Power Products

The financial results of our Power Products division were as follows:

(XLS:)

($ in millions,

 

 

 

% Change

except Operational EBITDA margin %)

2011

2010

2009

2011

2010

(1)

Operational EBITDA margin % is calculated as Operational EBITDA divided by Operational revenues.

Orders

11,068

9,778

10,940

13

(11)

Order backlog at Dec. 31,

8,029

7,930

8,226

1

(4)

Revenues

10,869

10,199

11,239

7

(9)

Operational EBITDA

1,782

1,861

2,136

(4)

(13)

Operational EBITDA margin %(1)

16.3

18.2

19.0

n.a.

n.a.

EBIT

1,476

1,636

1,959

(10)

(16)

Reconciliation to Financial Statements

(XLS:)

($ in millions, except Operational EBITDA margin %)

2011

2010

2009

(1)

For further details of FX/commodity timing differences, see “Note 22 Operating segment and geographic data.”

Operational revenues

10,901

10,202

11,229

FX/commodity timing differences on revenues(1)

(32)

(3)

10

Revenues (as per Financial Statements)

10,869

10,199

11,239

Operational EBITDA

1,782

1,861

2,136

FX/commodity timing differences on EBIT(1)

(36)

(4)

85

Restructuring-related costs

(70)

(44)

(77)

Reversal of depreciation and amortization

(200)

(177)

(185)

EBIT (as per Financial Statements)

1,476

1,636

1,959

Operational EBITDA margin %

16.3

18.2

19.0

Orders

In 2011, orders were up 13 percent (8 percent in local currencies) driven by investments in the power distribution and industry sectors. Both large and base orders grew during the year.

In 2010, orders were down 11 percent (13 percent in local currencies) primarily due to lower large orders in the transmission sector, which could not be compensated by an improvement in the distribution and industrial sectors. Order intake was further impacted by lower price levels due to weaker market conditions and increased competition.

The geographic distribution of orders for our Power Products division was as follows:

(XLS:)

(in %)

2011

2010

2009

Europe

32

35

34

The Americas

26

26

23

Asia

33

29

33

Middle East and Africa

9

10

10

Total

100

100

100

In 2011, the contribution of orders from the Americas remained at the same level, but volumes were higher than in 2010, mainly driven by demand for distribution and transmission-related products. Europe’s share declined due to slowdown in investments as a result of the macroeconomic situation. We saw a growth in Asia’s contribution with significant large order wins in China as well as higher base orders. The share of MEA remained around the same level as in 2010.

In 2010, the share of orders from Europe and the Americas improved despite declining order intake due to lower volumes in emerging markets. We saw a significant slowdown in China, resulting from local buying preference, and also in India. MEA remained flat as a percentage of total orders but declined in volume terms due to less large orders.

Order backlog

In 2011, order backlog increased 1 percent (4 percent in local currencies) after decreasing 4 percent (5 percent in local currencies) in 2010 compared to 2009. The increase in order backlog in 2011 reflects the higher order intake from the power distribution and industry sectors as well as some significant large orders in the transmission sector.

Revenues

In 2011, revenues grew 7 percent (2 percent in local currencies) due to higher volumes in the short- and mid-cycle business such as medium-voltage equipment and distribution transformers. Revenues from late-cycle businesses such as large power transformers were flat partly as a result of the lower transmission-related order backlog. Service revenues saw a double-digit growth.

In 2010, revenues decreased 9 percent (11 percent in local currencies) due to the slower conversion cycle of large projects in the order backlog. However, the short- and mid-cycle businesses (for example, medium-voltage equipment and distribution transformers), increased their contribution as a result of the revival in the distribution and industrial sectors.

The geographic distribution of revenues for our Power Products division was as follows:

(XLS:)

(in %)

2011

2010

2009

Europe

34

34

35

The Americas

27

26

25

Asia

30

31

31

Middle East and Africa

9

9

9

Total

100

100

100

In 2011, the regions maintained their share of total revenues. The Americas showed a small increase due to growth in the U.S. Asia’s share was slightly lower due to a lower transmission-related backlog.

In 2010, the geographic distribution of revenues followed similar trends as orders but revenues were down in all the regions. Europe’s share declined marginally due to slower order backlog conversion of large projects and the Americas’ share improved due to increased book and bill revenues from the distribution-related businesses. In Asia and MEA the share of revenues remained at similar levels as the previous year.

Operational EBITDA

In 2011, Operational EBITDA and Operational EBITDA margin were lower primarily due to the execution of lower margin orders from the backlog, reflecting the continued pricing pressure in an extremely competitive market across all businesses. However, cost savings partly mitigated this price impact.

Lower Operational EBITDA and Operational EBITDA margin in 2010 were mainly the result of lower cost absorption on the basis of lower revenues as well as the impact of price declines in certain emerging markets.

Fiscal year 2012 outlook

Market uncertainty persists as a result of continued macroeconomic challenges. Debt burden in mature economies combined with inflation and interest rate challenges in large emerging markets is affecting industrial investment and utility spending in the power sector. This uncertainty is likely to continue in the short term and we expect to see focused investments in specific sectors until overall economic stability returns. While demand in the power distribution and industry sectors continues to be stable, transmission sector recovery depends on an overall improvement in economic conditions and utilities becoming more proactive on capital investment.

The medium- and long-term growth drivers for the business remain intact. These include the buildup of capacity in emerging markets, increasing focus on renewables, energy efficiency, development of smarter, more reliable and flexible grids, as well as economic stimulus packages targeted at strengthening power infrastructure.

Financial review

© Copyright 2012 ABB.