ABB Group: Strong execution ensures steady business development

Zurich, Switzerland, Feb. 22, 2010 –ABB reported revenues for full year of 2009 were $31.8 billion, with orders at approximately $31 billion and earnings before interest and taxes (EBIT) of $4.1 billion. ABB secured the full year stable business development on a combination of rapid cost take-out and solid operational execution.

“By acting quickly and decisively, we delivered a 2009 result well within our target, despite the worst recession in memory,” said Chief Executive Officer Hogan. “We are in a stronger position today than we were a year ago and have successfully positioned ourselves for growth as the economy recovers.

“We’re encouraged that the year-on-year rate of order decline slowed in the fourth quarter and that base orders were slightly higher than the third quarter of 2009,” Hogan said. “We’ll continue to aggressively pursue growth in emerging markets and opportunities globally to improve industrial productivity, lower energy consumption and tackle climate change. At the same time, cost will remain a key focus. We have therefore expanded our cost savings target to $3 billion to ensure we remain within our profitability target.”

The order backlog at the end of December 2009 amounted to $24.8 billion, an increase of 4 percent in terms of US currency compared with the end of 2008.

ABB’s overall business performed well in the fourth-quarter of 2009, with cash flow from operations amounting to a record $1.8 billion. Orders from emerging markets showed double-digit growth in the fourth-quarter, an increase of 15 percent and accounting for 51 percent of total orders received in the last quarter of 2009. “The results show the resilience of ABB’s business portfolio and geographic scope, as well as our ability to execute in a tough market environment,” said Joe Hogan.

In 2010, ABB will continue to execute its cost take-out program. The company aims to reduce ABB’s costs – comprising both cost of sales as well as general and administrative expenses – by a total of $3 billion by the end of 2010. The savings are focused on low-cost sourcing, reduced general and administrative expenses, internal process improvements and adjustments to ABB’s global manufacturing and engineering footprint.

Cost reductions in 2009 have produced remarkable results. Approximately 50 percent of these savings were achieved by optimizing global sourcing (excluding changes in commodity prices). The remainder was achieved through reductions to general and administrative expenses, as well as global footprint and operational excellence measures.

Management appointments and organizational changes

In the fourth quarter ABB announced a reorganization of its automation divisions to align them more closely with customers. Under the announced changes, effective Jan. 1, 2010, the business units in the Automation Products and Robotics divisions have been regrouped into two new divisions – Discrete Automation and Motion, and Low Voltage Products. The Process Automation division remains unchanged except for the addition of the instrumentation business from the Automation Products division.

As part of the reorganization, Tom Sjökvist, previously responsible for Automation Products, now heads the new Low Voltage Products division. Ulrich Spiesshofer, previously responsible for Corporate Development on the Executive Committee, takes over the Discrete Automation and Motion division. Anders Jonsson, previously responsible for the Robotics division, remains on the Executive Committee with responsibility for continuing the implementation of ABB’s current cost take-out program as well as the company’s Global Footprint program. Veli-Matti Reinikkala remains head of the Process Automation division.

Outlook

The need for more efficient and reliable power transmission and distribution and the integration of renewable energies into existing power grids remains in all regions. As energy and commodity prices increase, and as globalization promotes more competition, industrial customers in all parts of the world require automation solutions for new capacity and to lower costs, improve quality and increase the productivity of their existing assets. The drivers of ABB’s businesses, fueled mainly by the need to build and upgrade energy infrastructure, address climate change and the increasing importance of emerging markets in the global economy, continue to offer attractive growth opportunities.

The recent global economic downturn, however, has resulted in overcapacity in some customer sectors and has reduced the amount of capital available for investment in others. It remains unclear at this time when and how quickly customer investments in these sectors will recover. As a result of these factors, management will maintain a cautious outlook for 2010 until there is a clearer view of the overall direction of the global economy.

In 2010, ABB will focus both on adjusting costs and taking advantage of its global footprint, strong balance sheet and leading technologies to tap further opportunities for profitable growth.

Update on 2007-11 targets

ABB remains confident that it can continue to achieve a Group full-year EBIT margin within its target corridor of 11-16 percent of revenues. The company also reiterates its commitment to the divisional EBIT margin targets.

ABB also confirms its target for free cash flow as a percentage of net income at an average 100 percent over the period 2007-11.

The ability of the company to achieve the remaining targets – revenue and earnings per share growth and return on capital employed – is contingent on the pace of economic recovery in 2010 and 2011.

ABB (www.abb.com) is a leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 120,000 people. ABB has a full range of business activities in China, including R&D, manufacturing, sales and services, with 15,000 employees, 30 joint ventures and wholly owned companies, and an extensive sales and service network across 60 cities.

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