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UPDATE 2-ABB chief Hogan to stand down, company cites private reasons
May 10, 2013 / 5:41 AM / 4 years ago

UPDATE 2-ABB chief Hogan to stand down, company cites private reasons

5 Min Read

* ABB says successor to be chosen in due course

* Hogan joined company as CEO in Sept 2008

* Has focused growth on power, automation

* ABB Q1 profits missed estimates

* Shares down 1 pct (Recasts with background, shares, analyst comments, writes through)

By Martin de Sa'Pinto

ZURICH, May 10 (Reuters) - ABB has announced the surprise departure of its chief executive just three weeks after the engineering group reported earnings that fell short of expectations, saying the move was for private reasons but giving no detail.

The Swiss company, the world's biggest supplier of industrial motors and power grids, said Joe Hogan, 56, would be leaving after nearly five years in the post. It said no date had been set for his exit and a successor would be named in due course.

His departure comes after ABB in April warned it faced a tough second half of the year and said it was stepping up cost-saving measures.

ABB also changed its chief financial officer just three months ago and analysts said the all-change at the top could herald a refocusing of the business.

"One natural assumption could be that, like (Hogan's) predecessor Fred Kindle, this is in reality a disagreement with powerful board factions over strategy," said Morgan Stanley analyst Ben Uglow in a note.

Hogan, who was paid a total of 10.2 million Swiss francs ($10.8 million) for 2012, said it had been a hard choice to leave.

"This has been a difficult decision as I leave behind a strong and talented executive committee and a cohesive board whose support I could always count on," he said in a statement.

Yet it also comes as ABB faces difficult market conditions.

"We have been concerned about their power business. The market in Asia is particularly competitive, the pricing is tough and it's a highly politicised environment in China," said Canaccord Genuity analyst James Stettler.

"The new CEO should have more of a view to expand outside of power. I'd like to see the new CEO try to shrink the high-voltage power business," Stettler said.

Shares in ABB fell 1.0 percent to 21.33 Swiss francs by 0848 GMT, underperforming a 0.3 percent rise in the European Industrial Goods sector and peers Schneider and Siemens, both trading higher.

Struggling Shares

Hogan took the helm at ABB in September 2008, since when the group has invested some $20 billion to strengthen its operations, including making the major acquisitions of U.S. groups Baldor and Thomas & Betts and, in April this year, solar energy company Power One.

Credited with bringing costs under control, Hogan invested heavily in research and development to strengthen ABB's power and automation businesses, raising R&D spending to almost 3.7 percent of revenue from 3 percent when he joined.

In Hogan's time at the helm, ABB's revenues grew to 13 percent to $39.3 billion, while the number of employees climbed more than 20 percent to 146,100.

But his drive to rebuild the company - which clawed its way back from near bankruptcy at the beginning of the millennium by slashing costs and closing businesses - has not been plain sailing.

Operating profit fell to 10.3 percent of revenue in 2012 from 13 percent when he took over. ABB shares are trading at the same level as then, against a more than 60 percent rise for French rival Schneider and an 8 percent increase for Siemens.

Nonetheless, competitive pressures from emerging Asian rivals may be easing, as regional wages rise, said Stefan Gaechter at Swiss brokerage Helvea, adding that the company is outperforming its peers on the operational side.

Hogan's departure is the latest in a string of unexpected CEO changes at top European companies, coming after Paul Walsh said he would stand down from the top job at spirits company Diageo while Pierre-Olivier Beckers said he would leave supermarket group Delhaize by year end.

Hogan, an avid sportsman who scaled Mount Kilimanjaro in Africa with his son, will lead the company until a successor is named to ensure a smooth transition, ABB said, adding it would look both within the company and externally for a replacement.

ABB Chairman Hubertus von Gruenberg said Hogan had done a remarkable job in leading the company through the economic crisis. "ABB today is in a much better position than it was when he joined ... the board sincerely regrets that Joe will be leaving the company." ($1 = 0.9408 Swiss francs) (Editing by David Cowell and David Holmes)

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