ABB posts sharp rise in net profit

The company has a positive outlook for the remainder of 2006 Keystone

The ABB engineering group has reported second-quarter net profit of $367 million (SFr454 million), almost three times the $126 million for the same period last year.

The Swiss-Swedish industrial giant, which has its headquarters in Zurich, said on Thursday that second-quarter sales had risen by five per cent to $6 billion, with orders up by 19 per cent to $7.28 billion.

A company statement said earnings before interest and taxes (Ebit) had beaten forecasts at $640 million, up 73 per cent, reflecting good growth in the group’s power products division.

“It might well be the best result in ABB history,” said company chief executive Fred Kindle.

The group said it expected a “solid second half” and added that the outlook for the remainder of the current year remains positive.

“We are clearly benefiting from the strong global demand for improved power infrastructure and increased industrial efficiency,” said Kindle.

“On top of that, our efforts to further improve our business performance continue to pay off.”

Energy boom

The engineering firm manufactures a range of equipment from electrical systems, motors, speed drives and quality-control systems involved in extraction and processing fuels.

As in previous quarters, strong demand from the energy sector amid high oil prices has been largely responsible for driving up profits.

The group said that it expected automation-related industrial investments to continue in most sectors, especially in metals and minerals, marine and oil and gas, with demand growth likely to be strongest in Asia and the Americas over the rest of the year.

The ongoing need for new power infrastructure and for greater industrial efficiency in the face of high oil prices should continue to drive demand for the remainder of the year.

However the impact of volatile prices for oil and commodities and the potential for further political instability in the Middle East posed certain business risks, it added.

ABB received almost ten per cent of its orders from the Middle East and Africa.

Comeback

These results confirm ABB’s recent turnaround and successful move back into profit, which Kindle has described as “a phase of profitable organic growth”.

In February 2006 the company announced that had swung into the black for the first time in five years, following a tough period when it nearly went bust.

The group, which has been plagued by asbestos claims in the United States, also reported that its asbestos-related plan for its Lummus subsidiary had been agreed by all parties and confirmed by US courts.

It would become final by the end of August if there were no appeals.

swissinfo with agencies

Key facts

ABB financial figures for the second quarter of 2006:
Net profit: $367 million, up from $126 million in the comparable period last year.
Sales: $6 billion (+5%)
Orders: $7.28 billion (+19%)
Ebit: $640 million (+73%)

In brief

Asea of Sweden and BBC Brown Boveri of Baden, Switzerland, merged in 1988 to form ABB.

After an initially successful expansion, ABB almost collapsed in 2001, with a record loss of $691 million.

At the same time, the company reported that former bosses Percy Barnevik and Göran Lindahl had received SFr148 million and SFr85 million in pension benefits after stepping down. After an outcry, some of the money was paid back.

The company has had to set aside more than $1 billion to settle asbestos-related lawsuits in the US.