In a move that caught the entire industry off guard, ABB CEO Fred Kindle left the company in mid-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 Chief Financial Officer Michel Demaré as interim CEO.
Fred 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 companys 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.
To ease the shock and eliminate fears about the soundness of the company, interim CEO Michel Demaré announced the 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 amounted to $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 percent from 11.1 percent a year earlier (full-year 2007, 13.8 percent).
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 the ABB 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. 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 francs, equivalent at current exchange rates to approximately $2 billion. The share buyback is designed to allow shareholders to benefit from ABBs improved profitability and strong cash generation, while maintaining sufficient financial flexibility for the companys growth ambitions.
In spite of von Grünbergs and Demarés reassurances and the companys record financial performance, ABB stock dropped more than 10% in value the day of the announcement.