The engineering group ABB weathered last year in the face of difficult market conditions, but its earnings were severely affected. Due to the coronavirus epidemic, production has been halted in China. This will undoubtedly be a theme to be managed by the new boss who arrives in a little less than a month.
Over 2019 as a whole, revenues increased very slightly (1%) to $ 27.9 billion (almost as much in francs), while orders remained stable at $ 28.6 billion. Those in the electrification and motors divisions gained 10% and 1% respectively, while those in the robotics and automation segment fell 14 percent.
Fall in net profit
Net profit plummeted 34% to $ 1.4 billion, penalized in particular by restructuring costs. Cash flow from operations plummeted 20% to 2.3 billion.
The savings made under the simplification program reached the $ 150 to $ 200 million forecast, due in particular to the reduction in the workforce of continuing operations. In fact, 3,900 people left the company in one year, bringing the workforce to 10,000 at the end of 2019. The transfer of employees to the various divisions led to the reduction of 900 positions at headquarters.
Funds from the sale of Power Grids to Hitachi, which is expected to close in the second quarter, will be used to buy back shares. ABB expects a pre-tax accounting gain of $ 5 billion from this sale.
Slowdown in the United States
In the fourth quarter of 2019 alone, ABB sales fell 4% to $ 7.07 billion when order intake fell 1% to 6.89 billion. In Europe, Switzerland and Germany recorded “excellent growth in orders”, while the downward trend was in the United States (-7%), “reflecting a slowdown in the economy”.
Operational Ebita reached $ 710 million, up 22%. Profit after minority interests increased by 3% to 325 million. The dividend remains stable at 80 centimes franc per share.
If revenues were lower than the consensus compiled by AWP, order intake and Ebita were higher than expected. The profit made it significantly better than expected, while falling within the broad range of forecasts.
In the short term, growth is expected to be weaker in the United States and Europe, while stabilization in China should be disturbed by the coronavirus epidemic, according to the press release. President and CEO Peter Voser said factories have been closed in China since this week due to the coronavirus. The country accounted for 15% of revenue in 2019.
As soon as possible, “we want to restart capacity as quickly as possible and as normally as possible,” he added during a conference call. The effects of stopping production are not yet quantifiable, according to the Argovian.
In 2020, it expects stable sales to be slightly higher than in 2019, as well as a slight improvement in margins, especially in the second half. However, “headwinds exist in certain markets, particularly in the automotive, machine building and conventional energy production sectors”.
New boss on March 1st
The new managing director, the Swedish Björn Rosengren, will take command of the Zurich specialist in electrical engineering on March 1st. He has started “to get acquainted with the activities and the staff,” said Peter Voser, who will take up the unique hat of the chairman of the board of directors. The task of the new boss will be to “continue the transformation” of the group.
The arrival of the boss of the technological group Sandvik at the head of ABB arouses the interest of the investors according to the Royal Bank of Canada, which hails his “impressive record in terms of shareholder return and decentralization of activities, in line with ABB’s strategy ”.
For UBS, the Zurich group achieved a decent end of the year, with “a set of sufficiently good figures, a good increase in order intake and a resilience of margins despite lower revenues”.
Deutsche Bank believes that the 2020 forecasts are cautious and even uninspiring. Around 1:35 pm, the ABB title continued to reap gains, leaping 4.7% to 24.40 francs, at the head of the SMI which gained 1.38%. (Ps / nxp)
Created: 05.02.2020, 14h08
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