Orders decreased by 3% (16% in U.S. dollar terms) to $9.2 billion compared to the very high levels a year earlier as large orders (more than $15 million) in the power and oil and gas sectors could not compensate for lower base orders (less than $15 million) across all divisions. The order decline also reflects lower prices resulting from decreased raw material costs.

The sale of standard products and base orders that convert into revenues within the same quarter declined significantly compared to the same quarter in 2008.

EBIT was $862 million with an EBIT margin of 12.0%. Excluding the mark-to-market treatment of hedging transactions in the respective quarters and certain other items, the EBIT margin deteriorated by around 3%age points versus the same quarter a year ago. The main driver of the deterioration was lower capacity utilization compared to the very high levels of a year ago, as well as a change in product mix and some price erosion in the short-cycle businesses.

Summary of first quarter 2009 results:

Orders received and revenues:

Excluding the impact of acquisitions, orders in Q1 2009 declined 3% in local currencies (down 17% in U.S. dollars) compared to Q1 in 2008; revenues grew 2% in local currencies (U.S. dollars: down 11%).

Orders received were modestly lower in local currencies compared to the near-record levels of the first quarter in 2008, despite the significant deterioration in most markets over the past 12 months.

Demand from utilities for new and upgraded power infrastructure remained steady in most markets. ABB won two large power transmission orders in the first quarter of 2009 – a subsea high-voltage link in western Europe and a substation award in the Middle East – with a combined value of almost $1 billion. However, the limited availability of financing for large power projects, especially in the private sector, and the uncertainty over raw material prices and other project costs continued to delay the award of new projects.

Demand for ABB’s industrial products and systems deteriorated in the quarter as global industrial production continued to contract and demand in the construction industry decreased further. The oil and gas business remained relatively resilient and ABB won a $490-million order in the sector in Algeria during the quarter. However, base orders for the Group decreased by 18% (28% in U.S. dollars) and were down in all divisions. Lower prices, primarily the result of the declining cost of raw materials, also contributed to the order decrease.

Regionally, orders doubled in local currencies in the Middle East and Africa as large orders increased. In Europe, higher orders in Power Systems were more than offset by decreases in the other divisions. Orders decreased in the Americas, mainly the result of lower orders in the U.S. In Asia, orders also decreased in a mixed environment, with a broad decline in the systems businesses partly offset by order growth for Power Products in China and for Automation Products in India.

Service orders increased by 14% in local currencies (U.S. dollars: down 1%) compared to the prior-year period.

The volume of large orders rose 82% (47% in U.S. dollars) in the first quarter to $2.5 billion. Large orders accounted for 27% of total orders received in the quarter compared to 16% in the first quarter of 2008.

The order backlog at the end of March amounted to $25 billion, a local-currency increase of 10% (7% lower in U.S. dollar terms) compared to the end of the first quarter in 2008 and a 9-percent local-currency increase compared to the end of the fourth quarter of 2008 (up 5% in U.S. dollars).

Total revenues in local currencies continued to grow as execution of the order backlog more than offset lower sales of products and base business during the quarter. In divisions with longer business cycles and order backlogs, revenues were higher (Power Products and Process Automation) or flat (Power Systems), while revenues decreased in Automation Products and Robotics, which have shorter backlogs. Revenues were also affected by delays in project execution and postponements by customers in taking delivery of some products. These trends reflect the difficult financing environment that still prevails in most markets. Service revenues were 6% higher in the quarter in local currencies (U.S. dollars: down 10%) compared to the first quarter of 2008.

Earnings before interest and taxes:

EBIT and EBIT margins in the first quarter of 2009 were substantially lower across most divisions. The decline resulted from a number of factors, including lower capacity utilization compared to the very high levels in the first quarter of 2008 as well as a lower share of revenues from higher-margin products and base business, reflecting the significant weakening of industrial markets.

EBIT was also reduced by the write-off of around $35 million of assets, mainly from operations in Russia, and to some extent by a weaker pricing environment in some short-cycle businesses.

EBIT was further impacted by the mark-to-market treatment of hedging transactions which did not qualify for hedge accounting, which had a negative impact equivalent to around 0.5% point of EBIT margin in the first quarter of 2009 compared to a positive impact of around 1%age point in the same quarter a year earlier.

Net income

Net income for the quarter developed in line with EBIT. The effective tax rate in the quarter was 26%, compared to 25% in the same quarter of 2008 resulting mainly from a favorable tax ruling in the prior year.

Demand in the power, oil and gas sectors was relatively resilient in the quarter, which allowed us to maintain orders close to the near-record level of a year ago, said Joe Hogan, ABB’s chief executive officer. Revenues benefited from our order backlog but earnings declined, partly on lower capacity utilization versus the very high levels of a year ago as well as some non-operational items such as asset write-offs and the mark-to-market of hedging transactions.

We saw good momentum with our cost-out program in the first quarter and we’re expanding the program to $2 billion with continued focus on optimized sourcing, global footprint, G&A and operational excellence,” Hogan added. “We are determined to stay ahead of the market on cost while remaining alert for opportunities to grow the business.”