ABB powers into profit

Strong performances in the Swiss giant’s core areas restores the firm’s fortunes.

Swiss engineering giant ABB showed signs of having turned the corner following years of financial difficulties.

ABB, which came near to financial meltdown less than five years ago, rebounded strongly thanks to surging demand in its core areas of power technologies and automation. A settlement of asbestos claims against the group in the US also appears close.

Results in the fourth quarter revealed a turnaround from a $223m (£128m) loss a year ago to a $222m profit this time around. This was achieved despite a $72m shortfall derived from revaluing ABB shares reserved to cover part of the asbestos liabilities.

The strong financial performance included an increase in sales in the fourth quarter to $6bn, a seven per cent year-on-year increase in orders, and a reduction in its net debt to $500m in December from more than $1bn a year ago.

The Q4 performance helped propel the group to a net profit of $735m for 2005, despite a relatively weak end to the financial year in its European and American markets. This was in marked contrast to the performance in its Asian operations, where high levels of economic expansion with investments in power transmission and distribution infrastructure produced strong second half results. Orders in Asia were 29 per cent higher compared to 2004, accounting for a quarter of all sales.

The middle east and Africa also continued to grow, with orders rising by six per cent and the region accounting for 11 per cent in total, where the majority of work went into new production capacity. This strong performance resulted in the last quarter posting headline earnings amounting to $520m, over double the same period in 2004.

Over the whole year the Americas posted 19 per cent growth due to recovery in demand for power systems and equipment as industrial growth continued across north and South America. Europe, however, performed poorly.

This growth resulted in ABB’s two main divisions, Power Technologies and Automation Tech- nologies, registering an increase of 14 per cent in combined orders.

The hearing for ABB’s revised asbestos plan is imminent. A settlement of the asbestos issue would mark the final disappearance of a cloud that has hung over the group for years, allowing it to continue restructuring the business around its core power and automation operations.