ABB posts fourfold jump in quarterly profit
Swiss-based electrical engineering giant ABB on Thursday posted a fourfold increase in fourth-quarter profit thanks to tax benefits and the sale of an oil and gas production plant.
14 February 2008
GENEVA - Swiss-based electrical engineering giant ABB on Thursday posted a fourfold increase in fourth-quarter profit thanks to tax benefits and the sale of an oil and gas production plant.
ABB said net profit surged to US$1.8 billion, up 315% from US$422 million in the year-earlier period. The Zurich-based company added that it expects growth rates of around 15% to 20% in 2008 for its power-related activities and about 10% in its automation business.
Shares in ABB rose 2.15% to CHF26.60 in Zurich, bouncing back from Wednesday's 5.1% slip when the company's CEO abruptly resigned.
ABB said revenues for the fourth-quarter increased 50% to US$8.7 billion, from US$6.9 billion in the year-ago period.
Profits were boosted by US$530 million from the sale of oil and gas production unit Lummus Global to the Chicago Bridge & Iron Company in November. ABB also benefited from a US$475 million tax benefit.
The company, which has recovered strongly from near collapse earlier in the decade, said that it will double its dividend to CHF0.48 per share and launch a US$2 billion share buyback.
On Wednesday, it shocked the market by announcing the abrupt departure of Chief Executive Fred Kindle over "irreconcilable differences," after he helped ABB recover from near bankruptcy.
ABB's past troubles were closely linked to an aggressive buying spree that included the purchase of US-based Combustion Engineering, which later cost ABB more than US$2 billion in asbestos-related claims.
Annual net income rose to US$3.8 billion last year, compared with from US$1.4 billion in 2006, the company said.
Orders in all divisions rose by over 10% for the year on strong demand in emerging economies, and the replacement of equipment and development of more efficient regional connections in developed nations, ABB said.
"2007 was a great year for ABB," said Michel Demare, ABB's chief financial officer and interim CEO. "Demand remained strong around the globe for the products and services at the heart of our business - to increase energy efficiency, deliver power more reliably and improve industrial productivity."
The company said Wednesday it is looking for a new chief executive with acquisition experience.
Analysts believe Kindle's departure could mark the beginning of a renewed round of takeovers.
Under Kindle, ABB pursued only small acquisitions and the company is now sitting on a cash pile estimated at about US$4 billion.
Last year, Kindle said the company had set its sights on more than 100 takeover candidates, but abstained because of high prices.[Coyright ap 2008]