Ladies and gentlemen,
Thank you all for joining our CFO Peter Voser and me this morning on the occasion of ABB’s 2003 first quarter results.
I expect you will have seen the press release.
Before we take questions I will give you an overview and Peter will provide further analysis of our Q1 results.
Let me from the outset underline that the first quarter report shows that we remain on course to meet our full-year targets in 2003 despite flat market conditions.
The report also shows that we have a lot of work to do in the year ahead.
It is important to note that our two core divisions in the first quarter sustained the positive trend established in 2002 reflecting both a strong order backlog and productivity gains.
Both the Power Technologies and Automation Technologies divisions improved their revenues and earnings in the first quarter compared to the same period last year.
Their EBIT margin increased from 6.4 percent to 7.2 percent.
Both divisions are gaining profitable market shares and steadily improving their cost competitiveness.
For the Group as a whole EBIT fell to 92 million dollars which is above our target.
The decrease compared to Q1 2002 was due to losses in non-core and corporate activities.
Adding these items together with higher net interest expenses and provision for losses in Oil, Gas and Petrochemicals we posted a Group net loss of 45 million dollars in the first quarter.
Our near-term priorities remain to strengthen our core businesseslower our cost base through our Step Change program and to improve our finances through our scheduled divestments.
We will execute the planned divestments during 2003.
We will further stabilize our cash flow and we are confident that we will resolve the asbestos issue once and for all in a way that is fair.
In short we remain on course to deliver our full year targets.
Thank you for your attention.
I now hand over to Peter.
Thank you, Jürgen.
I will first briefly take you through the financial results for the first quarter.
My comments will refer to dollarsbut given the strong currency movements between the quartersyou will find the local currencies in the release as well as in the slides.
In the Power Technologies division the order increase was mainly driven by high double-digit demand for Medium-Voltage Products.
We received several significant orders for instance a large export order for ABB India.
Overall the PT order intake was strong in Asia, the Middle East and Eastern Europe more than compensating mixed demand in Western Europe and weak conditions in the Americas.
Revenues were up reflecting our focus on faster project execution and strong demand for our technologies.
First quarter EBIT increased from 110 to 128 million dollars and the EBIT margin remained at 7.2 percent which is above target.
Orders in the Automation Technologies division increased and included two large service contract orders in Italy and Germany with a total value exceeding 200 million dollars.
This is in line with our strategy to increase the service content in Automation Technologies and to expand this higher-margin business across our large installed customer base.
The order growth came from Europe and Asia, especially China and India two increasingly important ABB markets.
Revenues were up on volume increases in the Drives and Motors business as well as in the Robotics, Automative and Manufacturing business areas.
In Automation Technologies EBIT went up from 108 million to 162 million dollars again reflecting the positive impact of our productivity drive.
The strong focus on improving gross margin on orders and reducing the cost base has resulted in higher EBIT margins in all business areas.
The AT EBIT margin was 7.3 percent ,up from 5.8 percent and also above target.
Looking now at the Group level results.
In dollar terms overall orders were up 8 percent.
Q1 group revenues were up 14 percent from 4.0 to 4.5 billion dollars.
Group EBIT reached 92 million which is lower than Q1 last year primarily due to losses in the non-core activities and higher corporate costs.
But as Jürgen said this is actually above our own budget.
The 72 million dollar higher net interest expenses reflect higher financing costs and an unrealized mark-to-market loss on the convertible bond and write-offs on marketable securities.
Following losses in discontinued operations we posted a Group net loss of 45 million dollars.
Net cash from operations was negative at 928 million and I will get back to the details.
Gross debt increased to 8.2 billion dollars compared to the 8 billion at year-end.
Turning to some first quarter highlights.
We continued our portfolio adjustments and disposed our aircraft leasing as well as the car leasing assets of ABB Export Bank.
Talks have continued with potential buyers of the Oil, Gas and Petrochemicals division and the divestment process for 2003 remains on target.
We also remain on target to sell most of Building Systems in 2003.
The restructuring measures we set in motion last year are starting to have an impact.
In Q1 we realized net cost savings of about 70 million from the Step Change program with a job reduction of 1,700.
Overall there were about 4,000 jobs fewer in the first quarter than at year-end.
Briefly on the asbestos issue, as you will recall, ABB announced in February this year that our US subsidiary Combustion Engineering had filed for pre-packaged Chapter 11 in bankruptcy court.
Well above 75 percent of the claimants voted in favor of the agreed settlement plan.
Last week the confirmation hearing started and will continue on May 1 and 2.
As Jürgen said we are confident that the plan will be approved.
Now I will walk you through the EBIT composition of the group.
As we already outlined, EBIT for the Power Technologies and the Automation Technologies divisions increased by 33 percent compared to Q1 last year.
Non- core activities recorded a loss of 64 million dollars in Q1 2003.
The main negative items were a write-down of marketable securities in the insurance business, a loss from the divested aircraft leasing portfolio and lower earnings from Swedish Export Credit, and write-offs and lower earnings in Building Systems.
The Q1 Corporate costs were positive last year because they included some one-time positive items such as a capital gain from the divestment of the Air Handling business and some pension recoveries.
Group EBIT reached 92 million compared to last year’s 272 million.
Net cash from operations was negative 928 million dollars in the first quarter.
However this sum was impacted by 736 million dollars in cash outflow in Combustion Engineering’s asbestos payments to the trust, discontinued operations, non-core activities and restructuring.
The combined cash-flow from operations in the two core divisions in the quarter amounted to negative 192 million dollars in line with the seasonal increase in working capital and in line with our plan.
Our medium-term financing goals remain unchanged from when we announced them in November last year.
We aim to reduce total debt from 8.2 billion at March to about 6.5 billion at year -end 2003.
Our 2003 to 2005 outlook remains unchanged.
We are well on our way to deliver on our 2003 EBIT margin targets of 4%.
Thank you for your attention.