Strong year for ABB, sees signs of improvement in the economies of U.S. and China

Engineering group ABB (SIX: ABBN, OMX: ABB, NYSE: ABB) reported fourth quarter revenues of 10.57 billion USD (9.18) and an EBIT of 1.12 billion (0.98). 2011. Both of these numbers grew at a 15% clip and orders received picked up about as much to 10.2 billion. Analysts had been expecting even better operational performance so the stock lost 3% of its value.

Full year revenues were 38 billion $ and orders received over 40 billion. EBIT margin was 12.3% so the fourth quarter number was somewhat weaker. Net income per share topped 3.1 billion (EPS 1.38 USD)and the Board of Directors suggests a dividend boost of 8.3% to 0.65 CHF (about 4.75 SEK or 0.70 USD).

Continued drive for energy efficient, productive and stable solutions contributed to good activity all year. Most improvement was seen in oil, gas and petrochemicals plus in power utility sectors. A single over 900 million dollar Ultra High Voltage Direct Current (UHVDC) power transmission system, the first of its kind, order from India to supply hydropower across 1700 kilometres contributed greatly into the backlog. Strong increase in orders was also seen in Australia and Singapore while Chinese orders grew at a 6% clip. Orders from Europe, Middle East and Africa were down in Q4.

During the quarter ABB offered to acquire Swiss company Newave Energy International, which manufactures specialty transformers, for 170 million USD. The major deal of 2011 was the completion of a 4.2 billion acquisition of industrial motor manufacturer Baldor Electric. Baldor’s 2011 contribution to revenues was 2 billion USD and its EBITDA contribution reached 390 million USD. Just weeks ago ABB announced it is eyeing another large U.S. company in Thomas & Betts with a 3.9 billion offer all cash offer.

On top of a 1 billion dollar cost savings program initiated in 2011, ABB plans to find a similar amount of savings in 2012 by further cost reductions resulting from global sourcing and operational efficiency improvements.

With plenty of grid upgrades and industry spending in the horizon, ABB remains positive on its long-term prospects. For the immediate future the company sees low single-digit growth until confidence returns. Margins can also be under some pressure in the first quarter of 2012. In ABB’s view conditions are improving in North America and China seems to be returning to growth trajectory. ABB’s stock closed just above 140 SEK in Sweden.