Asea Brown Boveri (ABB): Past tense, Future promising
ABB worldwide is a $25 bn company with a presence in 140 countries and employees of around 170,000.
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
After the divestment of the power generation business to the new entity ABB Alstom Power, the new ABB comprises power transmission and distribution (contributing 45% to the turnover) and industrial automation (45%) with the balance coming from building technologies (which comprise emission control systems, subcontracting etc.)
Coming to the results, the company’s results for the current year includes sales of Rs 222.2 million and a loss before taxation of Rs 65.8 million for the period January 1999 to March 1999 pertaining to the power generation business.
If one were to exclude the power generation business the net profit of the company was down 22% in 1999 at Rs 438 million as against Rs 559 million in 1998. The pre-tax profits have gone down from Rs 674 m to Rs 598 m. The reason for the decline in the pre-tax profit was that apart from lower contribution of revenues to the extent of Rs 46 million, the extra depreciation of Rs 24 million, the additional expenses for Voluntary Retirement Scheme of Rs 74 million also hit the bottomline. However, the company also gained due to lower operating expenses of employees to the extent of Rs 68 million.
As far as the future, the order book at the end of 1999 was up 17% from a level of Rs 6330 million in 1998 to 7410 million in 1999. If one were to include the order book of the power generation business it would go up marginally to Rs 7689 million in 1999 (from Rs 7295 million in 1998).
The specific focus for topline growth will be in the service areas exports and new products in transmission and distribution. Normally the ratio of expenditure on power transmission vis-à-vis power generation stands at 1:1. In India it stands at 28%. The company expects massive investment in the transmission and distribution sector in the year’s to come.
The only issue for the company is the accounts receivables which are around 50% of its balance sheet size (Rs 7.4 bn). This, the management feels causes a cash flow problem, On a net basis there are no borrowings otherwise.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407