It’s a new low for engineering multinational ABB . With revenues were down 9 per cent year-on-year to Rs 1,406 crore--- possibly the first time in eight years that sales have fallen--- and net profits down 33 per cent, ABB’s performance for the March 2009 quarter was, to say the least, disappointing.
The operating profit margin came off by a sharp 210 basis points to 9.1 per cent. While part of the fall in the margins was possibly the result of the company incurring costs for new facilities, the top line was more to blame: for the first time in several quarters, the product business saw stagnant revenues while revenues from the projects segment fell.
What was really disconcerting was the drop in the margins for the automation product segment which signalled some keen competition or a fall in prices. The good news was that orders flowed in---at Rs 2,300 crore, they saw a fall of 14 per cent year-on-year, but sequentially, they were up a fairly strong 83 per cent, albeit the low base of Rs 1,260 crore in the December 2008 quarter.
Nevertheless, the increase indicates that the environment is perhaps improving and moreover, at just over one time the trailing twelve months revenues, the order book of Rs 7,000 crore, provides some comfort.
However, with execution expected to be slow in the current difficult environment, analysts believe it’s unlikely ABB will clock a revenue growth of more than10 per cent in 2009 over the Rs 6,837 crore reported in 2008. Although there may be a rise in the operating profit, they point out that higher interest and depreciation could eat into the net profits.
