ABB Global’s (ABB) Q2CY12 revenue growth was flat on back of weak power division. Margin plunged 340bps YoY primarily due to unfavorable business mix and significant differences in forex rates. Orders received grew 9% to USD10.1bn as utility customers continued to invest in selected projects to strengthen grid reliability and hike capacity. Management indicated that though the macroeconomic scenario is uncertain, its short-term outlook is optimistic than it was three months ago on back of positive developments in China, continued strength in US market and resilience in Europe.
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ABB India: Power systems likely to drive growth
ABB reported steady growth of 11 % in orders for ABB India, driven by power systems. Management issued “stable pricing” commentary for the global T&D market.
Management outlook & key trends
· Short-term outlook: Signals in US, Europe and emerging markets remain mixed. Reasons for optimism in Q3CY12.
· Slight price recovery: Management maintained order pricing levels are recovering slightly.
· Power transformers capacity cut by > 10 % over past 12 months.
· Reasonable ordering pipeline in power systems provides visibility for a healthy order intake going forward.
Flat revenue growth; margin declines on unfavourable business mix
Revenue declined 6% and 8% YoY in power products and power systems, respectively, leading to flat revenue growth. Low voltage products posted 14% growth YoY in the quarter. EBITDA margin dipped 340bps YoY to 10.4% due to unfavourable business mix and significant differences in forex rates. Cost savings of about USD280mn offset the impact of lower prices and project margin slippages to a certain extent.
Power division leads order inflow spurt
Orders received grew 9% USD10.1bn. Utilities continued to invest in transmission grids, while industrial customers, especially in oil and gas, hiked spending to secure reliable power and improve productivity. Orders in the power division were steady to higher in most key markets, such as US, Brazil, China and India. Power orders were steady in Europe. On the automation front, the need for energy-efficient solutions and higher productivity and quality drove order growth across several businesses and regions.
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