOM POWER, return on capital employed reached 18.1
percent.
     Net income for the first six months increased by 32 percent to $
839 million (1998: $ 638 million). Excluding the extraordinary gains
resulting from the formation of the ABB ALSTOM POWER joint venture,
net income increased by 12 percent.
     ABB's net cash position (defined as cash and cash equivalents
minus short-, medium-, and long-term loans) at the end of the first
half of 1999 was $ -625 million (as reported March 31, 1999: $ -1,621
million). These figures include the effects of ABB's transfer of most
of its power generation businesses to ABB ALSTOM POWER, the
acquisition of Elsag Bailey Process Automation and cash compensation
from DaimlerChrysler for the 50-percent-stake in Adtranz. Operating
cash flow reached $ 291 million (1998: $ 162 million) reflecting a
positive development of net working capital compared to the same
period last year.
     ABB's shift into businesses with higher knowledge and service
content continued with major transactions during the first half year.
The acquisition of Elsag Bailey Process Automation was completed after
receiving all of the necessary approvals. ABB divested its stake in
Adtranz and last year's figures have been adjusted for this
transaction. In addition, ABB has acquired a Brazilian service company
with 3,000 people specialized on full-service contracts.
     As of June 30, 1999, ABB employed 174,601 people compared to
199,232 as reported at yearend 1998. Elsag Bailey Process Automation
added 11,000 employees and 37,000 employees have joined ABB ALSTOM
POWER from ABB. Adjusted for acquisitions and divestitures, the number
of employees decreased by 2 percent.
     After the successful introduction of the new ABB Ltd single-class
share, trading began on the Swiss Exchange and the exchanges in
Stockholm, London and Frankfurt at the end of June. ABB Ltd issued
300,002,358 registered shares with a nominal value of CHF 10 and with
one vote each. The former parent companies are now included in the
consolidated financial statements of the ABB Group.
     ABB's dependence on industrial demand means that it is typically
late in the business cycle. Accordingly, the general market
environment for ABB's products and systems is not expected to improve
until next year. Full year 1999 revenues and operating earnings are
expected to increase compared to 1998, excluding the capital gain from
the formation of the power generation joint venture with ALSTOM(3).
     Further indications of the ABB's longer-term goals and those of
its business segments will be given with the full year results of
1999.

1)   Note: Unless stated otherwise, all references to 1998 figures
     refer to the first six months. As described in the Notes to the
     Financial Statements, pro forma 1998 figures are adjusted for the
     power generation businesses related to ABB ALSTOM POWER and the
     sale of ABB's share in Adtranz (see Note 1). 1999 figures include
     Elsag Bailey Process Automation acquired in January 1999.

2)   Base orders for the second quarter 1999 compared to second quarter
     1998 were up 7 percent.

3)   50 percent of the ABB ALSTOM POWER's income before taxes will in
     the future be included in ABB's results below operating earnings
     after depreciation. Consequently, the outlook for the full year
     is based on operating earnings.