Profit at ABB forges ahead

The first half was positive for the Swedish-Swiss concern (ABB) ABB

ABB has reported first-half net profit of $325 million (SFr421.3 million), more than three times the $90 million for the same period last year.

The engineering concern, which has its headquarters in Zurich, said on Thursday that sales for the first six months had risen by 11 per cent to $10.81 billion, with orders up by eight per cent to $12.4 billion.

In a statement, the power and automation technology firm said net income for the second quarter had risen to $126 million from $89 million a year ago.

The second-quarter profit was more than double the figure forecast by market analysts and was helped by lower-than-expected restructuring charges. ABB reported a first-quarter net profit of $199 million.

“We had another quarter of strong operational performance building on the momentum we saw at the beginning of the year,” said ABB chief executive Fred Kindle.

“Although we took sizeable provisions to improve the longer-term profitability of our transformer business and to cover litigation and regulatory costs, we were able to improve our profitability once more.”

“Our focus remains on improving our business execution quickly and lifting operational efficiency even further,” he added.

Restructuring plan

The company last month launched a $240 million restructuring plan of which it booked $66 million in the second quarter, less than most analysts had expected. ABB has said it would book half the $240 million charges this year.

“The charges will still come. Everyone thought they would come in the second quarter but now they will come in the second half,” commented analyst Mark Diethelm at the Zurich Cantonal Bank.

Operating profit in the second quarter rose 16 per cent to $371 million, compared with an average forecast of $286 million. Sales rose by ten per cent to $5.72 billion.

“The numbers are definitely very good, better than expected,” said Rolf Steinmann, who manages about $155 million at Generali Investment Consulting of Zurich.

“They have done the turnaround and Mr Kindle is doing a good job,” he added.

Asbestos

ABB has undergone a major restructuring after asbestos claims in the United States and crippling debt pushed it to the brink of collapse at the beginning of the millennium.

It now focuses its activities on power and automation technologies and completed its turnaround last year.

However, rising prices of raw materials such as electrical steel and transformer oil have weighed on margins lately, and ABB last month cut its margin targets for the full year.

Turnover in the second quarter grew most quickly in North and South America, increasing 17 per cent as economic growth helped orders and utilities upgraded power-transmission equipment.

Asian sales increased by 15 per cent as companies invested in industrial equipment produced by ABB’s automation unit.

Commenting on its continuing asbestos litigation in the US, ABB said it was working with the various parties on its roughly $1.4 billion settlement proposal to resolve outstanding issues in a “timely manner”.

Shares in ABB have risen by about a third this year, valuing the company at SFr17.7 billion. That compares with a six per cent gain at German competitor Siemens and 29 per cent at Schneider Electric of France.

swissinfo with agencies

Key facts

ABB first-half net profit: $325 million (SFr421.3 million), up from $90 million in the comparable period last year.
First-half sales: $10.81 billion (+11 per cent)

Second-quarter net profit: $126 million
Second-quarter sales: $5.72 billion

In brief

Chief executive Fred Kindle said at the end of last month that he expected ABB to make a “very significant” profit this year.

This would reverse four years of losses.

The company on July 5 secured a $2 billion credit line from a group of 20 banks at less than half the interest rate margin paid in 2003 as part of its $4 billion refinancing.