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The Finnish ABB Companies

The Finnish ABB Companies / Review 1997. Print.

Contents

Key figures 1996 ...............................................2President’s comments ........................................3Overview of the year 1996 ................................4ABB Industry Oy ..........................................5-6ABB Motors Oy ............................................7-8ABB Control Group ....................................9-10ABB Installaatiot Group ............................11-12ABB Service Group .........................................13ABB Fläkt Oy .................................................14ABB Transmit Oy ......................................15-16ABB Power Oy ..........................................17-18ABB Ecopipe Oy ............................................19ABB Asea Skandia Group ...............................20ABB Financial Services Group ........................21ABB Tools Oy .................................................22ABB Current Oy ............................................23ABB Corporate Research, Finland ..................24Consolidated income statement ......................25Consolidated balance sheet .............................26Change in financial position ...........................27Organization, January 1, 1997 ........................28ABB Group ....................................................29

1996 1995 1994 1993 1992 1991 Change 1995-96

Orders received 7,675 7,490 6,393 5,890 5,261 5,198 +2 %of which exports 3,788 3,644 2,977 2,738 2,129 1,717 +4 %Total revenues 7,813 7,139 6,291 5,580 5,304 5,321 +9 %Result margin (%) 13 13 13 11 10 9Income before taxes 965 875 737 565 535 329 +10 %Return on equity (%) 28 30 27 23 22 14Order backlog 31. 2,953 3,692 3,531 3,319 2,993 3,019 -20 %Personnel 31.12. 9,175 8,975 7,971 7,788 8,025 9,318 +2 %Capital expenditure,new decisions 237 234 291 182 138 134 +1 %Research anddevelopment 502 438 401 397 315 267 +15 %Competence develop-ment of the personnel 77 71 60 47 42 50 +8 %

1996 excluding Rail Transportation Business

ABB Oy Group, key figures (FIM million)

2

3


Strong input in productdevelopment

The goal of the Finnish ABB companies´development work is technical proficiency. Ourprinciple is always to serve customers with state-of-the-art technology and efficiency.

The Finnish ABB companies have increased theirinvestment in reasearch and development quitemarkedly. In financial terms, our investmentshave increased by a factor of 2.5 since 1988, i.e.the year ABB was founded, and last year exceeded500 million Finnish marks.

We have devoted considerable resources toalternating ac-drives and their various applications.Our success has opened up an extensiveinternational market for our electric drivetechnology. Our products are ensuring moreeffective energy use in large and small projects allover the world.

Another area in which we have in-depth expertiseis the technology for medium-voltage electricitygrids. Our development work in that field hasalso reached world-class heights and we export toall the continents.

Thermonet technology represents the latestinnovation in building technology. It has found anumber of successful applications in Finlandand other Nordic countries and new uses arebeing actively developed.

The Finnish ABB companies need to be able toproduce quality for the customer service on theglobal market. We are developing our overallquality systematically, assessing our operation inaccordance with the criteria of the EuropeanQuality Award (EQA). We aim to develop ourcustomer services to match those of the bestcompanies in the sector, and this is a verychallenging assignment.

Helsinki, 10th March 1997

Matti Ilmari


Slower growth in orders

In 1996, the Finnish ABB companies obtainednew orders worth FIM 7.7 billion, i.e., 2 percentmore than in the previous year. The growth inorders gained over the previous eight ABB yearshas averaged 11 percent a year.

Annual sales rose to FIM 7.8 billion, representingan increase of 9% of the previous year. The growthin sales was on a par with the average for theFinnish electronics and electrical industry asa whole.

Exports now account fornearly half of all salesThe value of the Finnish ABB companies´ domesticsales last year totalled FIM 3.9 billion, an increaseof 1 percent. The distinct decline in large newindustrial investments was evident in trading.

Sales to the export market climbed to FIM 3.8billion, 4 percent more than a year previously.Orders from the export market accounted for49 percent of all orders.

A solid half of exports came from EU countries,15% from the emerging South-East Asian market,10% from the Americas, 8% from Eastern Europe,mainly Russia, and 11% from other countries.

Good profitabilyThe profitability of the Finnish ABB companiesremained good. The group´s result before taxestotalled FIM 965 million, compared to FIM 875million a year earlier.

Investments in product development rose toFIM 502 million. R&D investment is among thehighest for industrial companies in Finland.New investments in machinery and equipmentworth FIM 237 million were also implemented.

More expatriates forthe international operationsAt the end of the year, the ABB companiesemployed a personnel of 9,175, compared to8,975 a year earlier. The Finnish ABB companiesare one of the largest employers in Finland.

FIM 77 million was devoted to developingpersonnel expertise. 112 expatriates worked inABB´s international organisation last year.

4


For Enso Fine Papers Oyís new art paperproduction line, slated to operations inOulu in the spring, ABB will deliver e.g.sectional drive systems and productionmanagement system as well aselectrification.In 1996, ABBís so far smallest frequencyconverter series, ACS 300, was broughtonto the market.

