ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

Operational EBITDAIn 2012, Operational EBITDA decreased 61 percent (57 percentin local currencies), mainly due to the execution of lowermargin projects from the order backlog, as well as a chargeof approximately $250 million relating to a repositioning of thePower Systems division (announced in December 2012) tosecure higher and more consistent future profitability. An increasein sales expenses as well as research and developmentspending related mainly to the acquisitions of Mincom andTropos Networks Inc. In addition to the impact from acquisitions,sales expenses were also affected by increased tenderactivity. General and administrative expenses in 2012 remainedapproximately on the same level as in 2011. The impact fromlower prices on past orders, now flowing through to revenues,were mitigated by cost savings from supply chain managementand operational excellence activities.In 2011, Operational EBITDA increased 144 percent(132 percent in local currencies). The higher OperationalEBITDA and Operational EBITDA margin in 2011 was mainlythe result of higher revenues, the non-recurrence of projectrelatedcharges in the cables business, as well as successfulclaims management. Sales expenses, as well as generaland administrative expenses increased mainly following theacquisitions of Ventyx and Mincom. The increase in salesexpenses also reflected higher doubtful debt provisions thanin 2010. Higher research and development spending, as wellas the impact from lower prices on past orders now flowingthrough to revenues, were largely offset by cost savings.EBITIn 2012, EBIT decreased to $7 million. In addition to theimpacts disclosed in the “Operational EBITDA” section, EBITwas negatively impacted by further charges of approximately$100 million (presented in the reconciliation table above asrestructuring-related costs, and acquisition-related expensesand certain operational items) related to the repositioning ofthe Power Systems division. These charges related to certainimpairments and the closure of low value-adding contractingoperations in a number of countries. Overall, restructuringrelatedexpenses in 2012 were marginally lower than the$54 million in 2011. EBIT was also impacted by higher depreciationand amortization expenses of $174 million in 2012,compared to $144 million in 2011, mainly resulting from theMincom acquisition. There was a small positive impact relatedto FX/commodity derivative timing differences of $13 millionin 2012 compared to $3 million in 2011.In 2011, EBIT increased to $548 million. In addition tothe impacts disclosed in the “Operational EBITDA” section,EBIT was impacted by higher depreciation and amortizationexpenses of $144 million in 2011, compared to $84 millionin 2010, mainly resulting from the Ventyx and Mincom acquisitions.This negative impact was offset by a positive contributionfrom FX/commodity derivative timing differences of$3 million in 2011 compared to a negative impact of $58 millionin 2010. Restructuring-related expenses were $54 millionin 2011 compared to $48 million in 2010.(1)(1)Fiscal year 2013 outlookFundamental market drivers for the Power Systems divisionremain intact; these include power infrastructure investmentsin emerging markets to add capacity, aging infrastructureupgrades in mature markets, a focus on renewables, energyefficiency, and the development of more reliable, flexibleand smarter grids. There is, however, uncertainty in terms oftiming of investments, stemming from continued macroeconomicchallenges in several economies, as well as executionrisks surrounding the repositioning of the division.Discrete Automation and MotionThe financial results of our Discrete Automation and Motiondivision were as follows:($ in millions, % Changeexcept OperationalEBITDA margin %) 2012 2011 2010 2012 2011Orders 9,625 9,566 5,862 1 63Order backlog at Dec. 31, 4,426 4,120 3,350 7 23Revenues 9,405 8,806 5,617 7 57Operational EBITDA 1,735 1,664 1,026 4 62Operational EBITDAmargin % (1) 18.4 18.9 18.3 n.a. n.a.EBIT 1,469 1,294 911 14 42Operational EBITDA margin % is calculated as Operational EBITDA dividedby Operational revenues.Reconciliation to Financial Statements($ in millions) 2012 2011 2010Operational revenues 9,405 8,817 5,613FX/commodity timing differenceson revenues (1) – (11) 4Revenues (as per FinancialStatements) 9,405 8,806 5,617Operational EBITDA 1,735 1,664 1,026FX/commodity timing differenceson EBIT (1) 1 (19) (2)Restructuring-related costs 4 (10) (35)Acquisition-related expenses andcertain non-operational items (8) (90) –Depreciation and amortization (263) (251) (78)EBIT (as per FinancialStatements) 1,469 1,294 911For further details of FX/commodity derivative timing differences, see “Note 23 Operatingsegment and geographic data.”ABB Annual Report 2012 | Financial review 65