Note 22 Operating segment and geographic data

The Chief Operating Decision Maker (CODM) is the Company’s Executive Committee. The CODM allocates resources to and assesses the performance of each operating segment using the information outlined below. The Company’s operating segments consist of Power Products, Power Systems, Discrete Automation and Motion, Low Voltage Products and Process Automation. The remaining operations of the Company are included in Corporate and Other.

A description of the types of products and services provided by each reportable segment is as follows:

  • Power Products: manufactures and sells high- and medium-voltage switchgear and apparatus, circuit breakers for all current and voltage levels, power and distribution transformers and sensors for electric, gas and water utilities and for industrial and commercial customers.
  • Power Systems: designs, installs and upgrades high-efficiency transmission and distribution systems and power plant automation and electrification solutions, including monitoring and control products, software and services and incorporating components manufactured by both the Company and by third parties.
  • Discrete Automation and Motion: manufactures and sells motors, generators, variable speed drives, rectifiers, excitation systems, robotics, programmable logic controllers, and related services for a wide range of applications in factory automation, process industries, and utilities.
  • Low Voltage Products: manufactures products and systems that provide protection, control and measurement for electrical installations, as well as enclosures, switchboards, electronics and electromechanical devices for industrial machines, plants and related service. The segment also makes intelligent building control systems for home and building automation to improve comfort, energy efficiency and security.
  • Process Automation: develops and sells control and plant optimization systems, automation products and solutions, including instrumentation, as well as industry-specific application knowledge and services for the oil, gas and petrochemicals, metals and minerals, marine and turbocharging, pulp and paper, chemical and pharmaceuticals and power industries.
  • Corporate and Other: includes headquarters, central research and development, the Company’s real estate activities, Group treasury operations and other minor activities.

In 2011, the Company changed its primary measures of segment performance from earnings before interest and taxes (EBIT) and corresponding margin to operational earnings before interest, taxes, depreciation and amortization (Operational EBITDA) and Operational EBITDA margin (being Operational EBITDA as a percentage of Operational revenues).

Operational EBITDA represents EBIT excluding depreciation and amortization, restructuring and restructuring-related expenses, adjusted for the following: (i) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, (iii) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities), (iv) acquisition-related expenses and (v) certain non-recurring items.

Operational revenues are total revenues adjusted for the following: (i) unrealized gains and losses on derivatives, (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables (and related assets).

The CODM primarily reviews the results of each segment on a basis that is before the elimination of profits made on inventory sales between segments. Consequently, as of 2011, segment results below have been presented before these eliminations, with a total deduction for intersegment profits to arrive at the Company’s consolidated Operational EBITDA. Furthermore, the Company refined its methodology to eliminate profit on inventory resulting from intersegment revenues. These changes in presentation resulted in no significant reclassifications between segments and no change to the Company’s consolidated Operational EBITDA.

In the following tables, the Company presents segment revenues, depreciation and amortization, Operational EBITDA, Operational EBITDA margin, as well as reconciliations of Operational EBITDA to EBIT and Operational revenues to total revenues, capital expenditure and total assets. Intersegment sales and transfers for 2011, 2010 and 2009, are accounted for as if the sales and transfers were to third parties, at current market prices.

(XLS:)

2011 ($ in millions)

Third-
party
revenues

Inter-
segment
revenues

Total
revenues

Depreci-
ation and
amorti-
zation

Operational
revenues

Operational
EBITDA(1)

Operational
EBITDA
margin (%)

(1)

Operational EBITDA by segment is presented before the elimination of intersegment profits made on inventory sales.

Power Products

9,028

1,841

10,869

200

10,901

1,782

16.3%

Power Systems

7,833

268

8,101

144

8,128

743

9.1%

Discrete Automation and Motion

8,047

759

8,806

251

8,817

1,664

18.9%

Low Voltage Products

4,953

351

5,304

116

5,315

1,059

19.9%

Process Automation

8,078

222

8,300

83

8,318

1,028

12.4%

Corporate and Other

51

1,508

1,559

201

1,558

(194)

Intersegment elimination

(4,949)

(4,949)

(4,949)

(68)

Consolidated

37,990

37,990

995

38,088

6,014

15.8%

(XLS:)

2010 ($ in millions)

Third-
party
revenues

Inter-
segment
revenues

Total
revenues

Depreci-
ation and
amorti-
zation

Operational
revenues

Operational
EBITDA(1)

Operational
EBITDA
margin (%)

(1)

Operational EBITDA by segment is presented before the elimination of intersegment profits made on inventory sales.

