Storming warnings

22 January 2014 By Olaf Storbeck

A day after France’s Alstom shocked markets with a profit warning, ABB has followed suit. But while the French engineer faces structural challenges, its Swiss peer’s trouble is more contained. Still, ABB’s high valuation leaves its shares vulnerable to unpleasant surprises.

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Shares in the Swiss engineering group ABB dropped by more than 4 percent on Jan. 22 after the company published a profit warning for its fourth quarter. It said that operational EBITDA will be hit by $260 million in one-off charges. Three-quarters of this sum came because winter storms disrupted offshore wind projects in the North Sea. Non-operational charges of $50 million, resulting from restructuring of the group’s Power Systems unit, further dented earnings. ABB said it expects fourth-quarter earnings per share of $0.23 while analysts on average were forecasting $0.40.

“While the performance of four divisions was in line with our expectations during the fourth quarter, the issues we face in Power Systems are disappointing,” ABB’s Chief Executive Ulrich Spiesshofer said. “This means we will not be able to deliver our profitability target for the division in the quarter.”

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