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-CRISIL keeps ratings of ABB Ltd.

BANKING AND CREDIT NEWS-October 22, 2010--CRISIL keeps ratings of ABB Ltd(C)2010 M2 COMMUNICATIONS

22 October 2010 - Indian rating agency CRISIL on Thursday maintained the AAA/stable/P1+ ratings of ABB Limited (BOM:500002).

The agency issued the following press release:

Rs.10 Billion Cash Credit AAA/Stable (Reaffirmed)

Rs.60 Billion Letter of Credit and Bank Guarantee P1+ (Reaffirmed)

Rs.1 Billion Commercial Paper Programme P1+ (Reaffirmed)

CRISIL's ratings on the debt programmes and bank facilities of ABB Ltd (ABB) continue to reflect ABB's established market position in the power and automation technology segments, and its superior financial risk profile. These rating strengths are partially offset by ABB's working-capital-intensive operations.

ABB is the market leader in switchgears, power electronics, drive-relays, and several other transmission, distribution, and automation products. Its strong market position is supported by its access to the latest technology from its Zurich-based parent, ABB Asea Brown Boveri Ltd (rated 'A/Stable/A-1' by Standard & Poor's), diverse product portfolio, cost-competitive operations, wide geographical reach, and strong market penetration through channel partners. ABB has a strong financial risk profile, marked by robust capital structure and debt protection metrics, and healthy cash accruals and return on capital employed (RoCE) ratio. ABB had zero debt as on December 31, 2009; its interest coverage ratio was over 14 times in 2009 (refers to calendar year, January 1 to December 31). The company's RoCE ratio was high at 25 per cent in 2009. As on June 30, 2010, the company had unexecuted orders of Rs.85.3 billion, against Rs.76.2 billion a year ago.

However, ABB has a large exposure to financially-weak state power utilities (SPUs). Its receivables level increased to 160 days as on December 31, 2009 from 148 days a year ago. CRISIL expects ABB's receivables level to remain high during 2010 given the current economic environment.

Outlook: Stable

CRISIL believes that ABB will maintain its dominant position in the power and automation technology markets, supported by its technological superiority. ABB's financial risk profile is expected to remain robust, given its near-zero debt levels and healthy cash accruals. The outlook may be revised to 'Negative' if ABB's order inflow is adversely affected, or if the company undertakes larger-than-expected debt-funded capital expenditure programme.

About the Company

ABB is India's third-largest integrated power equipment manufacturer, and has been in operations for more than 70 years. It has plants in Bangalore, Mumbai, Nashik, Faridabad, Haridwar, Halol, and Vadodara. ABB has five customer-facing divisions: power systems, power products, process automation, discrete automation and motion, and low-voltage products. The power divisions provide turnkey solutions for integrated power systems, high- and medium-voltage sub-stations, power line carrier communication equipment, relay-controlled panels, and networking management and services. The automation divisions provide turnkey process automation, optimisation solutions, and complete electricals to sectors such as cement, metals, minerals and mining, pulp, paper, chemicals, petrochemicals, and marine.

ABB reported a profit after tax (PAT) of Rs.3.5 billion on net sales of Rs.62.4 billion for 2009, against a PAT of Rs.5.5 billion on net sales of Rs.68.4 billion for 2008. For the six months ended June 30, 2010, ABB reported a net profit of Rs.449.0 million on net sales of Rs.29.4 billion, against a net profit of Rs.1.6 billion on net sales of Rs.29.2 billion for the corresponding period of the previous year.

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Publication:M2 Banking & Credit News (BCN)
Date:Oct 22, 2010
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