The ABB Group, with European tunnel ventilation interests, announced a profit warning at the end of last month, sending its share price tumbling by 62% to a record low of US$1.30.
ABB also confirmed its target of reducing net debt by US$1.5bn by the end of the financial year, down from US$4.1bn at the end of 2001.
“The early signs of economic recovery that we saw in the first half of the year have not materialised,” said ABB chairman and CEO Jürgen Dormann. “Visibility during the months of July and August was low, and we now see that September has not delivered the expected recovery. As a result, we are re-lowering our outlook for earnings.”
In a bid to restore investor confidence, ABB plans to slash costs by US$800M, and dispose of its oil, gas and petrochemicals business. “Our organisational measures will allow us to build on our leadership positions in power and automation technologies, and secure competitive cost and profitability levels even in a weak market,” Dormann said. “Achieving a significantly lower cost base is a key priority.”
ABB has been dogged by recent problems. Fifteen months ago, the group cut 12,000 jobs (8% of its work force) to reduce its net debt. And in October this year, the group announced that the asbestos-related costs of its US subsidiary, Combustion Engineering Inc (CE), now exceeds the value of CE’s assets.