KEY FIGURES 1 9 9 6

Revenues: FIM 2,674 million

Export orders: FIM 1,946 million

Personnel (31.12.): 2,011

Profitability: good

ABB Industry Oy grantedenvironmental certificate

ABB Industry Oy is the first Finnish electricalcompany to receive an environmental certificatecovering all its operations. This ISO 14001standard certification is fast becoming the centralinternational environmental norm.

At the beginning of 1995, the company embarkedon a systematic development program for a moreenvironmentally conscious business approach, e.g.by training its 2,000 staff-members. The company’smost important suppliers have also been evaluatedaccording to their environmental attitudes.

In the analysis of environmental issues, the frequencyconverters produced by ABB Industry Oy havebecome major factors as far as electricity saving isconcerned.

Alternating periods of stronggrowth and streamliningIn 1996, there was a slump in sales after severalyears of brisk demand. ABB Industry Oyresponded to this weakening market situationwith a tight expenditure retrenchment program.At the same time, the company effectedorganizational changes to further adapt to thenew conditions.

Product range expanded to include smallfrequency converters, previous Variable SpeedDrives divisions combined into the Drives groupAt the beginning of 1996, ABB introduced the

5


The world’s largest cruise linerm/s Carnival Destiny is equipped withABB’s power plant and propulsionmachinery.

ACS 300 line, its hither-to smallest frequencyconverter series.

Intensive product development was carried out toaugment the utilization of DTC (Direct TorqueControl) technology, both in a wider power rangeand in system applications. Direct Torque Controlallows the torque and speed of induction motorsto be adjusted without a tachometer on the basisof the motor’s electro-magnetic state. Thuscontrolling the motor becomes more accurate andfaster.

The shared technological base of the new electricaldrives and the increased cost-efficiency pressureswere the main factors contributing to the mergerof the former Variable Speed Drives divisions intothe Drives group last December.

Brisk demand for induction machines,slow down in diesel generator salesThe world-wide demand for diesel power plantsfell off and the expanding sales volumes of thegenerator factory levelled out.

The manufacturing - concentrated since last yearin Helsinki - and world-wide guarantee of AMAinduction machines and AMK slip-ring machinesproved very profitable. HX induction machinesalso managed to further consolidate their marketposition.

In order to improve efficiency and distributeresources more evenly, the organization of largeelectrical machines was altered by decreasing thenumber of profit units from four to two, i.e.synchronous machines and induction machines.

Major project selling orders and deliveriesThe Pulp & Paper division received large domesticorders, such as the sectional drive systems and

production management system for Enso FinePapers Oy’s new art paper production line in Oulu.In September, Metsä-Serla’s new fine paperproduction line started operations in Kirkniemi inthe city of Lohja and ABB delivered sectionaldrive systems and quality control and webinspection systems as well as electrification.The order was valued at over FIM 130 million.

The greatest successes in export activities werereaped in certain Asian countries, such as Indone-sia and China. Operations will start at the SiamPaper company’s new fine paper plant near Bang-kok in early 1998. ABB delivered comprehensiveelectrification, sectional drive systems, automati-on etc. solutions to the customer.

The world’s largest cruise liner, m/s CarnivalDestiny owned by the American CarnivalCorporation, was completed at the Fincantiershipyard in Italy in October. For this vessel, ABBdelivered a power plant and the propulsionmachinery. In October, our Marine division madea contract of similar deliveries to two new cruiseliners owned by the Malaysian Star Cruises anddue to be completed at the German Meyerwerftshipyard in 1998 and 1999.

6


Generators made by ABB Motorsgenerate electricity in wind-poweredturbines at the Yorkshire Royal MoorWind Farm in England.

KEY FIGURES 1 9 9 6

Revenues: FIM 642 million

Export orders: FIM 491 million

Personnel (31.12.): 642

Profitability: good

7

Profitable growth bydeveloping operations

Compared to the previous year, ABB Motors madesignificant advances in the Far East. The companyalso retained its position in Central Europeancountries, despite a decline in total volume in thisarea’s markets.

Among the largest orders received were those fromUPM-Kymmene’s Rauma paper machine and theMalaysian Genting Sanyen paper machine, whichordered high-efficiency electric motors for sectionaldrives as well as DOL motors. Roller table motorsdesigned for demanding operating conditions wereordered for the hot-rolling plant of the Saudi-Arabian Hadeed project. ABB Motors is also asignificant manufacturer of wind generators, withseveral orders received for them.

The most important deliveries were to Metsä-Serla’s Kiri project and UPM-Kymmene’s Valkea-


Roller table motors, delivered toNational American Steel in the USA,are also among the most commonlyordered products.

koski project, which were supplied with motorsfor sectional drives, and the Taiwanese YiehLoong delivery comprising roller table motors fora hot-rolling plant.

Delivery processes shortenedProduction investments made last year wereintended to bring operations closer to customers.Production processes have been divided into twoparts, to ensure profitable growth and to shortenlead times in the order/delivery process, improvecustomer-orientation and develop teamwork.New notching centers, and flexible automaticmanufacturing systems (FMS) for manufacturingframes, shields and shafts increased productioncapacity.

