ABB Delivers Growth in Fourth Quarter
Solid transformation progress in 2016
Fourth quarter highlights include:
- 3% orders growth driven by large contract awards
- 9% orders growth in the United States and China
- Revenues up 1%
- Power Grids strong growth in orders (up 15%) and revenues (up 4%); Op EBITA margin2 increased to 4%
- Operational EBITA margin 7% impacted by default of a large distributor in Turkey and Egyptian currency losses
- Net Income $489 mn versus $204 mn in Q4 2015
Full year 2016 highlights
- Operational EBITA margin up 50 bps to 4%
- Operational earnings per share2 up 4%
- Orders -5% and revenues -1%
- Successful launch of ABB AbilityTM – integrating and expanding digital offering
- Cash return on invested capital up 70 bps to 1%; free cash flow up 5%
- Cost savings and working capital programs progressing
- 8th consecutive dividend increase to 76 per share proposed
“We delivered growth in the fourth quarter, driven by the strong performance of Power Grids, in a continued tough market,” said CEO Ulrich Spiesshofer. “Our customers are excited about ABB Ability, which bundles our leading offering as a digital champion in our industry. With the related orders already received, and significant interest, we are building growth momentum as we implement Next Level Stage 3,” he said. “The underlying performance improvement momentum continued and was stronger than the numbers we are reporting if you consider the one-off events that impacted us during the quarter.”
“In 2016, we made significant progress transforming ABB into a more customer focused, leaner, digital technology leader,” Spiesshofer said. “We delivered margin accretion through our continued focus on productivity and cost. Our working capital program, strong cash generation and disciplined capital allocation reflect the new cash culture of ABB. We are delivering on our commitment to attractive shareholder returns.”
Short-term outlook
Macroeconomic and geopolitical developments are signaling a mixed picture with continued uncertainty. Some macroeconomic signs remain positive in the United States and growth in China is expected to continue. The overall global market remains impacted by modest growth and increased uncertainties, e.g., Brexit in Europe and geopolitical tensions in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results. With this and the ongoing transformation of ABB, we expect 2017 to be a transitional year.
Q4 2016 Group results
Orders
Orders increased 3 percent (steady in US dollars) compared with the fourth quarter a year ago, driven primarily by large contract awards. Large orders ($15 million and above) were 35 percent higher (24 percent in US dollars) from large orders in Power Grids and Discrete Automation and Motion. Large orders represented 17 percent of total orders compared with 14 percent in the same quarter a year ago. These large orders included a $640 million ultra-high-voltage direct current systems order for Raigarh-Pugalur in India and a $100 million order for the upgrade of Sylmar converter station of the Pacific Intertie high-voltage direct current power link in the USA. Base orders (below $15 million) were 1 percent lower (4 percent in US dollars); improving in Discrete Automation and Motion, steady in Process Automation and lower in the two remaining divisions. Total service and software orders increased 4 percent (2 percent in US dollars) compared with the fourth quarter of 2015 and represented 20 percent of total orders, slightly higher than the same period a year ago.
The order backlog at the end of December 2016, amounted to $23 billion, 1 percent lower (5 percent in US dollars) compared with the end of 2015. The book-to-bill2 ratio in the fourth quarter was 0.92x compared with 0.89x in the fourth quarter of 2015.
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