ABB will take a charge of $470 million (SFr799 million) against its 2001 earnings to increase its provisions for asbestos claims in the United States.This content was published on January 30, 2002 - 10:22
The news that the company would as a result post a loss for 2001 wiped nearly $1 billion (SFr1.7 billion) off ABB's stock market value.
The news shocked the market which had recently pushed ABB shares higher on hopes that the asbestos problems were contained.
Shares ended the day down almost seven per cent at SFr15.45. Over the past 12 months, ABB shares have collapsed by 60 per cent.
In a statement released on Wednesday, ABB's chief executive Joergen Centerman said the group expects a net loss in 2001. ABB's asbestos provision now totals around $940 million.
"After our detailed annual review of the asbestos issue, we have decided to increase our provisions with an additional charge of $470 million against 2001 earnings, and we expect a net loss for the ABB Group in 2001," explained Centerman,
Centerman added that he did not expect the Swiss-based group to make any further provisions for asbestos-related claims.
Power and automation technology group ABB will report 2001 results on February 13. Until Wednesday's announcement, analysts had widely expected the group to report a profit for last year.
The claims made by people who say they were made ill by asbestos concern liabilities pending against Combustion Engineering, a US subsidiary of ABB.
Some analysts are now doubting that the $940 million set aside already will be enough to meet the final claims bill.
Investment bank Merrill Lynch said in a statement that it expects the costs to reach $2 billion for ABB.
"Our view is that new claims and cost per claim could continue to accelerate for the next few year and will continue to be received for at least the next decade," Merrill Lynch added.
Backing up the scenario of increased claims to come ABB said the number of new claims filed against Combustion Engineering rose to 55,000 in 2001 from 39,000 in 2000.
ABB said Combustion Engineering had intensified efforts to identify which claims were valid.
The group said the number of invalid claims appeared to be increasing significantly, and these were being disputed. This action has led to a fall in the number of claims settled to 27,000 in 2001 from 34,000 in 2000. Meanwhile, the average amount paid per claim increased from $4,833 in 2000 to $6,069 in 2001, added ABB.
At the end of last year, 94,000 claims were pending against Combustion Engineering compared with about 66,000 at the end of 2000. It expects insurers to reimburse some $43 million in 2001 compared with a total of $136 million paid out last year.
swissinfo with agencies
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