Leverage and focus

Transcription

Leverage and focus

Dinesh Paliwal
© ABB Automation Technologies
Head of Automation
Technologies Division
Leverage and focus
November 8, 2002
© ABB Automation Technologies - 2
Safe Harbor Statement
This presentation includes forward-looking information and statements that are
subject to risks and uncertainties that could cause actual results to differ. These
statements are based on current expectations, estimates and projections about
global economic conditions, the economic conditions of the regions and
industries that are major markets for ABB Ltd and ABB Ltd’s lines of business.
These expectations, estimates and projections are generally identifiable by
statements containing words such as “expects”, “believes”, “estimates” or similar
expressions. Important factors that could cause actual results to differ materially
from those expectations include, among others, economic and market conditions
in the geographic areas and industries that are major markets for ABB’s
businesses, market acceptance of new products and services, changes in
governmental regulations, interest rates, and fluctuation in currency exchange
rates. Although ABB Ltd believes that its expectations reflected in any such
forward looking statement are based upon reasonable assumptions, it can give
no assurance that those expectations will be achieved.
Outline
n Business & organizational overview
n Strategy
n Targets
n Operational priorities
n Conclusions
Products, industries and services
Control
Platform
Products
Drives,
Motors &
Turbochargers
Low Voltage Robots,
Products &
Automotive &
Instruments Manufacturing
Paper,
Metals &
Marine
Petroleum,
Chemical &
Consumer
Product market position
Source: ARC Advisory Group, ABB, (2001 revenues)
Industry market position
Power Industry
ABB
Siemens
14.8%
Invensys
Emerson
12.1%
Alstom
9.8%
Honeywell
3.5%
Yokogawa
3.0%
Metso
1.8%
Metals & Mining
ABB
Honeywell
13.4%
Yokogawa
12.3%
Alstom
10.9%
Invensys
8.9%
Toshiba
4.6%
Emerson
4.4%
Yamatake
2.9%
Source: ARC Advisory Group (2001 revenues)
Pulp & Paper
24.7%
24.3%
ABB
Honeywell
Metso
Invensys
Yokogawa
Siemens
Alstom
Emerson
39.0%
25.9%
13.9%
7.2%
4.5%
2.8%
2.4%
1.8%
Oil & Gas
35.2%
ABB
Honeywell
Invensys
Emerson
Yokogawa
Siemens
Alstom
Hitachi
36.5%
16.7%
13.7%
12.0%
7.5%
5.5%
4.1%
1.5%
Simplicity: reduced BAs from 11 to 6
Old Automation and Industries
Old AT
Old IN
New AT
Revenues
5,246
5,060
10,306
-635
-1,203
Control & Force Measurement
Elimination
-568
Drives and Power Electronics
Metering, etc.
-489
Electrical Machines
Net
Instrumentation and Metering
Low-Voltage Products
Robotics
6
BAs
4,189
-489
4,425
8,614
New Automation Technologies
Low-Voltage Prods & Instruments
(25%)
Drives, Turbochargers & Motors
(19%)
Robotics, Automotive & Mfg
(17%)
Marine & Turbocharging
Paper, Metals, Minerals & Marine
(17%)
Paper, Printing, Metals & Minerals
Petroleum, Chemical, Consumer
(15%)
Petroleum, Chemical & Life
Sciences
Control Platform Products
Automotive Industries
Manufacturing, Electronics &
Consumer
Actual 2001*
*MUS$
(7%)
Business overview (revenues)*
Industries
Regions
Channels
Offerings
3%
10%
11%
15%
13%
21%
17%
61%
19%
23%
63%
41%
9/2002
64%
39%
9/2002
9/2002
Power Industry
Transportation
Mid East & Africa
ABB Direct
Asia
Channel Partners
Building Industry
Americas
Discrete Manufacturing
Process industries
Europe
*Based on revenues 9 months 2002
9/2002
Services
Systems
Products
9 months 2002 results*
(MUS$)
Orders
Revenues
EBIT
Base EBIT**
Change in
local currencies
Base EBIT margin
n Orders:
n
7.3%
8.5%
increased, with order growth led by Asia.
n Revenues:
n Base
+4%
+/-0%
-11%
-15%
9M/02 9M/01
6,735 6,443
6,314 6,244
414
456
460
532
flat.
