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Feb 14, 2013

ABB reaffirms SA’s gateway status as orders rise to R4.3bn

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Outgoing ABB South Africa CEO Carlos Poñe and his successor Leon Viljoen in conversation with Engineering News Editor Terence Creamer on prospects for the company in 2013. Camera Work: Nicholas Boyd & Duane Daws. Editing: Darlene Creamer. Recorded: 14.2.2012.
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The Southern African unit of global power and automation group ABB reported a 36% rise in orders to R4.3-billion in 2012 and reaffirmed on Thursday that South Africa remained its main gateway into the expanding sub-Saharan Africa market, notwithstanding the country's social and economic problems.

New ABB South Africa CEO Leon Viljoen, who took over from Carlos Poñe on February 1, told Engineering News Online that he remained optimistic about prospects for both South Africa and the region.

Poñe, who delivered his fourteenth and final results presentation at the company’s Longmeadow facility, in Gauteng, had already relocated to the United Arab Emirates, where he was leading the group’s Southern Gulf and Pakistan region.

Poñe acknowledged that the South African business, which had invested materially in new manufacturing capacity over the past few years, faced serious power and labour cost pressures.

However, he and Viljoen stressed that the immediate focus would be on ensuring that these pressures were mitigated through an efficient delivery on its order backlog.

Many of its products and services were also geared towards assisting private and utility clients improve their energy efficiency positions, which meant that South Africa’s steeply rising electricity costs presented some growth opportunities.

During 2012, ABB South Africa had been buoyed by large orders arising from within the domestic renewable-energy sector.

In December, it secured a $225-million order from a SunEdison-led consortium to supply two turnkey photovoltaic power plants, located in the Limpopo province.

The group had also received strong domestic and regional order flow for motors and generators.

ABB South Africa reported a modest 2% rise in revenue growth to R3.5-billion. But 2013 had been placed on a firmer growth footing by the fact that its order backlog had risen 18% to R4.1-billion.

Energy efficiency-related workflow was also a significant driver, as process industries and miners sought to mitigate the impact of rising South African power prices.

Activity from the domestic mining and minerals sector dropped in the second half – a period during which a number of mines experieced significant disruptions as a result of industrial relations volatility. However, resources-related activity in the rest of the region remained strong and cross-border activity contributed 20% of overall revenue.

Poñe was also sanguine about the longer-term prospects for South Africa, where social factors such as inequality, poverty and unemployment were starting the weight on its credit rating and its attractiveness as an investment destination.

“Sometimes we are too negative when we approach most of our issues. We see some of the events that happened in 2012  . . . as a hurdle rather than something that is here to stay,” Poñe asserted.

South Africa’s physical and financial infrastructure remained more advanced than that which was available in the rest of the continent and, thus, positioned it ideally to provide a base from which to pursue emerging opportunities in the rest of the region.

Meanwhile, the larger ABB group reported a 15% fall in 2012 net income to $2.7-billion, on the back of a 4% rise in revenue to $39-billion.

Global CEO Joe Hogan indicated that the current focus was on balancing costs and growth, while seeking to leverage benefits from recent capital and research and development investments.

Edited by: Creamer Media Reporter
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