The new motor lines are flexible and fast. Forexample, the standard motor line started in 1996can dispatch a motor within 24 hours of receivingan order. A long chain of people, from employeesto occupational health experts, helped design theline and its tools and procedures, which representthe latest technology. Operators are multi-skilled,so that sudden absences do not upset production.The line has easily achieved its target capacity of100 motors a week.

A more comprehensive range of productsVarious customer applications ordered for windpower stations constitute the most importantinput in product development. At present, mostcustomers for wind generators are located inDenmark and the Netherlands, while theEuropean markets for wind turbines are

principally in Germany and Great Britain.The Chinese and South American markets areexpected to grow in coming years.

The company has prepared to supply the windenergy markets by introducing a new productionline manufacturing generators for wind powerstations. Almost one thousand generators weremade in 1996, with ABB Motors supplying mostof the requirements of the world’s largestmanufacturer of wind power stations.

A number of production series were supplementedduring the year. The steel motor series wascomplemented with motors size IEC 400. TheNEMA cast iron motor series now comprises sizes440-587, and the series of motors for hazardousenvironments is now complete and approved.

8


ABB Control’s handle range wasawarded in the Pro Finnish Designcompetition.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 834

Profitability: good

Design award forABB new handle range

ABB Control Oy’s investments in industrial designhave been awarded. The new handle range wasawarded in Pro Finnish Design competition.Electro-technical products must not only be welldesigned and ergonomic, but also easy tomanufacture and able to meet operatingrequirements.

Demands for better quality of electricity haveopened excellent market prospects for theharmonic filtering and power factor correctionequipment developed and manufactured byABB Control. These devices have already beensupplied for many applications, ranging fromprocess industry to greenhouses.

Increased exportsA large increase in exports has compensated forweakening domestic demand. Switchgear exportsdoubled last year, while switch exports alsogrew briskly.

9


The development of the newenvironmental management system hasimproved the operation, safety andcleanliness of the oil store.

The largest single export order came fromThailand, when Advance Agro ordered low-voltage switchgear and busduct system for theirpulp line, paper machine and power plant. Low-voltage switchgear and busducts were delivered tothe Thai company, Siam Paper, last year.

The most significant Finnish orders were low-voltage switchgears and busducts for Enso’s Lumi7 project in Oulu, which also were deliveredduring 1996 and an order from UPM-Kymmene’sRauma Paper Mill. Outokumpu Oy in Tornioordered motor control centers and busducts forthe annealing and pickling line of their refinedsteel mill. Low-voltage switchgear and busductswere also delivered last year to the Kaukaspaper mill. Metsä-Botnia’s Kaskinen mill wassupplied with power factor correction equipmentand harmonic filters.

Efforts to maintain the personnel’s work fitnessand to improve the working environment werecontinued. The emphasis was on teamworktraining and personnel skills development.

To improve service, a new information system wasintroduced in the Systems Division.

Environmental protection has always been one ofABB Control Oy’s top priorities. In the turn ofthe year, the company became the first Vaasa-based company who received a certificate ofenvironmental management systems covering thecompany’s all operations. The certificate is basedon the international ISO 14001 standard.

10


Metsä-Serla ordered instrumentationand process electrification fromABB Installaatiot for its Kirkniemi papermill and auxiliary departments.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 1,549

Profitability: good

1

Large industrial projects andcomplete building servicespackages

ABB Installaatiot maintained its good market share,while the company’s positive profit developmentcontinued. The largest orders received for industrialprojects are an instrumentation and processelectrification contract for the Metsä-Serla Kirkniemipaper mill and the process electrification and air-conditioning of the UPM-Kymmene KaukasLappeenranta pulp mill. The largest buildingservices orders received are for building servicesfor the Lesnaya office building in Moscow andfor the Hartwall Areena in Helsinki.

The year’s most significant deliveries included air-conditioning and automation for the president’spalace in the Kremlin, the electrification of thehead office of Sperbank Russia and a completebuilding services delivery for ICL’s office building.

Europe’s largest and most modern prefabricatedconcrete building module factory at Sertolovonear St. Petersburg was completed as the lastproject in the military housing program.ABB Installaatiot Oy was responsible for theelectrification and power supply system of thefactory and its related dried powder productsfactory and auxiliary premises.

1


Jyrki Heinonen and Markku Laaja fromABB Installaatiot are installing a highvoltage cable terminal.

ThermoNet gains ground andis developedThe majority of product development investmentswent to the further development of ThermoNettechnology, used to improve the energy efficiencyof buildings and communities and to cut service-life costs.

Building services system products and serviceoperations promoting industrialized constructionare being developed. Markets for building servicessystem products are being opened in the EU areaand in Russia and the Baltic countries.

District heating and cooling distribution systemsare being developed in a community energysystems program. The results will be applied indistrict cooling demonstration projects, based ondistrict heating, to be implemented in Helsinki,Finland and in Herning, Denmark. The use ofground water will be investigated in a pilot plantto be built in Vaasa.

In the spring, the Finnish District Heating Asso-ciation awarded the ThermoNet system its EnergyGolden Nugget prize.

