Three heavy-hitters in the industrial automation space announced increases in quarterly revenues and earnings this week, buttressed by strong demand for control and power systems.
ABB, Rockwell Automation, and Siemens all announced increases in orders, revenue, and net income, numbers that were strengthened by manufacturers' need to modernize plants as well as elevate energy efficiency through technology designed for "green" initiatives, the companies said.
ABB reported second-quarter 2007 revenue of $7.1 billion, a 27% increase over the $5.6 billion reported in the same quarter of 2006. Net income nearly doubled, from $367 million a year ago to $729 million this quarter, helped in part by a lower tax rate. The Automation division accounted for $2.1 billion of the overall revenue, a 27% increase from its the year-earlier performance, while the Process Automation division reported $1.5 billion in sales, for a 22% increase year-over-year.
Siemens' third-quarter results this week showed a similar upward pattern. The company reported net income of €2 billion on revenue of €20 billion. Net income doubled, mainly due to discontinued operations, and sales increased 8% from the year-ago quarter, the company said. And while Siemens suffered from a negative equity investment in Nokia Siemens Networks of €371 million, other groups — specifically Automations & Drives — held strong. A&D reported revenue of €3.8 billion, a 19% increase over the 2006 third-quarter figure of €3.2 billion.
Meanwhile, Rockwell Automation garnered $1.2 billion in revenue and net income of $164 million in its third quarter. That compares with sales of $1.1 billion and net income of $149 million in the like period last year. The company's two segments — Architecture & Software and Control Products & Solutions — experienced 11% and 8% increases in sales, respectively. Logix, the company's flagship control technology, experienced 15% growth in business in the quarter, the company said, brought on mainly by Rockwell's aggressive push into process industries, including life sciences, oil & gas, and food & beverage.
Rockwell's process push led to the acquisition of ICS Triplex earlier this month, a United Kingdom-based company specializing in fault-tolerant technology and safety solutions. Aside from the technology, the deal brings Rockwell a major sales force outside the United States, officials said. While Rockwell has been building out its global footprint over the past few years, the company acknowledges that it still needs to take major strides in areas of the world, such as like Asia, where it is underperforming given the growth opportunities.
"With respect to Asia, it was a difficult market for us the last two quarters," said Rockwell Automation CEO Keith Nosbusch in an interview with Managing Automation. "In this quarter, it grew 9%. We've made tremendous improvements and advancements in the last quarter, and the team has worked hard to improve performance, but we still have to get to that mid-double-digit, 15% growth for that region."
As Rockwell focuses on building out its sales force and executing effectively around the globe, Siemens is doing some internal reflection, with a new CEO and ongoing legal wrangling stemming from bribery allegations in its telecommunications group. As a result, Siemens is scrutinizing contracts within five other business units, including Industrial Solutions, in addition to conducting investigations in its power generation, power transmission, transportation systems, and healthcare units.
Meanwhile, Peter Loescher, who was recruited from drug maker Merck & Co. to become Siemens' new CEO, is concentrating on weeding out the weak areas of the business and building up the growth areas. To that end, just four weeks into the job, Loescher announced that Siemens will sell its VDO Automotive subsidiary and buy Dade Behring Inc., a U.S.-based clinical diagnostics company, to strengthen its healthcare business.
"We will continue to build [on our] positions, focus the company, drive out complexity in the organization, and streamline business processes," Loescher told investors and analysts during a conference call.
ABB CEO Fred Kindle had a similar message to shareholders and analysts. The company is finalizing the disposal of two equity investments, and the pending sale of its Lummus business means that the disposal of non-core assets is almost complete. Meanwhile, ABB maintains a strong global scope and an emphasis on energy-efficient technology in the form of motors and drives that help manufacturers lower operational costs. It also benefits from its Power Products division, which helps utility customers build out or refurbish power grid infrastructures.
All is not the picture of health, however, as ABB recently uncovered some internal turbulence of its own in the form of "suspect payments" made at some of its subsidiary companies in Asia, South America, and Europe. The company uncovered this during an internal audit and has alerted the U.S. Department of Justice and the U.S. Securities Exchange Commission.
"It's a pity we have to make this disclosure," Kindle said during the conference call. "It is the one snag in an almost perfect performance in the quarter."