ABB reported a 37% YoY decline in order inflows in 4Q, with order intake being the lowest in the past three years. While order inflows
could return with a lag, medium-term earnings growth will be impacted by the slip.
Earnings growth in 4Q slowed to just 5% (11% for CY08), led by slower revenue growth, operating margin decline (178 bp YoY),
and high interest cost (WC cycle extension and high borrowing cost). Reported numbers were aided by higher other-income (derivate gains of Rs180 mn) and a change in revenue recognition policy (revenue higher by Rs266 mn, PBT by Rs29 mn).
Weak order inflows impacted earnings growth, and despite being below consensus, we revised the earnings estimates down by 5-
8% for FY09-10. With earnings CAGR expected to slow to 14% (2009-2011) versus 36% over the past three years.