ABB Installaatiot has participated in the developmentof the LON (Local Operating Network) system,an open building services control and informationsystem that is not dependent on any particularmanufacturer.

Focusing on development ofskills and qualityA great deal of attention is being paid to qualityand environmental matters and theirdevelopment,as well as to personnel development. Last year wasa work safety theme year in the company. At theend of the year, quality manager Kai Alopaeusreceived the national work safety award.

12


Call us when you need maintenance.We’re at your service, all round theclock, all round the year.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 1,284

Profitability: good

Development ofcomprehensive maintenanceservices continued

ABB Service Oy continued to develop maintenanceservices to improve its customers’ productionprocesses and cost-effectiveness. The company’sgoal as a comprehensive maintenance company inFinland is to meet its customers’ present andfuture requirements.

Maintenance outsourcing for several customersFor the second year running, several productionplants in various fields handed over responsibilityfor their maintenance to ABB Service andconcentrated on their core business, thus increasingtheir competitiveness. These full-service contractsincreased the personnel of ABB Service by abouttwo hundred persons.

Spare parts service becameABB Logistics Center, FinlandABB Service’s spare parts service covers not onlyconventional spare parts sales and technical support,but also a large number of other activities relatingto maintenance. In the spring of 1996, the nameof the service was correspondingly changed toABB Logistics Center, Finland.

Spare parts logistics efficiencyincreased by StatimThe Statim spare parts ordering and informationsystem for ABB’s customers was launched inFebruary 1996. This has a partial real-timeconnection to ABB Service Oy’s operational sales,warehousing and purchasing system. By February1997, Statim was in use in 14 countries andincluded 14 000 items. By the end of the year,the system will cover 100 000 items.

ABB now sells and servicesJungheinrich fork-lift trucksSince spring 1996, ABB Service has beenresponsible for the sales and service of GermanJungheinrich fork-lift trucks in Finland.The agreement covers indoor and warehousetrucks. Jungheinrich trucks have been sold inFinland since the 1950s.

13


ABB Fläkt develops and manufactureshigh-quality products and services- rapidly and effectively. They meetcustomer requirements for thetreatment of both indoor air andindustrial process air.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 533

Profitability: good

The expert in air handlingincreased its exports

The revenues of ABB Fläkt Oy increased by about25 % over the previous year, mainly due to exports.All the profit units of the company are certifiedunder the ISO 9001 quality system. The company’sinternal innovativeness is reflected by a considerableincrease in its patent applications.

Rapid growth acceleratesinternal changeLapinleimu Oy, a subsidiary manufacturing airterminal devices, was merged with ABB Fläkt Oyin January 1997. This will improve customerservice and further increase operational efficiency.

Since February, all of ABB Fläkt’s operations inthe Helsinki region have been concentrated inEspoo. A new duct factory is under constructionin Turku, and will start operation in the spring.

New products launchedIn 1996, the new generation EU 2000 air handlingunit was brought onto the market, its greatestadvantage being economy in all sub-areas andover its entire life.

The first applications of the ThermoNet buildingservices center were also launched in 1996.The ThermoNet runs a building’s heating,cooling and ventilation. The company alsounveiled the quietest powered roof-fanon the market.

New software package forair handling designersAn entirely new tool was developed for airhandling designers, the most up-to-date softwarepackage in the field. The package comprises sixprograms, the most versatile of which is theEU 2000 air handling unit dimensioning andselection program.

14


The 100,000 MVA milestone in powertransformer production was reached inMarch 1996. The ‘Hero of the Day’ wasa 47 MVA transformer to an extensiveelectrification project in Colombia.The photograph shows representativesof the customer, Central Hidroelectricade Caldas, and of ABB Transmit.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 1,307

Profitability: good

1

A firm foothold inpower transmission anddistribution

ABB Transmit Oy offers a comprehensive range ofproducts for power transmission and distribution.The company’s revenues increased by 7 % overthe previous year. Exports account for more thanhalf of ABB Transmit’s business.

Large transformer orders in FinlandTeollisuuden Voima Oy ordered a 1000 MVApower transformer for the renovation project atOlkiluoto nuclear power station. The largest3-phase transformer ever made in the NordicCountries, will replace the existing 800 MVAmain transformer and permit the output increaseof the plant units.

IVO Voimansiirto Oy placed an order for two

5


A cellular terminal is the cornerstone ofpower distribution automation. The REFcellular terminal is a new generationprotective relay developed by Relaysand Network Control. The REF wasawarded the prize for the best productat the Poznan Fair in Poland.

400 kV power transformers for substations.In addition, ABB Transmit will supply circuitbreakers and surge arresters for a substationproject increasing power capacity in thetransmission lines between Sweden and Finland.

A GIS-switchgear extension and a powertransformer were supplied to Metsä-Botnia inKemi and a medium voltage switchgear toEnso Fine Papers Oy in Oulu.

Relays and electrification projects abroadRelays and Network Control Division furtherincreased exports. The growth was particularlystrong in eastern Europe, Asia and Sweden.

