Out of the doldrums for ABB

Engineering giant ABB returned to profitability after several years in the red, thanks to strong growth in its core businesses of power and automation technologies.

The Swiss group, which employs about 4,000 people in the UK, made a profit of $201m (£106m) in 2004 compared to a loss of almost $800m (£422m) the previous year. Sales were stable at around $20bn (£11bn).

The result is another step in the right direction for ABB, which came close to financial meltdown in 2002 after over-expansion in the late 1990s left it saddled with massive debts.

Despite the turnaround since those dark days, ABB admitted major challenges remain, not least resolving its $1bn-plus (£0.53bn-plus) liability for asbestos claims in the US.

‘We are focused on finding timely solutions to these issues,’ said chief executive Fred Kindle.

Resolving its asbestos liabilities, which are currently stuck in the American courts, would allow the group to focus fully on its two chosen areas of speciality: systems for power transmission and distribution, and automation technology. Both these areas performed well in 2004, according to ABB.

Power technologies grew across the board. Orders were up by 20 per cent in North America and doubled in China, partly thanks to the group’s $400m contract on the huge Three Gorges hydroelectric dam project. Automation technologies also did well, with the oil and gas and mineral sectors among those contributing extra revenue to ABB last year.

The slimmed-down ABB now employs just over 100,000 people, down by about 40,000 on its late-1990s figure, thanks to a string of disposals of businesses outside its core areas.

It remains a big investor in R&D, spending $900m (£474m) on development-related activity in 2004, a 10 per cent increase on the previous year’s level.