ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

We determine the geographic distribution of our revenuesbased on the location of the customer, which may be differentfrom the ultimate destination of the products’ end use. Thegeographic distribution of our consolidated revenues wasas follows:% Change($ in millions) 2012 2011 2010 2012 2011Europe 14,073 14,657 12,378 (4) 18The Americas 10,699 9,043 6,213 18 46Asia 10,750 10,136 8,872 6 14Middle East and Africa 3,814 4,154 4,126 (8) 1Total 39,336 37,990 31,589 4 20In 2012, revenues in Europe decreased 4 percent (increased2 percent in local currencies), despite growth in the DiscreteAutomation and Motion division, as the other divisions recordedlower revenues. Growth in Germany, Sweden, Norway andthe United Kingdom was offset by declines in Italy, France andSpain. Revenues from the Americas increased 18 percent(20 percent in local currencies and 4 percent, in local currencies,excluding Thomas & Betts) on higher industrial demandfor the automation divisions. The U.S. grew 25 percent(8 percent excluding Thomas & Betts), while Brazil recordedlower revenues than in the previous year. Revenues fromAsia increased 6 percent (8 percent in local currencies) ongrowth in all divisions. Within this region, revenues in SouthKorea grew on the execution of large marine orders, whileChina recorded stable revenues and India recorded lowerrevenues. Revenues in MEA declined 8 percent (5 percentin local currencies) on lower revenues generated in the powerand the oil and gas sectors in the region.In 2011, revenues in Europe grew 18 percent (11 percentin local currencies) on the execution of large Power Systemsorders, as well as on demand for automation productsacross the region. Revenues from the Americas increased46 percent (43 percent in local currencies and 14 percent,in local currencies, excluding Baldor). In the U.S., industrialdemand grew significantly and the transmission and distributionmarkets recovered from a low level, while Brazil revenuesgrew on the execution of large orders. Revenuesfrom Asia increased 14 percent (9 percent in local currencies)on growth from the industrial automation sector in Chinaand India. Revenues in MEA increased 1 percent, howeverdeclined 2 percent in local currencies. Weaker large orders inthe previous year lead to a decline in revenues in the utilitiesand oil and gas sector, which offset higher revenues from theother industrial automation sectors.Cost of salesCost of sales consists primarily of labor, raw materials andcomponents but also includes expenses for warranties, contractlosses and project penalties, as well as order-relateddevelopment expenses incurred in connection with projectsfor which corresponding revenues have been recognized.In 2012, cost of sales increased 5 percent (9 percentin local currencies) to $27,958 million. Excluding the impactfrom Thomas & Betts, cost of sales increased 1 percent(5 percent in local currencies). As a percentage of revenues,cost of sales increased to 71.1 percent from 69.9 percentin 2011. Higher cost of sales as a percentage of revenues isthe result of price erosion on the execution of order backlog,an unfavorable business mix arising from a higher proportionof revenues generated from lower margin types of business,current period margin erosion in certain projects and chargesassociated with repositioning the Power Systems division.Such cost increases were partly compensated by cost savinginitiatives.In 2011, cost of sales increased 20 percent (16 percentin local currencies) to $26,556 million. The increase in the costof sales reflects the growth in revenues from existing businessesand new acquisitions. Cost of sales was negativelyaffected by higher prices in certain commodities and anunfavorable change in business mix. The increase in the costof sales in 2011 was partly offset by savings realized fromthe cost saving initiatives, mainly in the areas of supply managementand operational excellence. As a percentage ofrevenues, cost of sales remained stable at 69.9 percent, asthe cost saving initiatives helped to offset continued pricingpressure on revenues.Selling, general and administrativeexpensesThe components of selling, general and administrativeexpenses were as follows:($ in millions) 2012 2011 2010Selling expenses (3,862) (3,533) (2,947)Selling expenses as a percentageof orders received 9.6% 8.8% 9.0%General and administrativeexpenses (1,894) (1,840) (1,668)General and administrativeexpenses as a percentage ofrevenues 4.8% 4.8% 5.3%Total selling, generaland administrative expenses (5,756) (5,373) (4,615)Total selling, general andadministrative expenses as apercentage of revenues 14.6% 14.1% 14.6%Total selling, general andadministrative expenses as apercentage of the averageof orders received and revenues 14.5% 13.7% 14.4%58 Financial review | ABB Annual Report 2012