Power Products

The financial results of our Power Products division were as follows:

 

 

 

 

% Change

($ in millions)

2015

2014

2013

2015

2014

Orders

10,033

10,764

10,459

(7)%

3%

Order backlog at December 31,

7,717

7,791

7,946

(1)%

(2)%

Revenues

9,550

10,333

11,032

(8)%

(6)%

Income from operations

1,051

1,204

1,331

(13)%

(10)%

Operational EBITA

1,178

1,319

1,435

(11)%

(8)%

Orders

In 2015, orders decreased 7 percent (increased 2 percent in local currencies). The local currency increase in orders was supported by the continued selective investments in large transmission projects in the United States and China.

In 2014, orders increased 3 percent (5 percent in local currencies), supported by the industry sector and continued selective investments in large transmission projects.

The geographic distribution of orders for our Power Products division was as follows:

(in %)

2015

2014

2013

Europe

28

28

31

The Americas

30

29

28

Asia, Middle East and Africa

42

43

41

Total

100

100

100

In 2015, the share of orders from the Americas increased, mainly driven by large transmission projects in the United States. Despite growth in India and China, the share of orders from Asia, Middle East and Africa declined as demand was lower in Saudi Arabia and Australia. Europe’s share of orders was steady, reflecting positive market developments in 2015.

In 2014, the share of orders from the Americas increased, mainly driven by the transmission sector. The continued development of power infrastructure investments led to a higher share of orders in Asia, Middle East and Africa, with India showing growth and China remaining stable. Europe’s share of orders declined, reflecting the difficult market conditions throughout the year.

Order backlog

In 2015, order backlog decreased 1 percent (increased 7 percent in local currencies). The local currency increase resulted from higher orders during the year.

In 2014, order backlog decreased 2 percent (increased 6 percent in local currencies) compared to 2013. In local currencies, the order backlog increased in all businesses resulting from higher orders during the year.

Revenues

In 2015, revenues decreased 8 percent (increased 2 percent in local currencies). The local currency increase mainly reflects the successful execution of the strong opening order backlog. Service revenues also continued to grow and represented a higher share of the total division revenues compared to 2014.

In 2014, revenues in the Power Products division decreased 6 percent (4 percent in local currencies), mainly reflecting the impact of the lower opening order backlog. Service revenues continued to grow and represented a higher share of the total division revenues compared to 2013.

The geographic distribution of revenues for our Power Products division was as follows:

(in %)

2015

2014

2013

Europe

27

32

32

The Americas

30

27

27

Asia, Middle East and Africa

43

41

41

Total

100

100

100

In 2015, the share of revenues in the Americas was higher as a result of the continued steady execution in North America. The increase in the share of revenues from Asia, Middle East and Africa was primarily driven by revenue increases in Saudi Arabia and India. The decrease in the share of revenues from Europe was a result of lower revenues in Sweden and Switzerland.

In 2014, the shares of revenues remained constant for all regions. Europe remained unchanged, reflecting the economic environment. The share of revenues from the Americas was also constant, even as revenues in certain key markets decreased slightly compared to 2013. Asia, Middle East and Africa was supported by revenue increases in India.

Income from operations

In 2015, income from operations was 13 percent lower compared to 2014. Income from operations was lower due to higher restructuring charges associated with the implementation of the company-wide White Collar Productivity program as well as the ramp-up costs associated with aligning our strategic production footprint towards key markets such as Saudi Arabia and India. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 5 percent.

In 2014, income from operations was lower compared to 2013 primarily reflecting lower revenues, higher charges relating to FX/commodity timing differences and higher selling expenses resulting from investments made in the sales function. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by 4 percent.

Operational EBITA

The reconciliation of income from operations to Operational EBITA for the Power Products division was as follows:

($ in millions)

2015

2014

2013

(1)

Amounts also include the incremental implementation costs in relation to the White Collar Productivity program.

Income from operations

1,051

1,204

1,331

Acquisition-related amortization

10

17

21

Restructuring and restructuring-related expenses(1)

105

51

66

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

4

16

19

FX/commodity timing differences in income from operations

8

31

(2)

Operational EBITA

1,178

1,319

1,435

In 2015, Operational EBITA decreased 11 percent (3 percent excluding the impacts from changes in foreign currencies) compared to 2014, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2014, Operational EBITA decreased 8 percent (7 percent excluding the impacts from changes in foreign currencies) compared to 2013, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.