Transmission and Distribution Projects Divisionwas responsible for a significant electrificationproject in Colombia. Most of the 28 transformersand other equipment delivered were taken over in1996. The division also won a large order for dieselpower plant electrification in the Tapal project inPakistan.

New products and developmentresponsibilitiesAn important production centre for air-insulatedswitchgear is being created in Vaasa following thetransfer of Uniswitch switchgear manufacturefrom Norway to Finland.

Systematic quality development led to extensionof ISO 9001 quality certificate to include networkcontrol and substation project operations.

Power Transformers Division pioneereddevelopment of operations; model process basedprocedure developed in Vaasa is expanded in ABB.

16


In the fall, the After Sales unit rebuilt thenumber 3 electrostatic precipitator ofthe soda recovery unit at Metsä-Sellu’sÄänekoski pulp mill.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 156

Profitability: good

1

Increasingly comprehensiveservices for power producers

ABB Power is responsible for business operationsinvolving power production and environmentaltechnology in Finland.

In the spring of 1996, a new profit unit, AfterSales, was established, comprising power plantand environmental service operations, with theaim of providing even more comprehensivecustomer service.

ABB Power was granted a quality certificatemeeting the requirements of ISO 9001. Qualitymanagement is now being developed further onthe basis of the European Quality Award criteria.

Large contracts in environmental technologyand power production machineryDeliveries of the Environmental Systems divisionincluded a pulp dryer for UPM-Kymmene’sKaukas mill and four electrostatic precipitators for

7


A turbine plant was delivered toOy Metsä-Rauma’s new pulp mill.

the Mosenergo coal-fired power plant in Moscow.Kvaerner Pulping Oy ordered electrostaticprecipitators for a soda recovery unit at the RiauAndalan mill in Indonesia, and Rautaruukki Oyordered a fabric filter for process dust removal.

The Power Generation unit supplied a turbo-generator for Oy Metsä-Rauma Ab. A contractwas signed with Kotkan Energia Oy for thesupply of a gas turbine and a steam turbine for agas combi power plant. The turbine plant willstart up in August 1997. ABB Power is responsiblefor future maintenance of the plant’s gas turbine.

The Control Systems unit received an order fromUPM-Kymmene for an EHJ2000 energy controlsystem. The delivery will include a total of ninecomputer systems for seven factory locations inFinland. The system will help manage the group’senergy purchasing operational planning, purchasingmonitoring and optimization, and post-invoicingand reporting.

Neste Oy ordered a gas turbine power plantelectrification project, with delivery due in thespring of 1997. Iijoen Voima Oy ordered agenerator for the Raasakka hydro power plant,together with electrification and automation.

New technology tested in a pilot power plantThe Wasa Pilot Power Plant ordered a 38 MWdiesel combi power plant from Wärtsilä Diesel.The principal shareholder in the project is WärtsiläDiesel Oy, which is developing and testing newpower plant technologies. ABB is supplying theplant with a new type of desulphurizationtechnology, a steam turbine and electro-technicaldeliveries. In addition, ABB Power Oy is ashareholder in the newly established powerplant company.

18


During the summer, more than 30,000households in Sarajevo were connectedto district heating using ABB Ecopipe’selements.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 35

Profitability: satisfactory

1

The 19-kilometre-long Vuosaari-Pasilatunnel, for which ABB Ecopipe delivereddistrict heating pipes, will be broughtinto use in autumn, 1997.

Quality certificationinvigorates operations

ABB Ecopipe Oy specializes in the manufactureof insulated district heating pipes. For severalyears, the company has emphasized thecomprehensive development of quality.In the summer of 1996, Ecopipe was grantedan ISO 9002 certificate for its quality system,which is particularly important in the exportbusiness.

The company significantly increased its exportsover the past year. Trade with Russia tripled andsales to Estonia nearly doubled. Ecopipeparticipated in the Finnish government’sreconstruction project in Sarajevo by supplyingabout 7 kilometers of district heating piping.

In Finland, the Helsinki City Energy company’sextensive Vuosaari-Pasila tunnel project, whichhas lasted for several years, was completed.

9


“18.00 hours is a system that ensuresthe Thorsman cable ducts you ordertoday will be supporting the cablestomorrow. At your installation.”ABB Asea Skandia expanded its servicesand became the first electricalwholesaler to accept daily ordersup to 6.00 p.m.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 275

Profitability: good

ABB Asea Skandiaawarded Finnish logisticsprize in 1996

Last year, the Finnish division of the ICHCA(International Cargo Handling CoordinationAssociation) awarded ABB Asea Skandia itsFinnish commercial logistics prize for work on thesubject ‘The development and implementation ofa wireless table and fork-lift mountainedcomputerterminal system´. In November 1996, the company’smaterials operations quality system was approvedas conforming to the ISO 9002 standard. It isnow intended to bring operations up to Europeanquality award standards.

ABB Asea Skandia has succeeded against stiffcompetition in saturated markets. The good resultcame not only from cost savings, but also fromgood service achieved by improved materialscontrol. The largest single order was for electricalinstallation materials for the Sarajevo waterworksreconstruction project.

