ABB Announces Mid-term Targets for 2005 to 2009

  • September 06, 2005
  • ABB
  • News
Zurich, Switzerland, September 6, 2005 – ABB, the leading power and automationtechnology group, today announced its new mid-term targets for the five-year period from2005 to 2009. The company also outlined a strategy that emphasizes improved businessexecution and a broader approach to value creation, including focus on growth, operatingmargin, use of capital and cash generation.“ABB today is in a strong position and we can look forward to sustainable and profitablegrowth,” said Fred Kindle, ABB’s President and CEO. “The targets and actions we areannouncing today are designed to build on our strength and secure our competitive successover the next five years and beyond.”The new group targets reflect the company’s continuing focus on revenue growth andoperational profitability as measured by earnings before interest and taxes (EBIT). Inaddition, the targets include net margin, return on capital employed and cash flowgeneration.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 bytheir respective five business areas. A new function is being introduced at the executivecommittee level to integrate the regional organization more strongly.“This is an evolution of our strategy, not a revolution,” Kindle said. “We remain focused onour core power and automation businesses. The strategy involves a balanced approach tovalue creation by widening our focus beyond growth to higher margins, greater return oncapital, and cash generation. Above all, the emphasis will be on better execution to deliverresults more consistently and reliably.”“Our new targets for net income and cash flow are intended to put more emphasis on ourbottom line and our ability to convert profit into cash,” said Michel Demaré, Chief FinancialOfficer. “The group target for return on capital employed will provide a more completepicture of how we use capital resources in the company and become a dynamic managementtool to enhance value creation.” ROCE will also be used at the divisional level to establishtarget rates of return for new investments, taking into account each business’ EBITexpectation, risk profile, volatility and capital intensity.New organizational structureThe current two core divisions, Power Technologies and Automation Technologies, will beeliminated, and their respective business areas will become the new divisions as of January 1,2006: Power Products (formerly the Power Technology Products business area), PowerSystems (formerly the Power Technology Systems business area), Automation Products (asat present), Process Automation (as at present), and Robotics (formerly the ManufacturingAutomation business area). A new function at the group level, Global Markets andTechnology, 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 Productsdivisions will be headquartered in Zurich, Switzerland. The Process Automation division willbe based in Norwalk, Connecticut in the U.S., while the Robotics division will be based inShanghai, China.Management appointmentsAs a result of the change in divisional structure, the membership of ABB’s ExecutiveCommittee will change. As of January 1, 2006, the Executive Committee will comprise FredKindle (President and CEO), Dinesh Paliwal (President, Global Markets and Technology),Michel Demaré (CFO), Gary Steel (head of Human Resources), as well as new membersBernhard Jucker (head of Power Products), Samir Brikho (head of Power Systems), TomSjoekvist (head of Automation Products), Veli-Matti Reinikkala (head of ProcessAutomation), and Anders Jonsson (head of Robotics).Jucker is currently ABB’s country manager and head of the Automation Technologiesdivision in Germany. Brikho is the head of the ABB Lummus Global downstream oil, gasand 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 theProcess Automation business area. Jonsson is currently head of the AutomationTechnologies division in China and is the operational excellence manager for the divisionworldwide. Brikho and Jonsson will take on the leadership of their respective businessesstarting October 1, 2005.In his new role as President of Global Markets and Technology, Paliwal – currently head ofthe Automation Technologies division – will focus on tapping the growth and profitabilityopportunities in key regions and trading areas. His responsibilities will include ensuring ABBexpertise and resources are applied across national borders and that existing local supportresources are used as efficiently as possible. Paliwal will continue to be country manager inthe U.S. and regional manager in North America.Peter Smits, currently head of the Power Technologies division, will assume the role ascountry manager in Germany and regional manager of Central Europe.Impact on financial reportingThe company will report its financial results according to the new divisional structurestarting in the first quarter of 2006. Also starting with its 2005 annual financialstatements, additional disclosures will be made on the group’s balance sheet to allow thecalculation of return on capital employed.ABB ( is a leader in power and automation technologies that enable utilityand industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 103,000people.

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