Swiss power and automation technologies company ABB Ltd. (ABB) reported Thursday a rise in third-quarter profit, reflecting significant net gain on provision adjustments. Meanwhile, revenues fell from last year, on 21% drop in orders. Looking ahead, the company said its outlook for its businesses over the rest of 2009 and into 2010 remains uncertain.
The Zurich, Switzerland-based company's net income for the quarter grew to $1.09 billion from last year's $979 million. Third-quarter net income attributable to ABB was $1.03 billion or $0.45 per share, up 12% from $927 million or $0.40 per share in the comparable quarter last year.
The company noted that latest quarter results included a $380-million net gain for various previously-announced provision adjustments. Restructuring-related costs were approximately $40 million in the quarter.
On average, analysts polled by Thomson Reuters expected the company to post earnings of $0.30 per share for the quarter. Analysts' estimate typically exclude special items.
Earnings before interest and taxes, or EBIT, for the quarter was $1.4 billion, up 10% from $1.29 billion in the prior year quarter. Excluding adjustments, EBIT and EBIT margin were lower than last year, primarily reflecting the business mix, decreased capacity utilization and lower prices in short-cycle businesses, partly offset by ABB's cost take-out program which yielded savings in the quarter of approximately $500 million.
Revenues for the quarter fell 10% to $7.91 billion from $8.79 billion in the year-ago quarter, yet beat two Wall Street analysts' estimate of $7.82 billion. Revenues from sales of products were $6.71 billion, down from last year's $7.50 billion. Sales of services declined to $1.20 billion from $1.29 billion a year ago.
Segment-wise, Power Products revenues dropped 7% year-over-year to $2.82 billion, mainly on lower revenues from shorter-cycle businesses related to the industrial and construction sectors, as well as delays in customer acceptance of products. Power Systems revenues were $1.61 billion, up 1% from last year, on continuing strong order backlog, while revenues from Automation Products fell 14% to $2.23 billion. In the quarter, Process Automation revenues totaled $1.81 billion, down 6% from prior year, and Robotics revenues plunged 51% from last year to $211 million.
Orders were $7.06 billion in the quarter, down 21% from prior year's $8.89 billion, despite strong power infrastructure orders, while the decline was 15% on local currency basis. The company noted that utility investments to expand and refurbish power transmission grids were more than offset by lower demand from most of ABB's industrial markets and the construction sector, resulting in lower orders.
Large orders, of above $15 million, increased 42% percent in local currencies, while base orders, of below $15 million, dropped 23% in local currency, due to lower demand for shorter-cycle products in industrial markets, despite ongoing growth in investments in power grids. The order decrease also reflects price declines resulting from both lower material costs and weaker demand.
The order backlog at the end of September 2009 amounted to $26.16 billion, down 4% from last year's $27.21 billion.
Commenting on the results, Joe Hogan, ABB's Chief Executive Officer, stated, "Order trends were in line with what we saw in the second quarter, with steady demand in power and oil and gas but lower base orders in industrial markets. We'll continue to focus on making sure our costs are in line with market demand, but at the same time stay aggressively positioned to capture the significant growth opportunities in power infrastructure, renewables, energy efficiency and emerging markets."
For the nine months of fiscal 2009, ABB's net income declined to $2.52 billion from last year's $3.09 billion. Net income attributable to ABB was $2.36 billion or $1.03 per share, down from $2.91 billion or $1.26 per share a year ago. Total revenues fell to $23.03 billion from last year's $25.77 billion.
Looking ahead, ABB noted that outlook for its businesses over the rest of 2009 and into 2010 remains uncertain.
The company noted that "it remains unclear when and how quickly capital investments by customers will recover from the downturn. In addition, the volatility of raw material prices and the limited availability of project funding continue to influence the timing of many power and industrial investment decisions, especially among small- to medium-sized companies."
ABB said its priority for the next several quarters will be to "ensure that the company has the flexibility to respond quickly to changing market conditions, taking advantage of its global footprint, strong balance sheet and leading technologies to improve its cost competitiveness while simultaneously tapping further opportunities for profitable growth."
Regarding its cost take-out program, the company noted that cost reductions for the first three quarters of 2009 were significantly ahead of plan and exceeded $1 billion, equal to the original targeted take-out for the full year. ABB said it continued to execute the program, which aims to sustainably reduce ABB's costs, comprising both cost of sales as well as general and administrative expenses, by a total of $2 billion by the end of 2010 from 2008 levels.
ABB closed Wednesday's regular trading session at $19.53, down $1.03 or 5.01%, on a volume of 5.7 million shares.
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