The central warehouse introduced a system, inwhich orders placed before 4.00 p.m. aredispatched from the Hyvinkää Logistics Centerthe same evening and are delivered to thecustomer the following morning. This system hassignificantly improved customer service and hasbeen in operation for all of last year. The excellentexperiences gained from this led to an experimentduring the autumn, in which orders can be placedup to 6.00 p.m., the products being dispatchedthe same evening. Positive customer reactionmeans that these services will be continuedand developed this year.

20

Two commercials were run on theFinnish commercial TV channel for theCylinda tumbler drier. One of these wasawarded in the VOITTO competition asthe best Finnish advertising film of 1996.


2

The management group of the AFS companies:From left: Olli Lempiäinen, Gunnar A. Larsen,Kenneth Stenberg, Gunnar Hindsberg,Heli Kämäräinen and Gerd Gripenberg.

KEY FIGURES 1 9 9 6

Share capital: FIM 175 million

Income afterfinancial items: FIM 72 millionBalance sheet total: FIM 2,608 million


Profitability: good

Financing companiessupport ABB’s sales

The ABB Financial Services Group’s result for1996 was good. In particular, sales grew in bothleasing financing (ABB Credit Oy) and investmentmanagement (ABB Investment ManagementFinland Oy), and the targets were exceeded. In thefuture, the AFS Group will increasingly concentrateon supporting sales by the ABB companies in anintegrating Europe and in the emerging marketsof the South East Asia, where competition isstiffening.

ABB Project & Trade Finance exploitsa range of financing sourcesThe growth of exports by the industrial ABBcompanies is targetted to high risk countries wherelack of financing is often an obstacle to investments.In the near future, the greatest challenge will be tostructure financing solutions in these emergingmarkets. In 1996 ABB Project & Trade Financeunit worked especially in the Russian market forwhich the risk taking appetite of commercialfinanciers has gradually increased.

ABB Credit arranges leasing financingLeasing financing arranged by ABB Credit Oy hasbecome an established form of financing for theenergy sector. Metal and engineering, forest andchemical industry enterprises have also begun toutilize the new opportunities offered by leasingfinancing. During its six years of operation, thecompany has developed into Finland’s marketleader in large industrial leasing transactions.

ABB Treasury Center manages risksIn the future, financing risks and the needs of riskmanagement must be known more precisely. Theviews of the professionals at ABB Treasury Center(Finland) Oy, and their efforts to improve riskmanagement through system support, produced agood result in 1996 - a year in which Finlandjoined the ERM and which was characterised byfluctuating interest rates. The company also actedas the internal bank of the Baltic ABB companies.

ABB Investment Management manages assetsContract-based investment management has

become established in the Finnish capital markets.As a pioneer in the field, ABB InvestmentManagement (Finland) Oy has focused on long-term customer relations and successfully madenew relationships among pension funds.

ABB Rahastoyhtiö (ABB Fund) terminated;securities trading changed ownersFrom the start, the development of the fundsmarket has been weak and from time to time thegrowth in volume has ceased. The attraction ofthe Finnish markets was insufficient for theprofitable growth of ABB Rahastoyhtiö Oy andfor its continued operation.

In May, ABB sold all of its worldwide brokerageoperations to Unibank, the second largest bank inDenmark. In Finland, ABB Aros Securities Ltd.was part of the deal.

1


The largest tool in the company’sfifty-year history was supplied toVolvo Truck Corporation to makecomponents for truck cabs.

KEY FIGURES 1 9 9 6



Personnel (31.12.): 224

Profitability: good

Tools gainscertificate

At the end of 1996, ABB Strömberg Tools, whichat the same time shortened its name to ABB Tools,gained the ISO 9001 quality certificate grantedby Det Norske Veritas. Work on quality will notstop with certification, as the development ofoperations is a continuous process. An environmentalsystem is being created parallel to the qualitysystem.

Cost-effective data systems for offices, financialplanning and production are important tools inthe development of operations. A computer-aideddesign (CAD) system and a CAM manufacturingsystem have already served Tools for ten years.

Biggest deal in the company’shistory goes to SwedenMost of the customers are Finnish, but exports areexpanding. Last year’s largest single deal was madewith the Swedish Volvo Truck Corporation, whichordered press tools for making parts for truckcabs. The order included the largest tool ever madein the company. It weighed about seven tonnes.

Tools’ products are mostly tailor-made for customersand require a great amount of individualdevelopment, so that the customer always receivesa tool fitting his own requirements as closely aspossible. More than 4 million FIM are usedannually for this development work.

22


Renovation work began last year on theTurku Prisma project, in which anindustrial building is being convertedto a hypermarket.

KEY FIGURES 1 9 9 6


Balance sheet total: FIM 1,034 million

Personnel (31.12.): 165

Profitability: adequate

2

A ten-storey parking and office buildingat Pitäjänmäki in Helsinki will becompleted in the summer of 1998.

