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27 July 2006 - ABB today reported a sharp increase in orders and profitability for the second quarter of 2006. Earnings before interest and taxes (EBIT) increased to $640m from $371m in the same quarter a year ago, reflecting good growth in the two product divisions (power & automation), and yielding an EBIT margin of 10.7 per cent.
Net income increased to $367m from $126m in the same quarter in 2005, and cash flow from operating activities amounted to $337m, an increase of $169m compared to the same quarter in 2005.
"We continued to deliver strong results in the second quarter," said Fred Kindle, ABB President and CEO. "We are clearly benefiting from the strong global demand for improved power infrastructure and increased industrial efficiency. On top of that, our efforts to further improve our business performance continue to pay off and we look forward to a solid second half."
Orders in the power products division improved in the second quarter in all businesses and regions, primarily on the strength of higher base orders. Investments continued by utility customers in western Europe to refurbish existing power infrastructure. In Asia and the Middle East, customer investments continued to support robust economic growth. As a result, orders in Europe, Asia and the Middle East rose at a double-digit pace. Orders in the Americas were modestly higher as continuing demand in the US to replace aging equipment and meet increasing load requirements was dampened by lower order intake in Latin America, primarily Brazil.
Revenues were up in all businesses compared to the same quarter in 2005, reflecting both volume growth and higher prices to compensate for increased raw materials costs, primarily in the transformers business. EBIT more than doubled compared to the second quarter of last year. In addition to the positive impact of higher volumes, operational improvements and higher capacity utilization, the EBIT and EBIT margin comparisons reflect the $66m EBIT reduction in the year-earlier period related to the transformer consolidation programme announced in June 2005. Costs for the programme in the second quarter of 2006 amounted to $3m.
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