Wednesday February 13, 12:43 PM
Engineering group ABB hit by sudden departure of chief executive
By Andre Lehmann
ZURICH (AFP) - Swiss-Swedish engineering group ABB (Stockholm: ABB-U.ST - news) announced on Wednesday the surprise departure of chief executive Fred Kindle because of "irreconcilable differences," clouding a doubling of profits last year.
The company's board of directors named Chief Financial Officer Michel Demare as interim CEO while the search for a replacement to Kindle was underway, ABB said a statement.
It said the board reaffirmed its support for strategic targets announced in September 2007 and confidence in management.
The news stunned investors. The price of shares in the group plunged by nearly 10 percent in morning trading.
Kindle joined the company in September 2004 and took over as president and chief executive in January 2005. He oversaw a period of strong organic growth and a return to profitability for the company which operates in around 100 countries and employs more than 110,000 people.
"The Board is very thankful to Fred Kindle for driving the company to the extraordinary level of performance it achieved over the last three years," Chairman Hubertus von Gruenberg said.
"Under his leadership, ABB today is a leading company in respect of growth, profitability and business ethics."
The surprise news overshadowed ABB's full-year results, which showed net profit more than doubling to 3.8 billion dollars (2.6 billion euros) in 2007.
The figure was considerably higher than the 3.1 billion dollars expected by analysts.
Earnings before interest and tax rose by 54 percent to four billion dollars, while revenues rose 19 percent to 29.2 billion, also beating analysts' expectations.
The company's board proposed a dividend of 0.48 Swiss francs per share, and a share buyback worth up to 2.2 billion Swiss francs.
In the fourth quarter, net income came in at 1.8 billion dollars on sales of 8.7 billion, with orders received worth 8.9 billion dollars.
ABB will present its 2007 results in greater detail on Thursday, as originally scheduled.
"We do not like the fact of Fred Kindle leaving the company and we can only speculate about these 'irreconcilable differences'", Bank Vontobel analysts said in a note.
Kindle may have wanted to make a large acquisition rather than a share buyback, or it may just have been a personality clash with new chairman von Gruenberg, they speculated.
"We think it's very bad timing when the captain leaves the ship at such a crucial time," when investors are concerned at how ABB may fare amid a global economic slowdown, the Vontobel (VONN.SW - news) analysts added.
Nevertheless, the fourth-quarter results "show that ABB is still firing on all cylinders and is seeing absolutely no slowdown in all its target markets."
"Despite the profitability being less overwhelming than in previous quarters, the operating performance is still enviable," the analysts added.
At mid-day, ABB shares were showing a loss of 8.53 percent to 25.10 Swiss francs on the Zurich stock exchange.
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