ABB promises $1bn cost cuts

 
City A.M. Reporter
SWISS engineering company ABB has unveiled a further $1bn (£610m) of cost savings as it continues to cope with price pressures from increasingly competitive emerging market players and falling Asian orders.

ABB’s new planned savings of more than $1bn build on deep cost cuts made during the recession.

The firm said yesterday that price pressures were set to continue, with emerging market producers of power equipment expected to expand further beyond their home markets.

ABB posted fourth-quarter net income of $700m, versus the $695m expected in an analyst poll.

The company reported five per cent sales growth in Asia as lower power orders from China and India came in.

“The cost savings are higher than I’d have expected,” ZKB analyst Richard Frei said, adding that this was not necessarily a sign of bad times ahead. “My conclusion is more that there’s quite a bit of potential that can be exploited.”

Shares in ABB, which have risen strongly this year, closed down 3.3 per cent at SwFr22.41, underperforming a flat sector index.

“Within expectations simply isn’t enough, especially when you see that the stock has climbed over 10 per cent in 2011,” a trader in Zurich said.

ABB’s business is heavily exposed to customers’ capital spending plans and suffered falling orders during the downturn.