Many importantbuilding projects

1996 saw the completion of many importantprojects in the field of real estate. Official approvalwas obtained for the 14 000 m2 Prisma projectin Turku, which will convert industrial premisesinto a hypermarket. Work began at the end of theyear. Work also began on a 4000 m2 extension toan industrial building in Turku, which will replacethe industrial premises lost because of the Prismaproject. The company owning a new building atPeronkatu was sold to Merita Rahoitus Oy, andwas then leased back on a 15-year leasingagreement.

Details of the area plan for Pitäjänmäki in Helsinki,which came into force in 1994, were reconsidered,and the parking garage was altered to a parkingand office complex. Design work for the parkingand office building began in early 1996 andbuilding commenced at the end of the year.The ten-storey building will have 12 620 m2 ofoffice space on four floors, the six lower floorshaving 28 850 m2 of parking space for 845 cars.The project is being financed by Eläke-Sampo,with Skanska Oy acting as project manager.ABB Current Oy has signed a 15-year leasingagreement for the building.

During the year, the remaining possible housingsites at Pitäjänmäki were sold, and the plans forStrömbergintie 6 and Kornetintie were developedfurther.

Group cost-cutting creates a challenge forcompany servicesThe main challenge of company services was tocreate conditions for the Group’s cost-cuttingprogramme. Competitive tendering andreorganization (re-numbering, virtual network)gave good results in telecommunications services.The purchasing of electrical power organized atGroup level achieved savings in both the price ofenergy and in the power requirement covering thewhole country.

Operation of the company became more efficientwhen key appointments were confirmed and theorganization of the company was clarified.Quality work and teamwork were reinforced.IT Center and ABB Development Services wereadded to the company as new operations.

3


2

The Production Technology Laboratory has combinedDFMA (Design for Manufacturing and Assembly) andteamwork with excellent results. The number ofproduct parts and work stages, as well as productioncosts, have been reduced to improve competitiveness.

KEY FIGURES 1 9 9 6




Research operationscontinued to grow andinternationalize

ABB Corporate Research works with otherABB companies to develop new products and toimprove quality and operations.

The revenue of the unit grew by 11 % in 1996.The size of the projects also increased. The researchcentre was also strongly represented in newextensive international HIP-projects (High RiskHigh Impact Projects), which contain both greatrisks and great opportunities.

The role of the production technology laboratoryin ABB’s international research organization wasreinforced. Enterprise simulation and businessprocess simulation projects were carried out inseveral ABB countries. In Asia, an extensivefeasibility study was carried out into the possibilitiesof expanding the operations of the ABB Group’sPTO organization (Process TechnologyOrganization) into the area.

New operating procedures and methods forFinnish ABB companiesAn EQA (European Quality Award) assessmentprocess was started in most Finnish ABBcompanies. A new Lean Office concept, whichmakes office work more efficient, was introducedin many Finnish ABB companies. The PDM(Product Data Management) pilot project formanaging product data proved successful inFinland, leading to its wider introduction in ABB.

Improved teamwork received particular emphasisin the development of the expertise of the electronicsystems laboratory. The replacement of oldmeasurement systems started with the design ofan effective and easy-to-use floating three-phasemeasurement system for ABB Industry Oy andABB Service Oy. Paper quality improvement waspursued through the continuation of the paperand pulp fibre light scattering project.

The modelling and simulation of motors continuedby field-testing the applicability of the algorithmsdeveloped earlier. There was an increase in

activities intended to find suitable simulationtools for the ABB companies.

The materials laboratory continued plastics moldingresearch and consultation. Environmentalprotection operations were expanded to includeLife cycle Analyses of products.

Testing accreditedIn December, the Center of Metrology andAccreditation (FINAS) approved accreditation fortesting according to IEC standards. The operationsof the testing laboratory are now accredited forboth testing and calibration.

4


INCOME BEFORE TAXES

OPERATING EARNINGS AFTER DEPR.

Consolidated income statement 1996 (FIM 1,000)

Total Total Group Group

1996 1995

7,813,086 7,139,036-3,857,425 -3,489,629-1,956,328 -1,832,563

-973,067 -913,730182,418 138,199

-182,607 -157,64123,365 75,115

1.049,442 958,787362 643

116,358 172,158-91,495 -103,100

-109,880 -154,002-83 478

964,704 874,964-213,600 -184,388-42,786 -13,415

-510 -1,821

707,808 675,340

REVENUESMaterial expensesPersonnel expensesOther expensesChange in inventoriesDepreciation of fixed assetsUnusual Items

Dividend incomeInterest incomeInterest on advancesInterest expensesExchange and translation differences

Current taxesDeferred taxesMinority interest

NET INCOME

25


L I A B I L I T I E S A N D E Q U I T Y :

A S S E T S :

Consolidated Balance Sheet, Dec. 31, 1996 (FIM 1,000)

Total Total Group Group

31.12.1996 31.12.1995

536,848 687,710926,972 973,171833,108 1,037,712

1,230,265 1,156,137

3,527,193 3.854,730

1,265,106 1,044,32831,066 28,38779,683 0

517 95916,498 28,343

576,130 506,032863,202 917,750

2,832,202 2,525,799

6,359,395 6,380,529

529,509 496,6681,240,985 1,499,180

461,644 635,019

2,232,138 2,630,867

756,632 854,16535,032 45,279

100,160 10,626426,730 369,859

2,949 3,653

1,000,000 1.000,0001,002,933 687,641

95,013 103,099707,808 675,340

2,805,754 2,466,080

6,359,395 6,380,529

CURRENT ASSETS Cash and marketable securities Trade receivables Other current receivables Inventories

