ABB flags $350 mln charge to revamp power unit

Fri Dec 14, 2012 1:53am EST

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ZURICH, Dec 14 (Reuters) - Swiss engineer ABB is restructuring its power business after the unit missed expectations, taking a fourth-quarter charge of $350 million.

"Power systems has not generated consistent returns. This is not acceptable; therefore we are recalibrating the growth, profitability and cash return ambitions for this division," chief executive Joe Hogan said on Friday.

The move was flagged by ABB, which competes with the likes of Siemens and General Electric, in October in conjunction with third-quarter earnings. The costs, largely restructuring expenses, are expected to yield results in two and a half years.

The restructuring comes as ABB's power division shifts focus to higher-margin products, systems, services and software activities, while closing lower-margin ones in engineering, procurement and construction.

As a result, ABB has raised the division's margin target on earnings before interest, tax, depreciation and amortisation (EBITDA) to 9-12 percent from 7-11 percent by the fourth quarter of next year. ABB confirmed all other 2015 targets.

ABB has been cautious in its outlook in recent months due to the euro zone crisis and slackness in other major economies, which translated into a fall of third-quarter orders.

Quarterly profit dipped 4 percent to $759 million, while orders slid 5 percent to $9.3 billion.

Fourth-quarter results are scheduled for Feb. 14. (Reporting by Katharina Bart; Editing by Mark Potter)

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