ABB job cuts send share price into free-fall

ABB dominated the business news this week Keystone Archive

The Swiss -Swedish engineering concern, ABB, announced massive job cuts this week in response to falling profits and the global economic slowdown.

Twelve thousand jobs are to go in the next 18 months as the company tries to improve its competitiveness. Two thirds of the cuts will come through redundancies. The announcement saw ABB’s share price fall by a fifth although it clawed back some of the losses later in the week.

ABB justified the eight per cent reduction in its workforce by highlighting falling profits, flat revenues and declining orders. But ABB’s CEO, Jörgen Centerman, found himself in the eye of a media storm for seeming too cheerful and confident when talking about the plans.

Several other companies reported figures this week as the summer results season rolls on.

The microchip producer, Micronas, added to the gloom by announcing that the slump in the technology sector had eaten into its first half results.
Its earnings for the first six months of the year fell to SFr 24.5 million ($14.16 million) compared with SFr32.6 million for the same period last year.
The decline came despite a rise in sales to SFr 283.7 million.

Adecco, the world’s largest temporary employment group, brought the smile back to the markets by reporting better than expected numbers on Thursday.
The Lausanne-based company said its operating income for the first half rose 21 per cent on a sales increase of 15 per cent.
Sales in the second quarter were less robust than in the first three months but the company said it was well placed to take advantage of the eventual upswing. The markets agreed and the share price soared.

There was good news from the Geneva-based biotechnology group Serono too. The company saw its net profit leap 42.5 per cent in the second quarter to SFr180 million. Its new treatment for multiple sclerosis, Rebif, showed a sales increase of 58 per cent.

And UBS this week warned that it expects its private equity arm, UBS Capital, to post big losses this year as the slowdown begins to bite. The bank said the decline in share values and the thin market in initial public offerings would weigh on earnings. It said pre-tax losses for the second, third and fourth quarters would amount to between SFr350 and SFr400 million.

The Swiss industrial group, Sulzer, said on Friday that it has agreed to sell its Sulzer Textil unit to Italy’s Promatech.

No financial details of the transaction have been released but Promatech will keep all 1,850 Sulzer Textil staff under their current employment contracts.
The deal will make Promatech and Sulzer Textil the market leader in the worldwide weaving machinery business.


The Swiss Federal Railways’ hopes of gaining a foothold in the British railway network may have hit the buffers after the British transport authorities announced plans to alter the franchise operating regulations.

The company declared last September that it wanted to operate concessions on three separate rail lines for a maximum 20 years starting in 2003.
But the British transport minister says that long-term franchises should no longer be granted.

Under his proposals, new licences would only run for five to six years rather than the 15 to 20 years originally envisaged.

And the country’s main petrol companies cut the price of unleaded petrol by two centimes this week and the cost of diesel came down by three centimes a litre.

It is the sixth consecutive time that the price of fuel has fallen and a litre is now 17 centimes cheaper than it was in mid-May.

by Michael Hollingdale