EBIT: decreased overall largely due to price pressure.
EBIT increased in systems & services due to productivity gains
Comments refer to local currency figures
* Pro-forma figures
** Definition of Base EBIT see Appendix
9 months 2002 achievements
n
Productivity
n
n
n
n
Portfolio
n
n
n
n
n
Focused factories: closed three factories
Headcount: reduced by 11%
Cost control: global risk review database
Selling metering business
Sold non-core marine business
Sold Flakt drying business
Absorbed oil & gas transport business
Penetration
n
n
High growth in China (21%) & India (25%)
Large orders across industries and geographies:
n
n
n
n
n
70 MUS$ to Statoil (petroleum)
68 MUS$ to Dubal (aluminum)
45 MUS$ to GlobalSantaFe (offshore drilling)
35 MUS$ to Tower Automotive (automotive)
35 MUS$ to Bombardier (transportation)
Employees
70,000
60,000
50,000
40,000
Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002
Orders in MUS$
3,000
2,500
2,000
1,500
1,000
500
0
Q1
2001
Q2
2001
Q3
2001
Q4
2001
Q1
2002
Q2
2002
Q3
2002
Markets
Underlying market growth 2002-2005 for the division: 2-3%
15
CAGR % 2002 - 2005
Electronics
10
Automotive
Life Sciences
Food & Beverage
Machinery
5
Power
Marine
Printing
Oil & Gas
Building industry
OEMs
Refining
Pulp & Paper
Metals & Mining
EPCs
Chemicals
Wholesalers
0
0
5
10
15
20
25
Market size in BUS$
ABBs market position:
Leadership (No. 1-2)
Source: ARC Advisory Group and ABB
Midsized
30
35
Strategy
n Grow
products through global presence and channels
n Grow
services through huge installed base
n Grow
solutions through blended process/discrete expertise
Grow products through presence and channels
n Leverage
presence in high-growth markets
n Leverage
size and R&D muscle to grow share and be first
with new products
n Leverage
internal cost efficiency through Industrial IT
Grow services through huge installed base
n Leverage
ABB’s $100 billion+
installed automation base
n Leverage
ABB’s substantial
electrical installed base
n Leverage
deep industry knowledge
Grow solutions through process/discrete solutions
n
Leverage the need for both process and discrete
solutions among respective installed bases
n
Leverage reduced risk & cost-efficiency of Industrial IT
integration to differentiate and add ABB solutions
Process
solutions
Discrete
solutions
Revenues growth target
4
1.0%
3.3%
Growth**
from
share gains
CAGR
2002-2005 E
2.3%
2
1.1%
-3.0%
0
-2
-4
Pro-forma
growth
2001*
Pro-forma
growth
2002E*
Market
growth
2002-2005
* in local currencies; definition of pro-forma revenues, see appendix
** share gains through building on strong base and expansion (e.g. service, new markets)
EBIT margin target
22% EBIT improvement year over year
14
1.5
12
2.3
10
8
-2.4
8.1%
8.1%
2.0
1.6
2.8
6
10.7
4
6.1
6.5
2
0
Base EBIT Base EBIT Optimizing Building Expansion Cumulative
the
margin
margin
on strong
Risk
business
2001*
2002E*
base
Pro-forma EBIT, definition see appendix
Adjustments for one-time items and non-recurring amortization, see appendix
*
Base EBIT = Pro-forma EBIT including adjustments, see appendix
2005E
Optimizing the business
14
1.5
12
n
Completed focused factory implementation
= avg. 1% EBIT impact/year per factory
n
Cost reduction 4% of revenue in people
and productivity over 18 months
n
Continuous product simplification program
= avg. 0.5% EBIT impact/year
-2.4
2.3
10
8
2.0
1.6
2.8
6
10.7
4
6.1
6.5
2
0
70%+ of AT products certified to Industrial IT standards 2002 YTD
Number of applicable products
35,000+
390
100%
= Certification Planned (%)
75%
= Certification Completed (%)
50%
25%
0%
Products
Products
Solutions
Systems
Optimizing the business: online parts processing
14
1.5
12
-2.4
2.3
10
8
1.6
2.0
2.8
6
10.7
4
6.1
6.5
2
0
n Focusing
on distributors
& parts customers
spare parts orders
processed electronically
n 80%+
n 40
US$ internal process
cost improvement for
each online order
Building on strong base
14
1.5
12
-2.4
2.3
10
8
1.6
2.0
6
2.8
10.7
4
6.5
6.1
2
0
n
n
n
Channels: channel focus unlocks resources and EBIT
n
Outsourced product sales of small accounts
n
Sales and administration cost reduction target 1.5% EBIT impact / year
Account management: higher share of spend
n
Account and relationship focus breeds portfolio growth
n
Strategic alliances and frame agreements up 30% in first nine months 2002
Industrial IT: gaining as manufacturing standard
n
Common platform promotes cross-selling
n
Clear competitive differentiator – more product alliances!
