ABB shares jump as new CEO raises turnaround hopes - GulfToday

ABB shares jump as new CEO raises turnaround hopes


ABB is selling its power grids business to Hitachi.

ABB shares jumped more than 4 per cent on Monday as investors welcomed news the Swiss engineering group had poached Bjorn Rosengren from Swedish mining equipment firm Sandvik to be its next chief executive.

The 60-year-old Swede will join the Zurich-based maker of industrial drives and robots in February and take over as CEO in March, the company said on Sunday.

ABB, whose previous CEO Ulrich Spiesshofer left suddenly in April, is in the middle of overhauling its business following years of lacklustre profit and bungled acquisitions.

Chairman Peter Voser, who has taken on CEO functions on an interim basis, said on Monday he was confident he had got the right man.

“He has a great track record of empowering businesses in a decentralised way, that is what he has done at Sandvik and at his earlier businesses as well,” Voser said.

“He is focused on driving performance,” added the former CEO of oil major Royal Dutch Shell who will revert back to his chairman role when Rosengren takes charge.

During his four years at Sandvik, Rosengren revamped the metal-cutting tools and mining gear maker and sold off underperforming businesses.

Voser said Rosengren would follow ABB’s strategy of reducing its corporate centre and giving more power to its four business units - industrial automation, electrification, motion and robotics and discrete automation.

“Over the last few months the company has outlined a strategy and we are following through on that,” Voser said.

“But a strategy will not be cast in stone for five years.”

ABB, whose shares have lost 14 per cent over the last five years, is selling its power grids business to Hitachi and last month announced a deal to quit the solar energy inverters business.

Voser has launched a review of businesses which generate $3 billion of revenue, or 11 per cent of ABB’s total, which could be improved or sold.

“With the appointment of Rosengren, ABB will have a CEO with a proven track record and a strong reputation in the capital markets for delivering operational improvement,” said Bank of America Merrill Lynch analyst Alexander Virgo.

“In our view, his success at Sandvik in implementing a decentralised business model should make him a good match for ABB.”

ABB’s largest shareholder Investor AB also welcomed the appointment of Rosengren, who before Sandvik was CEO of Wartsila, which makes and services power sources for the marine and energy markets.

“From his previous leading roles in several companies, he has a proven track record in driving a decentralised culture, improving performance and delivering value,” said Johan Forssell, CEO of Investor, which holds 11.2 per cent of ABB.

Sandvik’s shares have increased by 78 per cent with Rosengren in charge, as margins improved, while Wartsila’s share price increased 83 per cent on his watch.

Activist investor Cevian Capital, ABB’s second-biggest shareholder with a 5.3 per cent stake, said ABB shares could almost double in value if Rosengren could lift margins and valuations to match rivals.

“If these gaps are closed, ABB should be worth more than 35 CHF (Swiss francs). That is Bjorn’s main task,” said Cevian managing partner Christer Gardell.

At 0940 GMT, ABB shares were up 4.3 per cent at 18.29 francs.

Swedish engineering group Sandvik’s Chief Executive Officer Bjorn Rosengren will step down next year and will join Swiss-Swedish robotics and engineering group ABB Ltd as CEO, the companies said in separate statements on Sunday.

Rosengren, who has a reputation for being ruthless with underperforming divisions, will join ABB in February next year, ABB said.

He will take over from acting ABBCEO Peter Voser in March, with Voser reverting to his position as chairman of the board at ABB, according to the company’s statement.

Voser took over temporarily as head of ABB after Ulrich Spiesshofer left suddenly in April.

Businesses which generate $3 billion of revenue, 11 per cent of ABB’s total annual sales, are now under review and could be sold off or closed down, Voser told Reuters in a recent interview.

Voser, the former Royal Dutch Shell CEO, who is also ABB’s chairman, has pledged a turnaround after years of unsatisfactory performance. ABB shares have fallen nearly 20% in the last five years.

“Bjorn Rosengren has, since he joined Sandvik in November 2015, established a solid decentralized business model for the company and made the organisation more flexible and efficient,” Sandvik said in a statement, adding it would initiate the work to appoint a new President and CEO on Monday.

Rosengren, 60, has also held several positions in Sandvik peer Atlas Copco and was the CEO of Finnish engineering group Wartsila between 2011-2015.