ABB's development opportunities in volatile markets

ABB Group announced on July 26 that orders for the quarter increased by 9% (organic growth of 6%) to US$10.1 billion, and sales increased by 6% (organic growth of 3%) to US$9.7 billion. Public utility customers continued to strengthen the construction of transmission networks, and customers in the industrial sector, especially in the oil and gas industry, increased investment to ensure stable and reliable power supply and increase production efficiency. The profit before operating EBITDA was US$1.5 billion, a decrease of 5% from the second quarter of 2011. Operating profit before tax, depreciation and amortization was 15.1%, compared to 16% in the same period of last year. The cost savings of approximately US$280 million offset the negative impact of price reductions and project profit declines. Over the same period, the Group increased its investment in sales and R&D, and boosted business growth. The unfavorable economic situation in the world has an adverse effect on the rate of profit before tax, depreciation and amortization. Compared with the same period of last year, due to the large fluctuations in the exchange rate, in US dollars, the Group’s sales decreased by approximately US$600 million, and the profit before operating EBITDA decreased by approximately US$100 million.

Cash flow decreased by approximately US$300 million year-on-year, and total cash in various business units increased by US$40 million. The group's cash flow status also reflects the reduction of cash flow, avoiding the risk that the US dollar will bring to the company. In spite of the negative impact of the strong dollar on foreign exchange transactions, the acquisition of Thomas & Betts, a US low-pressure product manufacturing company, completed on May 16 this year resulted in an amortization charge of approximately US$100 million. The net income of the group still reached 656 million yuan. Dollars.

The amount of orders and sales increased in the second quarter of 2012. Despite large fluctuations in the global macro economy in the short term, customers in all regions of the world continue to upgrade their power grids and strive to increase industrial productivity, bringing development opportunities to ABB Group's business.

"These results clearly show that even in today's fluctuating markets, our balanced business and regional market development, and good cost control, have brought solid business achievements. We are very happy to see The profitability of the Group was higher than that of the first quarter. Although the macroeconomic situation is still not clear, we have already seen positive developments in the Chinese market, continuous improvement in the US market and a rebound in our European operations. Compared to three months ago, we The short-term market outlook is full of confidence."

Second Quarter 2012 Results Overview

In the second quarter, macroeconomic uncertainties continued to affect the timing of large-scale power equipment investment in most regions. However, utility customers continue to invest in selected projects to increase the reliability of the grid and increase transmission capacity. Customers in the oil and gas industry have also increased investment in power equipment to ensure the stable and reliable production and use of electricity. Therefore, in most of the key markets, such as the United States, Brazil, China, and India, orders from the power product business have steadily increased. Orders for the Power Products Business Unit in the European market remained stable.

In the automation business area, the demand for efficiency-enhancing energy-saving solutions and increasing industrial productivity and product quality have driven the growth of orders for many businesses in many regions. After the acquisition of Tongbei Company, ABB's automation business in the key North American market was significantly expanded, effectively boosting the growth of automation orders in the region. This merger did not have a significant impact on automated business orders in other regions. North American automation business also achieved its own organic growth. The volume of orders for the low-voltage products business in the Chinese market has picked up this quarter. Although industrial development in southern Europe has slowed down, the demand for automation services in countries such as the United Kingdom, Norway, and Eastern Europe has far outweighed these negative factors. In Europe, orders for automation services have generally increased. In Germany, orders for automation services fell compared to last year, when ABB obtained a major order to provide equipment for railway construction.

Basic orders for the quarter (orders less than $15 million) increased by 4% (organic growth 1%), large orders (orders greater than $15 million) increased by 43%, accounting for 15% of the total orders, the total of the same period last year 12% of order amount.

At the end of June 2012, the order storage amounted to US$29 billion, which was a year-on-year increase of 6% and a year-on-year increase of 1% in local currencies.

Sales in the power system business segment were basically the same as those in the same period of last year, which was mainly due to the execution of large orders in order storage. Also benefiting from order storage, discrete automation and motion control business units and process automation business units have higher sales this quarter. The sales volume of the Low Voltage Products Business Unit is slightly lower. The growth rate of service business exceeded total sales, reaching 11%, accounting for 16% of total sales, which was the same as last year. Exchange rate conversion caused total sales to decrease by approximately US$600 million year-on-year.

Prospects

The uncertainty of short-term growth in the US, Europe, and emerging markets poses a challenge to the company's recent performance forecast. At the same time, the performance of the second quarter was encouraging. In the face of fierce competition, the operating profit before tax, depreciation and amortization of the Power Systems Business Unit has remained stable over the past three quarters; despite sustained weak economic development in southern Europe, orders in Europe began to rebound; the importance of the Chinese market Electricity and automation (including engineering construction) have large orders; in the U.S. market, orders for various types of products continue to grow; major investments in the transmission field in the world continue to progress; there are further signs that price pressures on new orders for power products Eased.

The long-term prospects of the main terminal markets of ABB Group are still optimistic, driven by the need to increase resource utilization, the continuous development of urbanization in emerging markets, and the market's promotion of large-scale, more efficient and reliable power transmission demand and many other major trends.

Therefore, the management of the company cautiously and optimistically believes that if the macroeconomic situation does not deteriorate any further, the operating environment in the second half of 2012 will support the continuous growth of the Group's performance and enhance its profitability, and achieve the 2011-2015 medium-term development plan. Management will continue to focus on cost savings and ensure that the return on investment meets the group's long-term goals.

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