Building on strong base: channel management
14
1.5
12
-2.4
2.3
10
8
1.6
2.0
2.8
6
10.7
4
6.5
6.1
2
0
§ Global customer with >100 MUS$ annual sales
n Grew
from LV products to motors, drives, switchgear,
transformers
n 400+
small ABB direct customers transferred to Hagemeyer
n ABB/Hagemeyer
business growth exceeds ABB average:
n
ABB/Hagemeyer Motors: 16.8%
n
ABB/Hagemeyer Spain: 13.7%
n
ABB/Hagemeyer Netherlands: 7.3%
Building on strong base: account management
75
14
1.5
12
-2.4
2.3
10
8
2.0
1.6
2.8
6
56
10.7
4
6.1
6.5
2
44
0
1
1
1992
1993
5
6
5
1995
1996
1997
9
1998
12
1999
2000
2001
2002YTD
§ Standard terms through product frame agreements
§ Expand ABB scope to agreement
§ Higher volume, lower SG&A
Customers buy broader scope due to Industrial IT
14
1.5
12
-2.4
2.3
10
8
2.0
1.6
2.8
6
10.7
4
6.1
6.5
2
0
Tower Automotive, Belgium
n
35 MUS$ order
n
Greenfield plant for body parts for Volvo
n
Robotics solution & drives integrated through Industrial IT
Third parties expand the Industrial IT portfolio
14
1.5
12
-2.4
2.3
10
8
2.0
1.6
2.8
6
10.7
4
6.1
Bosch Rexroth AG
Pneumatic Products
6.5
2
0
Hewlett-Packard
Workstations
Tetra Pak
Plant Automation Software
Third-party IndustrialIT
certification
IFS AB
Business Software
Expansion: services
14
1.5
12
n Leverage
-2.4
2.3
10
8
1.6
2.0
2.8
6
10.7
4
6.1
6.5
2
0
100 BUS$ installed base
n Cross
sell product/system service
and outsourced maintenance
n “On
the ground” now as customers move from capex to
Return on Assets
n Merging
service organizations to target 13% cost reduction
n Increase
n Target
service revenue from 17% to 25% of total division
EBIT margin: >15% by 2005
Expansion: service centers
Rotterdam, Netherlands
Service
Fredericia, Denmark
Zaventen, Belgium
Service
Service
Oslo, Norway
Toronto, Ontario, Canada
Service
Daresbury,
UK
Service
Service
Västeras, Sweden
Beijing, China
Service
Milton Keynes, UK
Service
Wickliffe, Ohio, USA
Service
Helsinki, Finland
Service
Seoul, Korea
Service
Massy, France
Service
Service
Tallinn, Estonia
Service
Perafita, Portugal
Auburn Hills, Michigan, USA
Riga, Latvia
Service
Service
Service
St. Ouen L’Aumône, France
Vilnius,
Lithuania
Service
Tokyo, Japan
Service
Barcelona, Spain
Service
Service
Poland
Birr, Switzerland
Service
Mexico City, Mexico
Service
Service
Shanghai, China
Turino, Italy
Service
Service
Taipei, Taiwan
Bogota, Colombia
Sesto San Giovanni, Italy
Service
Service
Service
Mannheim, Germany
Service
Camcari, Brazil
Friedberg, Germany
Service
Service
Vienna, Austria
Service
Osasco, Brazil
Service
West Saint-Laurent, Quebec, Canada
Service
Buenos Aires, Argentina
Service
South Africa
Service
14
1.5
12
8
2.0
1.6
6.1
6.5
6
4
2
0
-2.4
2.3
10
2.8
10.7
Melbourne, Australia
Service
Drive best practices via Service
Methodology Centers
Managing cash flow
Net Working Capital
Net Working Capital
n Focus on advanced payments
% of revenue
12
(~7% of revenues)
n Target 10% DSO reduction (65)
7
n Targeting 2% percentage point
5
net reduction in inventory
à17% of revenues
Q100
Q200 Q300 Q400 Q101
Q201 Q301 Q401 Q102
Q202 Q302 Q4022005
2005
2002
2000
2001
Investments
