ABB Announces Mid-term Targets for 2005 to 2009 | Automation.com

ABB Announces Mid-term Targets for 2005 to 2009

September 062005
Zurich, Switzerland, September 6, 2005 – ABB, the leading power and automation
technology group, today announced its new mid-term targets for the five-year period from
2005 to 2009. The company also outlined a strategy that emphasizes improved business
execution and a broader approach to value creation, including focus on growth, operating
margin, use of capital and cash generation.

“ABB today is in a strong position and we can look forward to sustainable and profitable
growth,” said Fred Kindle, ABB’s President and CEO. “The targets and actions we are
announcing today are designed to build on our strength and secure our competitive success
over the next five years and beyond.”

The new group targets reflect the company’s continuing focus on revenue growth and
operational profitability as measured by earnings before interest and taxes (EBIT). In
addition, the targets include net margin, return on capital employed and cash flow
generation.

To support the execution of the strategy, the organization will be adjusted as of January 1,
2006. One layer of management is being removed, with the two core divisions replaced by
their respective five business areas. A new function is being introduced at the executive
committee level to integrate the regional organization more strongly.

“This is an evolution of our strategy, not a revolution,” Kindle said. “We remain focused on
our core power and automation businesses. The strategy involves a balanced approach to
value creation by widening our focus beyond growth to higher margins, greater return on
capital, and cash generation. Above all, the emphasis will be on better execution to deliver
results more consistently and reliably.”

“Our new targets for net income and cash flow are intended to put more emphasis on our
bottom line and our ability to convert profit into cash,” said Michel Demaré, Chief Financial
Officer. “The group target for return on capital employed will provide a more complete
picture of how we use capital resources in the company and become a dynamic management
tool to enhance value creation.” ROCE will also be used at the divisional level to establish
target rates of return for new investments, taking into account each business’ EBIT
expectation, risk profile, volatility and capital intensity.

New organizational structure
The current two core divisions, Power Technologies and Automation Technologies, will be
eliminated, and their respective business areas will become the new divisions as of January 1,
2006: Power Products (formerly the Power Technology Products business area), Power
Systems (formerly the Power Technology Systems business area), Automation Products (as
at present), Process Automation (as at present), and Robotics (formerly the Manufacturing
Automation business area). A new function at the group level, Global Markets and
Technology, will help to drive execution of the strategy across national and regional borders.

As of January 1, 2006, the Power Products, Power Systems and Automation Products
divisions will be headquartered in Zurich, Switzerland. The Process Automation division will
be based in Norwalk, Connecticut in the U.S., while the Robotics division will be based in
Shanghai, China.

Management appointments
As a result of the change in divisional structure, the membership of ABB’s Executive
Committee will change. As of January 1, 2006, the Executive Committee will comprise Fred
Kindle (President and CEO), Dinesh Paliwal (President, Global Markets and Technology),
Michel Demaré (CFO), Gary Steel (head of Human Resources), as well as new members
Bernhard Jucker (head of Power Products), Samir Brikho (head of Power Systems), Tom
Sjoekvist (head of Automation Products), Veli-Matti Reinikkala (head of Process
Automation), and Anders Jonsson (head of Robotics).

Jucker is currently ABB’s country manager and head of the Automation Technologies
division in Germany. Brikho is the head of the ABB Lummus Global downstream oil, gas
and petrochemicals business and will retain this role in addition to his new responsibilities.
Sjoekvist is the head of the Automation Products business area and Reinikkala is head of the
Process Automation business area. Jonsson is currently head of the Automation
Technologies division in China and is the operational excellence manager for the division
worldwide. Brikho and Jonsson will take on the leadership of their respective businesses
starting October 1, 2005.

In his new role as President of Global Markets and Technology, Paliwal – currently head of
the Automation Technologies division – will focus on tapping the growth and profitability
opportunities in key regions and trading areas. His responsibilities will include ensuring ABB
expertise and resources are applied across national borders and that existing local support
resources are used as efficiently as possible. Paliwal will continue to be country manager in
the U.S. and regional manager in North America.

Peter Smits, currently head of the Power Technologies division, will assume the role as
country manager in Germany and regional manager of Central Europe.

Impact on financial reporting
The company will report its financial results according to the new divisional structure
starting in the first quarter of 2006. Also starting with its 2005 annual financial
statements, additional disclosures will be made on the group’s balance sheet to allow the
calculation of return on capital employed.

ABB (www.abb.com) is a leader in power and automation technologies that enable utility
and industry customers to improve performance while lowering environmental impact. The
ABB Group of companies operates in around 100 countries and employs about 103,000
people.
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