The outlook for ABB India (www.abb.co.in), a major process automation supplier, has become bleaker with recent results. While the company’s automation sales are showing signs of improvement, ABB India overall started the financial year 2010 on a dismal note, with a 92 percent fall in its net profit for the quarter ended March 2010, on sales that were up by a modest 5 percent.
The firm belied hopes of a turnaround in its fortune as it posted this sharp decline for the fifth consecutive quarter, with an average decline of 30 percent in the previous four quarters. Prospects for a turnaround appear further complicated by the fact that commodity prices are still continuing to rise.
The outlook on the top-line front is also uncertain because of the high share of long gestation projects in its existing stock of orders and delays in some projects. The cost break-out shows a combination of externalities as well as inability to control cost.
Biplab Majumder, vice chairman and managing director, ABB India, announcing the company's results, noted, “The company is now investing heavily in developing competency, particularly in engineering and project management, in its endeavor to take on large technology projects when the market cycle turns upward.”
The only solace is from the automation sector. All the segments of the company, except “process automation” have recorded a significant decline in profits. The automation segments provide products and solutions for efficient operation of major industries, such as oil and gas, chemicals and pharmaceuticals. Products in the segment include motors, instrumentation, power electronics and robotics systems.
Though the company’s overall order intake for the quarter ended March 2010 was $375 million, a fall of 27 percent year-on-year, the order intake for process automation registered growth of more than 40 percent on the back of revival in some industrial activities, especially minerals.
Some good news is that the company recently received orders aggregating $32 million from Bhartiya Rail Bijlee Co. for construction of a turnkey substation and power transformers.
About the author
Uday Lal Pai, email@example.com, is a freelance journalist based in India.