TOTAL CURRENT ASSETS

FIXED ASSETS Loans granted and financing receivables Shares and participations Goodwill Intangible assets Construction in progress Machinery and equipment Land and buildings

TOTAL FIXED ASSETS

TOTAL ASSETS

CURRENT LIABILITIES Trade payables Short-term loans Other current liabilities

TOTAL CURRENT LIABILITIES

Advances from customers Medium- and long-term loans Pension liabilities Deferred taxes Minority interestSTOCKHOLDERS' EQUITY Share capital Restricted reserves Retained earnings Net income

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND EQUITY

26


CHANGE IN CASH AND MARKETABLE SECURITIES

EXTERNAL FINANCING

INVESTMENTS IN FIXED ASSETS

INTERNAL NET FINANCING

INTERNAL FINANCING

Change in Financial Position 1996 (FIM 1,000)

7,813,086-3,823,164-1,956,328

-973,067148,15768,388

-84,738234,516

-178,211-148,157

15,988-213,600

-510-425,000477,360

-212,63931,502

-246,553

-205,677-11,24821,924

-145,331

Total revenuesMaterial expensesPersonnel expensesOther expensesChange in inventoriesUnusual ItemsFinancial income and expenseChange in current receivablesChange in current non-interestbearing liabilitiesChange in inventoriesChange in advances from customersCurrent taxesMinority interestDividend paid

Change in financial receivablesSales of fixed assetsCapital Expenditure

Change in short term loansChange in medium and long term loansOther

27


The Finnish ABB Companies, January 1, 1997

ABB Industry Oy

PresidentMartti T. Määttänen*

ABB Installaatiot Group

PresidentSakari Vornanen*

ABB Motors Oy

PresidentJorma Koivusipilä

ABB Service Group

PresidentKalevi Hasi

ABB Control Group

PresidentRainer Smått

ABB Fläkt Oy

Managing DirectorHannu Paitula

I n d u s t r i a l a n d B u i l d i n g S y s t e m s

ABB Transmit Oy

PresidentLauri Ruotsalainen*

P o w e r Tr a n s m i s s i o n a n d D i s t r i b u t i o n

ABB Power Oy

PresidentKalle Mattila*

ABB Ecopipe Oy

Managing DirectorHarry Majonen

P o w e r G e n e r a t i o n

ABB Financial ServicesGroup

PresidentGunnar Hindsberg*

ABB Current Oy

Managing DirectorAulis Kohvakka

F i n a n c i a l a n d R e a l E s t a t e S e r v i c e s

ABB Asea SkandiaGroup

Managing DirectorMarkku Nihti

ABB Tools Oy

Managing DirectorAri Niemi

S p e c i a l S e r v i c e s

*Member of the Executive Committee (FIEC)

Working Committee of FIEC

President and CEO, Country ManagerMatti Ilmari*

Finance and Business ControlSenior Vice President Erkki Luhta*

Human ResourcesSenior Vice President Harri Mattila*

CommunicationsVice President Pentti Nuutinen*

ABB CorporateResearch, Finland

Senior Vice PresidentJuhani Pylkkänen*

Marketing,Domestic

Vice PresidentOlli Pakkala

Marketing,Europe

Vice PresidentHarri Launonen

28


ABB Group1,000 Companies37 Business Areas

organized into4 Business Segments

ABB Asea Brown Boveri LtdZürich, Switzerland

ABB ABSweden

ABB AGSwitzerland

ABB ABShareholders

ABB AGShareholders

50 % 50 %

2

The ABB Group

ABB is a global $35 billion engineering Groupserving customers in electric power generation,transmission and distribution, industrial andbuilding systems, and rail transportation. Incomebefore taxes in 1996 was $2,007 million and netincome was $1,233 million. The total numberof employees worldwide at the end of 1996 was214,894. Of the Group's total sales, 57 percentwere in Europe, 18 percent in the Americas, and25 percent in Asia, Australasia and Africa.

ABB Group ReportsThe ABB Group publishes an annual report aswell as a six-month report in English, German,and Swedish. The English version is binding.The Group also publishes an annualEnvironmental Review. These reports canbe obtained from:

ABB Oy, Corp. comm.PL 69FIN 65101 Vaasa+358 10 22 41224

Ownership structure:ABB Oy is a fully owned subsidiary ofABB Asea Brown Boveri Ltd, Zurich (Switzerland),the holding company of the ABB Asea BrownBoveri Group of approximately 1,000 companiesaround the world.

ABB Asea Brown Boveri Ltd is owned in equalparts by ABB AB, Stockholm (Sweden) andABB AG, Baden (Switzerland).

The shares of the two parent companies are listedon various stock exchanges in Europe and theUnited States.

9

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