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ABB says turnaround is complete

ABB is at last looking forward to a year in the black. ABB

ABB, the Swiss-based engineering group, says it has successfully completed its turnaround and will achieve a full-year profit this year.

The company announced on Thursday that it had swung to its biggest quarterly profit in more than two years, with improved demand in most markets.

It reported “solid” increases in core division orders, revenues and earnings.

“We have said before we will achieve a black number at net profit level in the full year… It will be blacker than black,” commented chairman and CEO Jürgen Dormann.

The company reported net income of $86 million (SFr110 million) for the second quarter after posting a loss of $55 million during the comparable period last year.

The maker of industrial robots and electric turbines said in a statement that net profit for the first six months was $90 million, compared with a loss of $100 million in the same period last year.

Solid track record

“Most of the businesses in our core divisions continue to outperform the market. With a solid track record of achievement, we remain on course to achieve our 2005 targets,” said Dormann.

The group’s target EBIT (earnings before interest and taxes) remains eight per cent in US dollars.

The 2005 EBIT margin targets in dollars for the power technologies and automation divisions remain at ten per cent and 10.7 per cent respectively.

ABB said that sales at its automation unit rose 12 per cent in the second quarter to $2.7 billion and climbed by 18 per cent to $2.28 billion at its power unit.

Group orders rose 17 per cent to $5.53 billion, compared with expectations of $5.2 billion.

“The orders and sales at automation and power technologies are clearly better than expected,” commented analyst Alessandro Foletti at Lombard Odier Darier Hentsch private bank.

Mixed bag

But he added that the overall picture was “a bit mixed”, pointing to slightly lower results at the operating and net income levels caused by higher-than-expected corporate expenses.

Operating income more than doubled to $288 million, while group sales rose by one per cent to $4.91 billion.

A major restructuring programme under Dormann helped ABB break even in the first quarter of 2004 after three consecutive losses. An acquisition spree in the 1990s had almost pushed the group to collapse.

The company’s debt stood at $6.1 billion at the end of June compared with $6.7 billion at the end of March.

Outgoing chief financial officer Peter Voser said that ABB would repay some bonds early to meet its target of reducing debt to $4 billion by the end of next year.

The group confirmed its target of four per cent sales growth on average from 2002 to 2005.

Oil and gas

Commenting on divestments, ABB said the sale of a major part of its oil and gas business, first announced in October last year, was completed on July 12.

Net proceeds from the sale were about $800 million, also received this month.

Voser told journalists that he expected to sell the remainder of ABB’s oil, gas and petrochemicals unit this year.

He added that he still expected the company’s building systems unit in Germany to be sold this year.

ABB also confirmed that it was “confident” that its $1.2 billion asbestos settlement, which has been approved by lower US courts, would have a successful outcome.

A definitive ruling would put the lid on potentially crippling asbestos liabilities and help the sale of ABB’s Combustion Engineering business in the US, which used to make industrial boilers insulated with asbestos.

swissinfo with agencies

Second-quarter figures:

Sales $4.91 billion (+1 per cent)
Orders $5.53 billion (+17 per cent)
Net income $86 million

ABB has announced its turnaround is complete, after posting its biggest quarterly profit in two years.

It reported “solid” increases in core division orders, sales and earnings.

Net income for the first half was $90 million.

Chairman and CEO Jürgen Dormann is confident that the company will record a profit for the whole of the year.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR