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ABB moves back into the black

ABB swings to profit but there is still a problem with asbestos claims. ABB

The international engineering concern ABB moved into the black in 2004 after three years of losses.

This content was published on February 17, 2005 - 09:57

The company, which is based in Zurich, reported on Thursday a net profit of $201million (SFr238 million), after making a loss of $779 million in 2003.

But the ABB figures were weighed down by one-off charges of $60 million related to various businesses being discontinued.

And the company, which has core businesses in power and automation technologies, lowered its profitability target.

It now aims for earnings before interest and tax (EBIT) to represent 7.7 per cent of sales this year instead of the eight per cent previously announced.

Group revenues for 2004 were $20.72 billion, up by one per cent on the 2003 figure of $20.43 billion.

Operating profit was $1.1 billion compared with the previous year’s $357 million, the company said in a statement.

Turnaround year

"We met many of our objectives in a key turnaround year," commented ABB’s new chief executive Fred Kindle, who has taken over from Jürgen Dormann.

"We again took out costs and lifted productivity. Coupled with a recovery in most markets, we substantially increased EBIT and reported a rebound in net income of almost $1 billion," he added.

ABB is still under the cloud of asbestos claims in the United States, with a $1.2 billion offer from the company still not approved.

The company now says it is considering whether to change its settlement plan, which concerns ABB’s bankrupt Combustion Engineering business in the US.

"We faced some challenges in the year, including a delay in resolving the asbestos issue. We are focused on finding timely solutions to these issues and took steps in the fourth quarter to establish a more stable base for 2005," said Kindle.

Net income from the fourth quarter of $13 million compared with a loss of $391 million for the same period in 2003.

Total debt was $5.5 billion at the close of 2004, down from $7.9 billion the previous year, the company reported.

Rebuilding

Kindle, who came to ABB from Sulzer, is rebuilding a company that had 102,500 employees at the end of the year, down from about 146,000 two years earlier and a peak of 219,000 in mid-1998.

In its outlook, ABB said that the 2005 EBIT margin for the Automation Technologies division remained unchanged at 10.7 per cent.

However, it was more cautious about the target for its Power Technologies unit, warning that it would be "challenging" to achieve the stated ten per cent EBIT margin.

swissinfo with agencies

Key facts

2004 financial figures:

Net profit: $201 million (SFr238 million), compared with a loss of $779 million in 2003
Net revenues: $20.7 billion, up from $20.43 billion in 2003
Income per share: 10 cents
The board of directors has recommended that no dividend be paid for 2004, in order to improve the company’s balance sheet.

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In brief

Sweden’s ASEA and Switzerland’s BBC Brown Boveri announced plans to merge in 1987. ABB began operations in 1988.

ABB is the world number one in power technologies and the world’s largest automation supplier (robots).

In recent years, the company has become bogged down with problems relating to a failed expansion strategy and asbestos claims in the United States.

It employed 102,500 people worldwide at the end of 2004.

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