ABB Celebrates Successes and Sees Bright Future
The evergreen agenda of all vendor user events is to rally the troops and showcase new products. ABB Automation & Power World 2012, held April 23-26 at the George R. Brown Convention Center in Houston, was no different. And ABB Group had plenty of cause to celebrate.
Unofficial attendance estimates were in the 5000+ range, 25% above last year's 4200 total, and setting a new record. Better yet, CEO Joe Hogan took time out mid-week for the quarterly financial conference call with business reporters and analysts to announce higher orders and revenues in the first quarter of 2012, led by growth in North America. Operational earnings before interest, taxes, depreciation and amortization (EBITDA) declined 7% compared to the same quarter a year earlier, but net income was up 5%.
Orders were 2% above the very high levels in the first quarter of 2011, driven mostly by utility investments in power distribution and industrial demand for automation solutions that increase productivity. Order growth mirrored regional economic trends and, therefore, was weakest in China and southern Europe. ABB's services sector showed growth in that service orders were up 9% and represented 20% of total orders, reflecting progress in implementing the service growth strategy.
Revenues increased in all divisions and were 8% higher than the same quarter a year earlier, led by 21% growth in Discrete Automation and Motion (15% organic) and 9% in Power Products. Revenues were also supported by the strong order backlog, which continued to grow in the first quarter and is now at a near-record $29.9 billion. Service revenues grew 12%.
Back at the show, Hogan and Enrique Santacana, president and CEO of North America-based ABB Inc., told the audience at the opening keynote that, in spite of general economic wobbliness, players in the industrial automation and electric power industries should look forward to a robust business climate for 2012 and beyond.
Santacana pointed to several trends that should help sustain a powerful economic growth climate: energy efficiency; increased availability of natural gas through fracking; exponential growth in data-driven processes; grid and infrastructure investments; and industrial productivity. "In this global economy, if you're not investing in productivity improvement, you're going out of business," he argued, adding that every one of those growth trends falls in ABB's "sweet spot."
Hogan detailed more of ABB's strategy to take advantage of these trends. Energy efficiency, which he called "the greenest form of energy you can think of," is a key focus, he said. "Last year, our low-voltage drives saved 260 million MW/h," he said, explaining that the savings were achieved by matching the motors to the drives. "It's really that simple."
It's also simpler for ABB these days, now that it's finding synergy with recent acquisition Baldor, whose motors are coming together nicely with ABB's drives. "Motors use 40% of the energy in industry," Hogan said. "If you put low-voltage drives on every motor, you would save $40 billion."
Data centers were a key talking point for Hogan, who pointed to that market for incredible potential energy savings. Data centers use 100 times more power than a similar-sized office building, he said, which in itself makes the potential huge.
Added to that is the exponential growth in data-driven processes. "Every time someone develops a new app, you have to build a data center somewhere," Santacana said.
Great Disruptors and Megatrends
Innovation is likely to come in the form of DC power, which will be a "great disruptor," Hogan said. In data centers, for example, energy efficiency could be improved 10% to 20% over an AC system.
Utilities have used DC power distribution for a long time, but the concept is relatively new to data centers, Santacana explained later at a media briefing. In practice, using DC power would call for fewer rectification steps, leading to fewer losses and better efficiency, he said.
The planet used almost 18 trillion KWh of electricity last year. Although the world is standardized on AC power, it's time to take advantage of DC's ability in many areas to improve power efficiency, Hogan said.
ABB doesn't advocate that DC take over everything, he added, but there are places where it makes sense.
"The need for DC power is on the rise. We need to take advantage of every kilowatt of power—AC and DC," he said.
Finding and exploiting such disruptive technologies is part of ABB's growth strategy, Hogan added. Another part is looking for megatrends, which include resource economics, green technologies, transportation and mobility, electrification and communicating to smart grids, increasing urbanization, digital information and data center growth, and power shifts in emerging economies. "We want to be in areas where the market's growing," he said. "We look for markets where the wind is blowing."
One of the markets ABB is emphasizing is the United States, which remains by far the largest economy, still about double that of China. "By far the most momentum we see in the world right now is occurring in the United States," he said.
Santacana added, "ABB in North America represents the largest installed base of ABB's power and transmission and distribution equipment. North America is our largest market for products, systems and services such as discrete automation and motion, low-voltage products, power products, process automation and power systems."