ABB sees profit growth in 2Q; automation leads the charge

ABB reported a sharp increase in orders and profitability for the second quarter of 2006. Earnings before interest and taxes increased to $640 million from $371 million in the same quarter a year ago, reflecting good growth in the two product divisions.

“We continued to deliver strong results in the second quarter,” said Fred Kindle, ABB President and CEO. “We are clearly benefiting from the strong global demand for improved power infrastructure and increased industrial efficiency. On top of that, our efforts to further improve our business performance continue to pay off and we look forward to a solid second half.”

In the automation products division the company reported that markets continued to develop favorably in the second quarter of 2006, driving higher orders received in all businesses and regions. Orders grew strongest in the power electronics, machines, drives and motors businesses. Regionally, orders were up in both eastern and western Europe. Orders grew in the Middle East and Africa, driven primarily by demand from the oil and gas sector. Orders from Asia were higher, led by India and China, and were up in the Americas, with growth continuing across most sectors in North America, particularly the U.S.

Demand for automation solutions, both base and large orders, continued to grow strongly across all sectors and most regions, driven mainly by the need for greater industrial efficiency in the face of high oil prices. The strongest growth was recorded in the marine, oil and gas, chemical and pharmaceutical, and pulp and paper businesses. Regionally, orders increased in Europe, the Americas and Asia, but were slightly lower in the Middle East and Africa compared to the same quarter the year before.

In the power systems division, Orders increased in the second quarter of 2006 across all businesses, primarily due to a sharp increase in large orders. Orders grew strongest in Europe, as utilities in western Europe upgraded infrastructure, including power plants and substations, to increase system efficiency and offset higher energy prices. Orders in the Middle East and Africa grew, fueled mainly by the ongoing need for new power infrastructure.

In Asia, orders were flat (higher in local currencies) as higher orders in India were partly offset by decreases in several other countries, including China. Orders decreased in the Americas as continued growth in North America was more than offset by a decrease in Latin America.

The company expects automation-related industrial investments to continue in most sectors, notably metals and minerals, marine and oil and gas. Overall, automation-related demand growth is expected to be strongest in Asia and the Americas over the rest of the year, with more modest growth in Europe.

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