ABB chief in surprise departure

ABB chief in surprise departure

By Haig Simonian in Zurich

Published: February 13 2008 07:55 | Last updated: February 13 2008 19:12

ABB surprised investors on Wednesday with the announcement of the departure of Fred Kindle, its respected chief executive, after “irreconcilable differences about how to lead the company”.

Hubertus von Grünberg, chairman of the Swiss-Swedish engineering group, declined to explain much further but stressed that there had been no differences over strategy, potential acquisitions, or problems “lurking in the bushes”.

Mr Kindle, a former management consultant and chief executive of the Sulzer engineering group, will be succeeded by Michel Demaré, chief financial officer, pending a successor.

The incident suggests a falling out between Mr Kindle, the outsider hand picked in 2004 to succeed Jürgen Dormann, and Mr von Grünberg, Mr Dormann’s successor as chairman since last May.

The company noted the board “fully supports” targets unveiled by Mr Kindle last September. Those envisaged further increases in profitability, as well as plans to return cash to shareholders if ABB’s search for acquisition-led growth was unsuccessful.

Mr von Grünberg, a former chief executive and now supervisory board chairman of Continental, the German tyres and components group, has an active management style. Although he denied a “clash of egos”, analysts suspected a rift over responsibility for strategy.

The group, which also unveiled a SFr2.2bn ($3.2bn) buyback and a doubling of its planned payout to shareholders to SFr0.48, said redeploying capital would not reduce its scope for takeovers. But while targets had been assessed, Mr von Grünberg said the board and top management had been “unanimous” on not proceeding with them.

The shares closed 5.1 per cent lower at SFr26.04. ABB also brought forward its 2007 results.

The figures show a further leap in profits on internal restructuring and strong external demand. Net earnings jumped to $3.76bn from $1.39bn.

Profits were swollen by $530m in sale proceeds. The group also booked $475m in deferred tax assets. Together, the items lifted net profits in the traditionally weaker fourth quarter to $1.75bn. But even without exceptionals, net earnings in the final three months were about double the same period the previous year.

On the operating level, fourth quarter profits jumped by 50 per cent to $1.15bn, taking the group’s closely watched margin to 13.1 per cent from 11.1 per cent year on year. Operating earnings for the full year amounted to $4.02bn, with margins up to 13.8 per cent from 11.0.