Shares Slide as Gloom Hits ABB

Article excerpt

Byline: Steve Pain

Disgruntled investors yesterday wiped half the value from shares in ABB - Europe's largest engineering conglomerate - as a new profit warning and fresh concern over potential asbestos costs in the US shattered confidence in the Swiss firm.

Following the warnings ABB stock collapsed by more than 50 per cent to an all-time low of 2.55 francs (pounds 1.09), recovering only slightly to trade at 2.84 francs, down more than 47 per cent.

ABB said it did not now expect a recovery in its markets before the third quarter of next year and said it would not reach its earnings target in 2002 - which was for an operating margin of between four and five per cent.

A union representative said they expected a fresh round of job losses, after 12,000 jobs cuts to 150,000 in the most recent drive to save pounds 325 million in annual costs.

'There is a limit to how much employment can be reduced. The workers have already bled a lot,' he said.

Moody's Investor Service downgraded ABB debt to the lowest rung of investment grade and said it could cut it even further because of weak performance and the need for refinancing pounds 2.4 billion of debt in the coming year. But the group insisted it was sticking to its aim of cutting net debt by at least pounds 974 million from pounds 2.66 billion at the end of 2002, or twice its equity.

ABB said it was considering options for its Combustion Engineering asbestos liability because the likely costs would be higher than the assets of the US firm, which were pounds 527 million at the end of September.

Options include the possible reorganisation of Combustion Engineering under Chapter 11 of the US Bankruptcy Code.

ABB bought the division in 1990 and is being sued by former workers in the United States for the use of asbestos in the decades before that.

However, analysts yesterday said investors had lost faith in ABB - which has a number of subsidiaries in the West Midlands - due to the timing of the latest warning. …