|
ABB Posts Profit for 2005, Says Turnaround is Complete Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Thursday, February 16, 2006 4:36:00 PM |
Declaring that it has entered a new phase of growth, ABB said it was profitable in the fourth quarter and for all of 2005, the first full-year net profit the engineering and automation giant has recorded since 2000.
ABB posted net income of $735 million for 2005, compared with a loss of $35 million in 2004, on a 9% revenue gain to $22.4 billion. For the fourth quarter, ABB booked net income of $222 million, compared with a loss of $223 million in 2004, as revenues inched up 2% to $6 billion.
For the first time since 2000, ABB's board proposed that a dividend, in the amount of CHF0.12 (Swiss Francs), be paid to shareholders. A shareholder vote on the dividend proposal is scheduled for May 4 at the company's annual general meeting.
Automation Technologies, the larger of the company's two business units, saw revenues jump 11% for the year to $12.1 billion. Revenues in the fourth quarter, however, grew only 3% to $3.2 billion. The company's other business unit, Power Technologies, grew 13% for the year to $9.7 billion, and 13% for the quarter to $2.8 billion.
ABB's Automation Technologies unit posted fourth-quarter pre-tax earnings of $349 million, up 25% from the year-earlier period. For the year, pre-tax earnings reached $1.3 billion, up 28% from 2004.
In automation-related areas, ABB said demand growth was strongest in minerals, mining, and marine industries during the fourth quarter. The company also said that demand from the U.S. pulp and paper industry increased from "very low levels."
Overall, customer spending globally followed two different tracks: North American and European manufacturers were focused on improving the performance of existing assets, while companies in Asia and the Middle East were investing in new production capacity, ABB said in a statement.
Discussing the quarterly and year-end results at a meeting with financial analysts in Zurich, president and CEO Fred Kindle expressed confidence that ABB's troubles were behind it. "We are not talking about the turnaround anymore," he said. "We have successfully moved into a new phase of profitable growth."
The turnaround Kindle referred to has had to do, in part, with lengthy asbestos-related litigation involving ABB's U.S. subsidiary Combustion Engineering. A U.S. district court hearing is expected to be held on February 28 on a reorganization plan designed to settle Combustion Engineering's asbestos liabilities. The judge's decision would be followed by a 30-day appeals period, after which the reorganization plan could be made effective.
Another ABB subsidiary in the U.S., ABB Lummus Global Inc., has also prepared a reorganization plan due to asbestos-related claims, but this plan has not yet been filed in a U.S. bankruptcy court. Claimants against the subsidiary, however, have voted in favor of the plan.
As a result of these developments and the 2005 financial results, Kindle and other ABB executives said they were "positive" about 2006. While saying that the business environment was consistent with what they saw in the second half of 2005, company officials noted that backlogs going into 2006 were better than they were a year ago.
Kindle also reiterated details of a five-year strategic plan announced in September of last year under which ABB revenue growth is targeted to be 5% or greater through 2009.
Kindle emphasized that as a result of entering a profitable growth phase, ABB would focus on a set of value-creation metrics different from those it emphasized during the 1990s, when growth through acquisitions was a main tenet of the company's plans. Going forward to 2009, he said, profitable growth, operating margins, capital efficiency, a "disciplined" acquisitions approach, and a corporate organizational focus on execution would characterize ABB's approach.
An important part of the new approach has already begun. On January 1, ABB began the transition from its two-divisional structure -- Automation Technologies and Power Technologies -- to a five-division structure. The new units and their 2005 revenue contributions are: Power Products, at $6.4 billion; Power Systems, at $4 billion; Automation Products, at $5.9 billion; Process Automation, at $5 billion, and Robotics, at $1.7 billion.
|
|
|
|
|