The Bloomberg synopsis on ABB was more thorough. Seems to me that power generation capability in Asia will continue to be a large driver going forward. I know everybody keeps saying China, China, China when it comes to the demand for natural resources and the like, but its hard to argue against, after all, they do have the money.
July 26 (Bloomberg) -- ABB Ltd., the world's largest builder of power grids, reported a record quarterly profit on increased sales of transformers, switchgear and substations to clients in China and the Middle East.
Second-quarter net income almost doubled to $729 million, or 32 cents a share, from $367 million, or 17 cents, a year earlier, Zurich-based ABB said in a statement today. Analysts had estimated a profit of $580 million.
ABB's order backlog jumped 39 percent, swollen by contracts to build substations in Abu Dhabi and provide electrical systems for oil platforms off Qatar. In Asia, China alone plans to spend about $33 billion this year on extending its electricity grid to power new factories and reduce outages.
``ABB has switched on the turbo boost to deliver stellar results,'' said Panagiotis Spiliopoulos, and analyst at Vontobel in Zurich with an ``outperform'' rating on the stock. ``The outlook remains solid, though order growth is unlikely to remain at these high levels,'' he said in a note.
Shares of ABB closed little changed at 27.5 Swiss francs after European stocks tumbled the most in five months. It earlier rose 4.9 percent, the sharpest gain since April 26. ABB has advanced 26 percent this year, compared with a 2.5 percent increase in the Dow Jones Stoxx 600 Index. That gives a market value of 62.4 billion francs ($52 billion).
`Suspect Payments'
The Swiss company said in the statement it has informed U.S. authorities of ``suspect payments'' made by some units and may face penalties. London-based Credit Suisse analyst Julian Mitchell said that while the disclosure is ``worth monitoring,'' he does not view it as a major issue at this stage.
News on the payments ``is the one snag in an almost perfect quarterly report,'' ABB Chief Executive Officer Fred Kindle said on a conference call, adding that the company hasn't put aside provisions as it can't yet determine what the case may cost.
Second-quarter sales gained 27 percent to $7.14 billion and profit before interest and tax rose 60 percent to $1.03 billion. That's equal to 14.4 percent of revenue, the company's best-ever margin, up from 11.4 percent a year earlier. Kindle said there's potential to increase profitability further.
China Sales
Emerging markets generated 44 percent of ABB's revenue last year. In China, the world's fastest-growing major economy, sales rose 17 percent to $2.8 billion, more than one-tenth of the group total. Work in the Middle East was spurred as countries and companies used higher oil revenues to fund infrastructure projects. The Abu Dhabi contract for three substations is valued at $126 million and the Qatari order at $26 million.
``Emerging markets are helping us a lot,'' Kindle said in an interview. ``They need power-grid infrastructure because that's the backbone for industrial development.''
Second-quarter sales rose 36 percent in Asia and 57 percent in the Middle East and Africa.
``These are incredible quarterly results, especially on the margin level,'' said Flavio Miloni at Banca del Gottardo in Lugano, Switzerland, which oversees about $33 billion, including ABB shares. ``I didn't expect such a positive surprise, it shows the market underestimated the need for infrastructure in Asia.''
Revenue increased 20 percent in Europe, where new orders include a sub-sea connection between the U.K. and the Netherlands aimed at increasing the efficiency of the continent's power. In the Americas, sales rose 17 percent as power providers such as the Tennessee Valley Authority upgrade decades-old networks.
Order growth may ``moderate somewhat'' over the remainder of 2007 compared with the first half, ABB said today. The company said on April 26 it plans to provide new revenue and profit targets through 2011 in September after exceeding most of its goals set for 2009 by the end of last year.
Purchase Plans
Kindle, 48, said last December that ABB has ``several'' billion dollars to spend on acquisitions, ending five years of disposals, mainly under former CEO Juergen Dormann, as the company emerged from near-bankruptcy. Kindle is continuing to assess opportunities, he said today.
ABB on July 13 informed the U.S. Justice Department and Securities and Exchange Commission of payments made by employees in Asia, South America and Europe, particularly Italy, it said in the statement. The payments, discovered after an internal audit, may leave ABB ``liable for penalties and other costs.''
ABB was formed in 1988 through the merger of BBC Brown Boveri of Switzerland and ASEA AB of Sweden, and generates about 90 percent of sales at its automation and power units. The company also makes robots used for everything from packaging cookies to the industrial milking of cows.
The business employed about 111,000 people at the end of the second quarter, up 2,000 from the first, it said today.
To contact the reporter on this story: Antonio Ligi in Zurich at aligi@bloomberg.net |
