Thursday February 12, 07:26 PM
ABB profit falls as emerging markets decline
ZURICH (AFP) - Engineering (Milan: ENG.MI - news) giant ABB (Virt-X: ABBN.VX - news) said Thursday its annual net profit slipped 17 percent in 2008 to 3.12 billion dollars (2.4 billion euros) after a sharp drop in big orders from emerging markets in the fourth quarter.
Net profit for the quarter plummeted to just one-eighth of that in the previous year at 213 million dollars, mainly because of a drop in demand for large new power infrastructure projects, the Swedish-Swiss group said in a statement.
Reduced investment in industry due to the credit squeeze also had an impact, and the group is waiting to see when state economic stimulus packages in industralised nations boost investment in power infrastructure.
ABB chief financial officer Michel Demare said that while governments still had to earmark specific projects, "we are discussing project financing with them."
Overall orders dipped 19 percent in the fourth quarter to 7.2 billion dollars, but the ABB still ended the year with a 23.8-billion-dollar backlog of orders to fulfill -- five percent more than at the end of 2007.
Over the full year, orders rose by 11 percent to 38.2 billion dollars.
Orders from "mature markets" to upgrade power grids and replace equipment continued to grow, as did demand for energy efficient technologies, the group said.
Overall revenues rose even as the economic crisis started to bite worldwide during the final three months of the year, by five percent to 9.1 billion dollars.
"The outlook for 2009 remains uncertain," the group?s chief executive Joe Hogan said. "We are taking steps now to ensure that we remain competitive, no matter how the market develops."
The group said it had no significant order cancellations, but Demare told AFP that the trend observed at the end of last year had continued early in 2009.
While the need for replacement or new power infrastructure in all regions had not changed in recent quarters, the costs and scarcity of project funding have delayed investment decisions, according to the company
"ABB is unable to forecast when the various government investment stimulus programmes will have an impact and when the availability of funding will improve," the engineering giant said.
Major industralised nations have announced multi-billion dollar economic stimulus packages, that often include state investment in infrastructure.
In the United States, President Barack Obama wants to entirely revamp power generation to focus on clean energy.
Hogan said: "We aim to come out of this downturn in a stronger competitive position and we confirm our 2011 targets."
ABB announced a 1.3 billion dollar, two year, cost-cutting plan last month to adjust to changing market conditions and customer demand.
Earnings before interest and tax (EBIT) fell by 60 percent in the final quarter of 2008 to 459 million Swiss francs, as ABB booked provisions of 870 million dollars for likely costs from the US and EU cartel probes, a tax dispute, restructuring costs and asset writedowns.
But full-year EBIT still grew by 13 percent compared to 2007, to 4.5 billion dollars.
By close of trading, ABB's share price had fallen 2.2 percent to 15.25 francs.
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