As it moves forward with a sweeping reorganization that will separate its Automation and Power Technologies units into five product-oriented divisions, ABB Group reported third-quarter net income of $188 million, twice what it made in the corresponding period last year.
Group revenues for the period ended September 30 were $5.7 billion, up 13% from the like period last year. Revenues were split almost evenly between Power Technologies ($2.4 billion) and Automation Technologies ($2.9 billion), the unit's two core divisions.
The Automation Technologies group has received a boost from customers making control and equipment investments, especially in China and India, the company said.
Group earnings before interest and taxes (EBIT) were $458 million, $323 million of which was generated by the Automation unit, a 21% increase from the same period last year. According to Fred Kindle, ABB's CEO, the Automation group has experienced 12 consecutive quarters of higher EBIT growth.
Much of the unit's momentum is being driven by investments in process-based technology from industries such as oil and gas. For instance, process orders in Asia more than doubled compared to the same quarter a year ago, augmented by an oil refinery order in Thailand of more than $100 million. Wins such as this made up for more modest orders in ABB's robotics group, which for now also falls under the Automation Technologies business.
ABB is also moving forward with a reorganization, announced earlier this year, that will create separate divisions for its power, power systems, automation, process automation and robotics products as of January 1, 2006.
This will help more closely align the company with its diverse customer set, said Larry O'Brien, an analyst at ARC Advisory Group (Dedham, MA), and logically separates distinct businesses, some of which -- like robotics -- are not high performers. ABB is the number-one supplier of distributed control systems (in terms of revenue), with 20.6% of the market, according to a February 2005 market positioning report released by ARC Advisory Group.
Industry areas that it has the lead in include pulp and paper, oil and gas and cement and glass. ABB is also the number-three robotics supplier, with 19% market share.
Kindle did not issue any guidance for the next year, other than to reaffirm a forecast made in September of a 5% compound annual growth rate through 2009.
"The forecast might seem conservative but we have a bit of work ahead to reach our targets," Kindle said in a conference call with media and analysts. "We still have to execute and assume the market will not continue to treat us this well. But if it treats us well through the end of year, we are off to a good start in 2006."
The strong economy is also paying dividends in helping ABB lower its debt. The company reported net debt of $866 million at the end of the third quarter, compared to $1.2 billion in the second quarter.