ABB Gears Up to Gain from the Upswing in Energy Sector
On Sep 23, 2014, we issued an updated research report on ABB Ltd. (ABB), a leading power and automation technology company. The company has been positioning itself to reap benefits from the growing demand and increased spending in the energy sector.
ABB is a major player in industries like wind energy and rail. Recently, the company received a $70 million contract from Swiss Railways (SBB) to provide novel traction converters for the modernization of the latter’s locomotive fleet.
ABB had been witnessing sluggishness in its Power Systems segment which continued to weigh down on its financials and hinder future growth. To counter the problem, ABB has undertaken a series of business restructuring initiatives so as to drive organic growth while minimizing risks and augmenting competitiveness.
Per the company’s Next Level strategy for 2015–2020, it will remain focused on three primary areas – profitable growth, relentless execution and business-led collaboration – which will form the base for future growth. Further, ABB intends to leverage its PIE (penetration, innovation and expansion) initiatives to expand and enhance its business in high-growth sectors like utilities, transport and infrastructure, among others.
Moreover, the company has been undertaking divestment measures to drive future growth. In the recent past, ABB closed the $260 million sell-off of Thomas & Betts’ heating, ventilation and air conditioning business to Trinity Industries Inc. (TRN) and the $117 million sale of Power-One’s Power Solutions business to Bel Fuse Inc (BELFA).
Since a significant portion of ABB’s revenues is derived from non-U.S. markets, its business is prone to be impacted by currency fluctuations and adverse global political and economic conditions. This apart, fixed-price nature of some long-term contracts can also prove to be a headwind going forward, as it considerably increases the risk of cost overruns for the company.
Whether ABB’s initiatives will be able to beat the odds and achieve desired growth levels, only time will tell.
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Read the Full Research Report on BELFA
Read the Full Research Report on SBB
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