Power Products

8,486

1,713

10,199

177

10,202

1,861

18.2%

Power Systems

6,590

196

6,786

84

6,783

304

4.5%

Discrete Automation and Motion

4,978

639

5,617

78

5,613

1,026

18.3%

Low Voltage Products

4,263

291

4,554

105

4,554

926

20.3%

Process Automation

7,209

223

7,432

76

7,427

925

12.5%

Corporate and Other

63

1,468

1,531

182

1,532

(230)

Intersegment elimination

(4,530)

(4,530)

(4,530)

12

Consolidated

31,589

31,589

702

31,581

4,824

15.3%

(XLS:)

2009 ($ in millions)

Third-
party
revenues

Inter-
segment
revenues

Total
revenues

Depreci-
ation and
amorti-
zation

Operational
revenues

Operational
EBITDA(1)

Operational
EBITDA
margin (%)

(1)

Operational EBITDA by segment is presented before the elimination of intersegment profits made on inventory sales.

Power Products

9,370

1,869

11,239

185

11,229

2,136

19.0%

Power Systems

6,356

193

6,549

46

6,508

532

8.2%

Discrete Automation and Motion

4,601

804

5,405

74

5,374

773

14.4%

Low Voltage Products

3,799

272

4,071

100

4,059

679

16.7%

Process Automation

7,606

233

7,839

80

7,785

861

11.1%

Corporate and Other

63

1,504

1,567

170

1,567

(180)

Intersegment elimination

(4,875)

(4,875)

(4,875)

(5)

Consolidated

31,795

31,795

655

31,647

4,796

15.2%

(XLS:)

December 31, 2011
($ in millions, except Operational EBITDA margin in %)

Power
Products

Power
Systems

Discrete
Automation
and Motion

Low Voltage
Products

Process
Automation

Corporate and Other and Inter-
segment elimination

Consol-
idated

Operational revenues

10,901

8,128

8,817

5,315

8,318

(3,391)

38,088

Unrealized gains and losses on derivatives

(49)

(56)

(29)

(16)

(39)

1

(188)

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

(17)

(19)

1

2

(33)

Unrealized foreign exchange movements on receivables (and related assets)

34

48

17

5

19

123

Total revenues

10,869

8,101

8,806

5,304

8,300

(3,390)

37,990

 

 

 

 

 

 

 

 

Operational EBITDA

1,782

743

1,664

1,059

1,028

(262)

6,014

Depreciation and amortization

(200)

(144)

(251)

(116)

(83)

(201)

(995)

Acquisition-related expenses and certain non-recurring items

(90)

(17)

(107)

Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives)

(58)

(16)

(29)

(21)

4

(38)

(158)

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

(14)

(19)

(2)

2

1

(32)

Unrealized foreign exchange movements on receivables/payables (and related assets/ liabilities)

36

38

12

2

20

1

109

Restructuring and restructuring-related expenses

(70)

(54)

(10)

(20)

(8)

(2)

(164)

EBIT

1,476

548

1,294

904

963

(518)

4,667

 

 

 

 

 

 

 

 

Operational EBITDA margin (%)

16.3%

9.1%

18.9%

19.9%

12.4%

15.8%

(XLS:)

December 31, 2010
($ in millions, except Operational EBITDA margin in %)

Power
Products

Power
Systems

Discrete
Automation
and Motion

Low Voltage
Products

Process
Automation

Corporate and Other and Inter-
segment elimination

Consol-
idated

Operational revenues

10,202

6,783

5,613

4,554

7,427

(2,998)

31,581

Unrealized gains and losses on derivatives

20

30

16

3

11

80

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

6

9

(1)

1

12

1

28

Unrealized foreign exchange movements on receivables (and related assets)

(29)

(36)

(11)

(4)

(18)

(2)

(100)

Total revenues

10,199

6,786

5,617

4,554

7,432

(2,999)

31,589

 

 

 

 

 

 

 

 

Operational EBITDA

1,861

304

1,026

926

925

(218)

4,824

Depreciation and amortization

(177)

(84)

(78)

(105)

(76)

(182)

(702)

Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives)

10

(8)

6

4

(33)

18

(3)

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

4

(15)

3

(1)

(9)

Unrealized foreign exchange movements on receivables/payables (and related assets/ liabilities)

