ABB Profit Cut by $260 Million in Power Systems ChargesPatrick Winters
ABB Ltd. said it will book $260 million in charges from delays to offshore wind projects and “some operational issues” at its Power Systems division.
Additional expenses will be booked for restructuring, with net income predicted to be $525 million in the fourth quarter, Chief Financial Officer Eric Elzvik said on a call today. Analysts had been predicting about $923 million, according to an average of estimates collected by Bloomberg. Shares of the Zurich-based company fell 2.7 percent to 23.53 Swiss francs as of 9:04 a.m. local time.
Today’s announcement is “bad news and means downside to full year 2013 estimates,” said Bank Vontobel analyst Panagiotis Spiliopoulos. Net income would have been in line without the additional expenses, he said in a note.
ABB is feeling the brunt of winter storms in the North Sea last month, which delayed offshore wind projects, causing knock-on costs elsewhere. The task of getting the profitability of power systems back on track falls to Claudio Facchin, who was announced as a successor to Brice Koch in November.
The supplier of electricity grids and substations booked $50 million in restructuring charges after its order intake weakened. Employees will work flexible hours to help adjust capacity, alongside some jobcuts, Chief Executive Officer Ulrich Spiesshofer said.
“The issues we face in Power Systems are disappointing,” Spiesshofer said. “This means we will not be able to deliver our profitability target for the division in the quarter.”
“We are addressing issues in this division unrelated to offshore wind power with a high sense of urgency,” Spiesshofer said on a call. “Claudio Facchin and his team are taking a fresh look at the business and its operation.”
The power systems unit was ABB’s second smallest unit with sales of $7.6 billion in 2012, or 19 percent of the total.
ABB’s surprise announcement follows disappointment at Alstom SA, the French maker of trains and Power equipment, which yesterday cut its forecast for operating margins because of weaker-than-expected sales of thermal-power equipment.
Spiesshofer pledged to give an update on the “progress and targets” of realigning power systems when ABB announces full-year earnings on Feb 13.