In a move that caught the entire industry off guard, ABB CEO Fred Kindle left the company the middle of February. The announcement, made by Chairman of the Board Hubertus von Grünberg in a press conference on Feb. 13, cited “irreconcilable differences about how to lead the company” as the cause. He would not elaborate further, and Kindle was not available for comment. The board of directors named CFO Michel Demaré as interim CEO.
Kindle joined the company in September 2004, and took over as president and CEO in January 2005. He oversaw a period of strong organic growth and a return to profitability at ABB.
“The board is very thankful to Fred Kindle for driving the company to the extraordinary level of performance it achieved over the last three years,” said von Grünberg. “He successfully streamlined and strengthened the company’s operations around the world. Under his leadership, ABB today is a leading company in respect of growth, profitability and business ethics.”
During the press conference, von Grünberg strongly emphasized that ABB had no intention of changing its strategy of “organic growth,” and that “ABB is the same company today as it was yesterday.”
The fact that Kindle brought ABB back from near bankruptcy and that even at the conference announcing his departure, no one spoke of him in less than glowing terms gave rise to immediate speculation that the departure was the result of conflicts with von Grünberg, who is known to be a difficult man to work with.
To ease the shock and eliminate fears about the soundness of the company, interim CEO Demaré announced ABB’s full-year and fourth-quarter results a day early.
Fourth-quarter orders received were $8.9 billion (full-year 2007, $34.3 billion). Fourth-quarter revenues were $8.7 billion (full-year 2007, $29.2 billion). Earnings before interest and taxes (EBIT) in the quarter reached $1.1 billion (full-year 2007, $4 billion), and the EBIT margin increased to 13.1% from 11.1% a year earlier (full-year 2007, 13.8%).
Net income in the fourth quarter amounted to $1.8 billion. Included in net income is a gain on the sale of ABB Lummus Global of $530 million and a positive impact of $475 million from the recognition of deferred tax assets. Full-year 2007 net income amounted to $3.8 billion compared with $1.4 billion in 2006.
Demaré also said ABB’s board of directors will propose a dividend of 0.48 Swiss francs ($0.44 US) per share to the annual general meeting on May 8, 2008. The dividend will be in the form of a nominal value reduction.
In addition, Demaré said the company has decided to start a share buyback program up to a maximum value of 2.2 billion Swiss francs, equivalent at current exchange rates to approximately $2 billion. The share buyback is designed to allow shareholders to benefit from ABB’s improved profitability and strong cash generation, while maintaining sufficient financial flexibility for the company’s growth ambitions.
In spite of von Grünberg’s and Demaré’s reassurances and the company’s record financial performance, ABB stock dropped more than 10% in value the day of the announcement.