Financial, Technology Outlook Strong for ABB

March 23, 2009
ABB Helps Clients Realize the Potential of Process Automation, Safety and Power Systems Integration

“Our intention is to emerge from this downturn in a stronger position than before.” New to the post since last year’s ABB Automation World conference, ABB Group CEO Joe Hogan repeated this refrain several times as he led the automation press through a tour of ABB’s financial position in this year’s tough new economy. “2008 seems like it was a decade ago,” he said, as he reported the company’s record-breaking financial performance last year.

“Revenue was $34.9 billion, orders were $38.3 billion. EBIT was $4.6 billion after adjustments, and we have about $4 billion in cash on hand,” he said. “We started 2009 with a $24 billion backlog, which will carry us into 2010,” he added, “so we should be able to ride out the cycle.”

He broke down ABB’s business units and their individual results: Power Products, responsible for $12 billion; Power Systems, another $7 billion; Automation Products (that’s motors and drives), $10.3 billion; Process Automation, $7.8 billion; and Robotics, $1.6 billion. Hogan said that Automation Products and Robotics are pretty hard-pressed by the current downturn, since Automation Products has a short ship cycle, and Robotics is still quite heavily tied into the automotive sector. He noted that the dividend would remain unchanged in 2009. He also showed the remarkable improvement in company’s debt-to-equity ratio since 2001, from 82% to 17% last year.

Hogan reported on what he called “phase one” of ABB’s proactive strategy to get ahead of the economy. $1.3 billion in cost reductions will come from sourcing changes, improved footprint and consolidations, operational excellence activities and reductions in G&A (general and administrative) costs resulting from what he called “One Simple ABB.” Research and development investments were notably spared any reductions.

Hogan noted that ABB is well-placed to participate in the stimulus-funded electric grid infrastructure rebuilding projects ($20 billion in the U.S. and $132 billion in China, for example), and he noted that North America would remain ABB’s largest market for the foreseeable future.

The outlook for 2009, he said, was “maximum flexibility.” ABB will work with those “external factors beyond our control” using cost competitiveness, operational excellence and financial strength, by being alert to growth opportunities, focusing on energy efficiency, leveraging global/local opportunities and leading market share and technology, he said.

Hogan noted that ABB is a very large company, and that can be both good news and bad news for customers. But if ABB can balance the economies of scale and technology afforded by size with the more intimate relationships of a smaller company, “We’ll be well positioned for the future,” he said.

Technology future is bright, too

Peter Terweisch, ABB Chief Technology Officer, briefed the press after Hogan. “The Smart Grid is making headlines faster than new technologies,” he said. “So let’s cut through the buzz a little.”

“Edison once said, ‘Vision without execution is hallucination.’ But we’re executing.” CTO Peter Terweisch detailed how ABB is helping clients to realize the potential of process automation, safety and power systems integration.

There will be fundamental changes in the electricity supply brought on by multiple factors, including increasing demand, more sources of supply, more emphasis on renewable sources, energy efficiency and changing reliability of the infrastructure and operators, he said, but it will be an evolution, not a revolution. “The grid of the future will be different from those of the past,” Terweisch added. “It will be open for all types and sizes of generation technologies, and it will be integrating the demand side in system operation.”

Power electronics and information and computer technology will be the key enablers, but base technologies such as insulation, current interruption and others will also advance.

Terweisch went through a detailed briefing on ABB technologies for wind power, high- voltage DC transmission (HVDC), HVDC Light, FACTS (flexible AC transmission systems) and ultra-low noise transformer technology.

Terweisch moved on to the automation part of ABB’s business, saying that the same drivers he talked about at last year’s Automation World in Houston were current, with one additional driver. “There’s a difficult global economy,” he noted wryly. The aging infrastructure, globalization, aging workforce, rising demand for energy and an uncertain future CO2 price make it imperative for automation to increase productivity without compromising safety, extend asset life, optimize energy use and support decisions, by making best use of scarce experts. ABB’s focus will be, he said, on new functionality, more flexible infrastructure, open standards and integration—especially on the integration of process automation with power automation systems, Terweisch said.

“Edison said, ‘Vision without execution is hallucination,’ but we’re executing,” Terweisch continued. “We are working with Petrobras on a five-year project to boost capacity and reduce internal energy consumption. We expect to increase production by 40%.” The integration will use IEC61850 devices for power integration and the new System 800xA control systems will integrate process control, electrical distribution and safety systems.

Terweisch discussed the state of wireless in both process and discrete manufacturing. He announced “summer” delivery for ABB’s WirelessHART adaptor and noted that Festo is now a second supplier for the newly opened WISA discrete wireless sensor architecture that ABB created almost a decade ago. “We are making WISA a standard,” he said.

Finally, Terweisch introduced the IRB4600 robot, which he called the fourth generation of robotic technology. He discussed the smaller footprint the robot has and the simpler safety systems needed. He said it was easier to show than tell how dextrous the robot can be, especially in food and beverage applications, so he showed a video. Watch the video "Superior Motion Performance."

Terweisch closed by noting that research and development investment rose 5.9% in 2008 to $1.242 billion, with about half of that focused on energy efficiency and breakthrough technology. The R&D budget will remain the same for 2009, Terweisch and Hogan said in answer to a question.