(18)

(35)

(8)

(1)

(16)

(1)

(79)

Restructuring and restructuring-related expenses

(44)

(48)

(35)

(36)

(44)

(6)

(213)

EBIT

1,636

114

911

788

759

(390)

3,818

 

 

 

 

 

 

 

 

Operational EBITDA margin (%)

18.2%

4.5%

18.3%

20.3%

12.5%

15.3%

(XLS:)

December 31, 2009
($ in millions, except Operational EBITDA margin in %)

Power
Products

Power
Systems

Discrete
Automation
and Motion

Low Voltage
Products

Process
Automation

Corporate and Other and Inter-
segment elimination

Consol-
idated

Operational revenues

11,229

6,508

5,374

4,059

7,785

(3,308)

31,647

Unrealized gains and losses on derivatives

31

36

43

9

79

198

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

(3)

22

(1)

6

24

Unrealized foreign exchange movements on receivables (and related assets)

(18)

(17)

(12)

4

(31)

(74)

Total revenues

11,239

6,549

5,405

4,071

7,839

(3,308)

31,795

 

 

 

 

 

 

 

 

Operational EBITDA

2,136

532

773

679

861

(185)

4,796

Depreciation and amortization

(185)

(46)

(74)

(100)

(80)

(170)

(655)

Net release of certain provisions

431

431

Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives)

93

(11)

32

1

(29)

(7)

79

Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized

(4)

22

(1)

5

22

Unrealized foreign exchange movements on receivables/payables (and related assets/ liabilities)

(4)

(13)

(2)

5

(17)

(31)

Restructuring and restructuring-related expenses

(77)

(90)

(154)

(67)

(114)

(14)

(516)

EBIT

1,959

394

574

518

626

55

4,126

 

 

 

 

 

 

 

 

Operational EBITDA margin (%)

19.0%

8.2%

14.4%

16.7%

11.1%

15.2%

(XLS:)

 

Capital expenditure(1)

Total assets(1)

($ in millions)

2011

2010

2009

2011

2010

2009

(1)

Capital expenditure and Total assets are after intersegment eliminations and therefore refer to third-party activities only.

Power Products

192

200

272

7,355

7,205

6,882

Power Systems

136

119

131

7,469

6,039

4,602

Discrete Automation and Motion

202

98

119

9,195

3,696

3,348

Low Voltage Products

149

100

150

3,333

2,899

2,726

Process Automation

72

76

99

4,777

4,728

4,551

Corporate and Other

270

247

196

7,519

11,728

12,619

Consolidated

1,021

840

967

39,648

36,295

34,728

Geographic information

(XLS:)

 

Revenues

Long-lived assets
at December 31,

($ in millions)

2011

2010

2009

2011

2010

Europe

14,657

12,378

13,093

3,067

2,995

The Americas

9,043

6,213

6,049

829

345

Asia

10,136

8,872

8,684

862

849

Middle East and Africa

4,154

4,126

3,969

164

167

 

37,990

31,589

31,795

4,922

4,356

Revenues by geography reflect the location of the customer. Approximately 14 percent of the Company’s total revenues in 2011, compared to 10 percent in 2010 and 2009, respectively, came from customers in the United States. Approximately 13 percent of the Company’s total revenues in 2011, compared to 14 percent and 13 percent in 2010 and 2009, respectively, were generated from customers in China. Approximately 8 percent, 7 percent, and 8 percent of the Company’s total revenues in 2011, 2010 and 2009, respectively, were generated from customers in Germany. In 2011, 2010 and 2009, more than 98 percent of the Company’s total revenues were generated from customers outside Switzerland.

Long-lived assets represent property, plant and equipment, net and are shown by location of the assets. At December 31, 2011, approximately 19 percent and 13 percent of the Company’s long-lived assets were located in Switzerland and Sweden. At December 31, 2010, approximately 21 percent and 12 percent of the Company’s long-lived assets were located in Switzerland and Sweden, respectively.

The Company does not segregate revenues derived from transactions with external customers for each type or group of products and services. Accordingly, it is not practicable for the Company to present revenues from external customers by product and service type.

At December 31, 2011, approximately 58 percent of the Company’s employees are subject to collective bargaining agreements in various countries. Approximately one-third of these agreements will expire in 2012. Collective bargaining agreements are subject to various regulatory requirements and are renegotiated on a regular basis in the normal course of business.

Financial review

© Copyright 2012 ABB.