n Sustaining and expansion investments 2.7% of revenues
n 4% R&D investment
Revenues growth and EBIT margin targets
n
Target revenue CAGR: 3.3% through 2005
n
Target EBIT margin: 10.7% by 2005
Revenues growth in
local currencies
EBIT margin
* CAGR 2002-2005
2002
2003
2005
-3.0%
3.0%
3.3% *
6.5%
7.1%
10.7%
What’s different this time?
n
New culture of consequence management is now in place
n
Group Processes division has been eliminated
n
Non-core businesses are being divested
n
Country Managers empowered for local execution
n
External benchmarks to validate our cost reduction
targets/metrics and rigorous follow-up routines
Cost reduction 4% of revenue
n
Merger of two operating divisions will eliminate
n
5 Business Areas
n
Redundant functions in more than 25 countries
n
Redundant project and administration resources
n
Aggressive channel management; taking out cost of sales
n
Corporate and country holding structures are being trimmed
n
No R&D investment outside core businesses!
Conclusions
n
Leveraging the strong base:
n
n
Combine the strengths of former:
n
Automation division (product channels)
n
Industries division (services)
n
Capitalize on huge installed base for product
and service growth
n
R&D muscle and market presence
Radical cost reduction
Appendix
Drives, Motors and Turbochargers
Business Activities
§ Low and Medium Voltage AC Drives
§ DC Drives
§ Power Electronics Systems
§ Diesel and Gas Engine Turbochargers
§ Electrical Motors and Generators
§ Services
Industries Served
§ Drives: Building automation, marine, power,
transportation, and manufacturing industries
§ Power electronics: Aluminium and magnesium smelters,
excitation systems for power plants
§ Turbochargers: Marine, power and transportation
§ Motors and generators: OEM customers, distributors, and
end users
Market Drivers
§ Investments to inrease production effeciency, reduce
energy costs, and improve environmental performance
Main Geographic Markets
§ Europe, North America and Asia
Low Voltage Products and Instruments
Business Activities
§ Breakers, Control Products, Switches and Fusegear
§ Line Protection Devices, Enclosures and Cable Systems
§ Switchgear and Motor Control Centers
§ Process Measurement and Actuation Devices
§ Process Analytical Products and Systems
§ Services
Industries Served
§ LV Products: Distributors and wholesalers, OEM‘s and
panel builders, systems integrators and end users
§ Instrumentation and Analytical: Process manufacturing
industries
Market Drivers
§ LV Products: Investments in buildings and industries to
increase energy efficiency and level of automation
§ Instrumentation: Process quality, consistency and
efficiency
§ Worldwide
Control Platform Products
Business Activities
§ Industrial IT platform product
§ Control products and systems
§ Software solutions for optimizing and integrating of
plant operations
§ Logistics, Data Historian and Manufacturing
Execution Systems
§ Plant and Professional Services
Industries Served
§ Full range of process industries, including pulp and
paper, metals and minerals, chemicals, petroleum,
life sciences, etc.
