Matt LaWell
ABB CEO Ulrich Spiesshofer far right and other company executives

ABB Lowers Sales Target, Angles for $1 Billion in Savings

Sept. 9, 2015
The multinational engineering company will combine power and automation into one unit focused on power grids and increase productivity of white-collar staffers.

ZURICH — Engineering giant ABB revised down its sales growth target for the next five years on Wednesday and unveiled a cost-cutting program to rake in about $1.0 billion in savings.

ABB announced it now expects sales to swell between 3% and 6% between 2015 and 2020, down from its previous estimate of between 4% and 7%. The group explained its sales target had been “aligned to new market realities,” pointing to “the expected continuation of lower oil prices, signs of slowing industrial production growth and forecasted emerging market growth below the levels expected in 2014.”

ABB is already undertaking a vast restructuring program, but CEO Ulrich Spiesshofer said Wednesday it was accelerating its efforts.

“We are actively shifting the center of gravity of this business with a focus on higher growth,” he said.

Among other things, ABB plans to cut the number of divisions from five to four, combining power and automation into a single unit dedicated to power grids. 

The group, which employs some 140,000 people worldwide, said it intended to push through $1.0 billion in savings by the end of 2017 by increasing the productivity of its white-collar staff. That comes on top of its ongoing program to slash costs equivalent to 3% to 5% of cost of sales every year.

ABB said the cost of its white-collar productivity program was expected to cost it $1.2 billion mainly in restructuring costs. Spiesshofer said it was too early to say if any job cuts would be required.

At the same time, the company said it planned to free up $2.0 billion in cash by the end of 2017 to allow it to pursue more acquisitions.

Baader Helvea analyst Stefan Gaechter voiced skepticism at the wisdom of ABB’s apparent plan “to become more aggressive on the side of external growth.” He also said the downward revision of ABB’s sales target did not come as a surprise, but warned “the high end of the new guidance is still rather optimistic.”

Following the announcement, ABB saw its share price rise 0.86% in midday trading to 18.70 Swiss francs ($19.12) as the Swiss stock exchange’s main SMI index rose 1.95%.

Copyright Agence France-Presse, 2015

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