Last year around this time, we gave ABB a bit of a hard time for posting a very positive title on a pretty dismal annual return. Revenues for our industry in general have been so flat this year, that we just didn’t have the heart to give them grief again. We do however, want to summarize their return and commend them on their “glass half full” philosophy and some changes they are making to overcome the slump caused by the current economy.
To review, earlier this month ABB posted the following headline for its 2015 results:
ABB: increased profitability in changing markets
In summary, operational revenues are up (less than 1%), but revenues are down 11%, and orders are down 12% in U.S. dollars, compared to FY2014. Cash flow is also up, in part due to a 3% overall reduction in staffing (approximately 4,500 positions). Not exactly the results the headline would lead us to expect.
The exciting news is that ABB is moving forward with some exciting new offerings in areas not impacted by oil and gas; areas that will potentially drive profitable growth. For example, at the United Nations Conference on Climate Change (COP21), ABB introduced a fast charging robot for public buses to enable sustainable, emission free public transportation. This solution removes the longstanding barrier typically associated with these systems, i.e., long charging times for short driving ranges, by incorporating an automated rooftop connection and a typical charge time of 4-6 minutes. The system is easily integrated into existing bus lines, and when combined with the new electric vehicle (EV) fast-charging services platform that ABB developed in partnership with Microsoft, it provides a sustainable transport solution and advanced management features. In addition, the ABB/Microsoft collaboration “will also take advantage of machine learning and predictive analytic capabilities to drive future innovations.”
Plans for profitability in FY 2016 are multifaceted. Part of ABB’s profitability initiative includes a “shift in the company’s center of gravity” which will realign its operating sectors into four groups, Power Grids, Electrification Products, Discrete Automation and Motion and Process Automation. There are also more job cuts on the horizon. ABB makes note of its white-collar productivity program which is “aimed at making the company leaner, faster and more customer focused. This program is focused on the three structural pillars: lean business functions, global shared services and market-oriented complexity reduction.”
We do offer one word of caution. It is difficult to save one’s way into a profit, and while trimming costs through payroll reduction and other operational efficiencies will increase cash flow, the only real way to increase profits in our industry is to provide fiscally healthy customers with innovative products and services that will meet their needs and help them perform more efficiently. ABB is definitely moving in that direction.
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