In advance of its third-quarter earnings announcement next week, Swiss power and automation giant ABB Ltd. revealed that a series of balance sheet adjustments will yield net income of approximately $1 billion, which would be on par with the third quarter last year.
The third-quarter results will be positively impacted by a change in provisions that will result in an overall expense reduction of about $380 million, according to a company statement. The adjustment is primarily due to changes in the provisions related to alleged anti-competitive practices, including, but not limited to, the European Commission’s power transformer decision earlier this month to fine ABB €33.75 million.
In December 2008, ABB announced that it made a fourth-quarter, pre-tax provision of $850 million in the face of corruption investigations in the United States and Europe, as well as other tax and restructuring matters.
ABB said it would assess the impact of the EC’s decision as well as other unspecified developments on those provisions and on its financial results for the third quarter, which will be announced on Oct. 29, 2009.
The news comes as ABB looks to reverse a downward trend in its earnings reports. In its first quarter, revenue dropped 9% year over year to $7.2 billion, while orders fell 16% to $9.2 billion. In the second quarter, ABB’s revenue fell 12% to $7.9 billion and net profit dropped by 31% to $675 million amid layoffs. In that quarter, ABB spent $120 million on an ongoing, $1 billion restructuring program, contributing to the profit decline, the company said. Cuts have included plant closures and layoffs in Europe and North America as well as reduced working hours in various locations.
The company said in its statement today that third-quarter accruals would also include an increase in charges “relating to the challenges of doing business in Russia, including the impact of ongoing tax matters. As a result, ABB continues reviewing the situation and assessing its business model in Russia.” For the third quarter last year, ABB reported net income of $927 million on revenue of $8.79 billion.