§ Public and private power generation, transmission
and distribution
Market Drivers
§ Investments to improve production efficiency,
quality, safety, environmental and regulatory
compliance.
§ Investments to improve time to market and
manufacturing agility
§ Worldwide
Robotics, Automotive and Manufacturing
Business Activities
§ Development, production and sale of industrial robots
and related equipment to the automotive industry and
other manufacturing industries
§ Manufacturing cells and solutions
§ Application-specific software and services
Industries Served
§ Automotive, foundry, packaging and palletizing,
material handling and machine tending, painting and
coating
Market Drivers
§ Higher productivity, improved production efficiency
and manufacturing flexiblity
§ Europe, Asia/Pacific, Americas
Petroleum, Chemicals and Consumer
Business Activities
§ Application-specific products, systems, software
and solutions
Industries Served
§ Oil and gas production, processing, refining, and
transportation
§ Primary and secondary pharmaceutical
manufacturing and packaging; quality control and
regulatory validation/compliance
§ Food and beverage, home care, agricultural milling,
personal care products
Market Drivers
§ Investments to inrease production effeciency,
quality and consistency and to comply with
regulatory agencies.
§ Europe, North America and Asia
Paper, Metals, Minerals and Marine
Business Activities
§ Pulp and paper automation, production and quality
control; machine health monitoring; chemical
delivery
§ Measurement and automation solutions for ferrous
and non-ferrous metals production and processing
§ Automation of cement manufacture and mining
processes
§ Propulsion, power, dynamic positioning, and
integrated automation of cargo and cruise vessels
and offshore installations
Industries Served
§ Pulp and paper manufacturers
§ Ferrous and non-ferrous metals producers
§ Cement, mining and mineral processing
§ Cruise, ferry and oil and gas vessels
Market Drivers
§ Investments to improve production efficiency and
quality, reduce energy usage, maximize safety and
environmental compliance
§ Worldwide
Automation Technologies division – Pro-forma orders
MUS$
Reported orders
Former Automation Technology Products div.
Former Industries division
Elimination of inter-company transactions
Transfer of non-core business to corporate*
Disposals**
Pro-forma orders
New Automation Technologies division
* Semiconductor business
** Metering business
9/2002
2001
9/2001
3,768
3,448
5,170
4,865
3,633
3,794
-448
-33
-1,169
-47
-454
-948
-36
6,735
8,365
6,443
Automation Technologies division – Pro-forma revenues
MUS$
Reported revenues
Elimination of inter-company transactions
Disposals**
Pro-forma revenues
9/2002
2001
9/2001
3,672
3,093
5,246
5,060
3,590
3,632
-420
-31
-1,203
-42
-447
-949
-29
6,314
8,614
6,244
Automation Technologies division – Pro-forma EBIT
MUS$
Reported EBIT
Disposals**
Pro-forma EBIT
9/2002
2001
9/2001
274
128
380
154
315
132
12
11
-22
9
414
523
456
Automation Technologies division – Base EBIT
MUS$
Pro-forma EBIT
Adjusted for one-time items:
Restructuring costs
One time costs
Capital gains
9/2002
2001
9/2001
414
523
456
45
81
2
-8
6
-3
99
73
697
532
1
Adjusted for non-recurring
amortization
Base EBIT
460
Business overview (revenues)*
Business Areas
7%
13%
Control & Enterprise Solutions
Petroleum, Chemical & Consumer
17%
17%
Robotics, Automotive &
Manufacturing
Paper, Metals, Minerals & Marine
19%
Drives, Motors & Turbochargers
25%
9/2002
*Based on revenues 9 months 2002
Low Voltage Products & Instruments
EBIT Reconciliation 9 months 01 vs 9 months 02
456
208
150
414
70
39
15
9 months 01
Price Erosion, Restructuring
/ inflation
charges
Legacy
Projects
Non-recurring Restructuring
amortization
savings
9 months 02

Leverage and focus

Transcription

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