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ABB: Low base effect boosts profits

Mar 6, 2012

ABB has announced fourth quarter and full year results of financial year 2010-2011 (It is a December ending company). The company has reported 6.2% YoY and 847.4% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Sales increase by 6.2% YoY during 4QCY11 (December ending fiscal). Sales growth was led by strong performance from power systems, power products and discrete automation and motion products.
  • Operating margins rise to 4.9% during the quarter due to fall in overall expenditure as a percentage of sales.
  • Net profits increase 847.4% YoY during the quarter, due to strong performance at the operating level. However, it may be noted that in 4QCY10 the company incurred one time provisioning costs on exit from rural electrification business. Thus, the overall profit growth appears to be high on a low base effect. The company also changed its accounting policy on goodwill during the quarter which boosted profits by Rs 81.6 m.
  • Order inflow during the quarter stood at Rs 22 bn, up 58.5% YoY. Orders from the power segment contributed to the overall growth during the quarter. The order backlog at the end of the year stood at Rs 91.2 bn.
  • The company has recommended a dividend of Rs 3 per equity share for the year under consideration.

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