Low Voltage Products

The financial results of our Low Voltage Products division were as follows:

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% Change

($ in millions)

2013

2012

2011

2013

2012

Orders

7,696

6,720

5,364

15%

25%

Order backlog at Dec. 31,

1,057

1,117

887

(5)%

26%

Revenues

7,729

6,638

5,304

16%

25%

Income from operations

1,092

856

904

28%

(5)%

Operational EBITDA

1,468

1,219

1,059

20%

15%

Orders

Orders increased 15 percent (14 percent in local currencies) in 2013, driven primarily by the impact of including Thomas & Betts for the full year in 2013. In addition, orders grew moderately in most product businesses, while in the systems business orders decreased.

Order growth in 2012 of 25 percent (29 percent in local currencies) was driven by the contribution from Thomas & Betts, which was acquired in May 2012. Excluding Thomas & Betts, orders decreased 4 percent (flat in local currencies). There was moderate growth in the systems business, while the product businesses decreased.

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

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(in %)

2013

2012

2011

Europe

39

43

55

The Americas

32

26

9

Asia

22

24

28

Middle East and Africa

7

7

8

Total

100

100

100

In 2013, the share of orders from the Americas increased and the share of orders from both Europe and Asia decreased, due primarily to the impact of including Thomas & Betts for the full year in 2013, which operates primarily in the U.S. and Canada.

In 2012, orders in North America increased significantly due to Thomas & Betts, resulting in a more balanced geographic distribution of orders worldwide. Excluding Thomas & Betts, orders increased in Northern Europe and South Asia, but at the same time the division faced weaker demand in industrial and construction sectors in several of ABB’s largest markets, such as Central and Southern Europe.

Order backlog

In 2013, order backlog decreased 5 percent (4 percent in local currencies), driven mainly by certain product businesses.

Excluding Thomas & Betts, order backlog increased 5 percent (4 percent in local currencies) in 2012. The higher backlog was driven by both product and systems businesses.

Revenues

In 2013, revenues increased 16 percent (16 percent in local currencies), primarily due to the impact of including Thomas & Betts for the full year in 2013. In addition, revenues grew in our product businesses, while revenues were lower in the systems business.

In 2012, revenues increased 25 percent (29 percent in local currencies). Excluding Thomas & Betts, revenues decreased 4 percent (flat in local currencies), as lower revenues from the product businesses were not fully offset by increased systems business revenues.

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

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(in %)

2013

2012

2011

Europe

39

43

56

The Americas

33

26

9

Asia

22

24

28

Middle East and Africa

6

7

7

Total

100

100

100

In 2013, the share of revenues from the Americas increased and the share of revenues from both Europe and Asia decreased, due primarily to the impact of including Thomas & Betts for the full year in 2013.

In 2012, the share of revenues from the Americas increased significantly due to Thomas & Betts. Excluding Thomas & Betts, the geographical distribution of revenue reflects the weaker demand in certain key markets, such as Central and Southern Europe.

Income from operations

In 2013, income from operations increased 28 percent, due mainly to the impact of including Thomas & Betts for the full year in 2013 and also due to the inclusion in 2012 of $106 million of acquisition-related expenses and certain non-operational items (which mainly included certain employee-related expenses and transaction costs for Thomas & Betts). Depreciation and amortization of $323 million was higher than in 2012, due primarily to including Thomas & Betts for a full year. In addition, the change in geographic distribution of revenues in 2013, as well as a different revenue mix between products and systems, increased profitability.

In 2012, income from operations decreased 5 percent due to an increased proportion of revenues from the lower margin systems business, and lower volumes in certain key markets partly offset by the benefits from including Thomas & Betts. Excluding Thomas & Betts, income from operations decreased 10 percent. Acquisition-related expenses and certain non-operational items of $106 million negatively impacted income from operations. Depreciation and amortization of $250 million was substantially higher in 2012, compared to 2011 ($116 million), due to Thomas & Betts.

Operational EBITDA

The reconciliation of income from operations to Operational EBITDA for the Low Voltage Products division was as follows:

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($ in millions)

2013

2012

2011

Income from operations

1,092

856

904

Depreciation and amortization

323

250

116

Restructuring and restructuring-related expenses

31

23

20

Acquisition-related expenses and certain non-operational items

16

106

FX/commodity timing differences in income from operations

6

(16)

19

Operational EBITDA

1,468

1,219

1,059

In 2013, Operational EBITDA increased 20 percent compared to 2012, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2012, Operational EBITDA increased 15 percent compared to 2011, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. Excluding Thomas & Betts, Operational EBITDA declined 11 percent.

Fiscal year 2014 outlook

The outlook for 2014 continues to be uncertain, despite some positive early cycle macroeconomic signs. In emerging markets trends are improving but the level of growth depends on the strength of the economic development. Some key markets in Europe remain challenging, including the Mediterranean countries.