Swiss ABB Banks On Emerging Markets Growth
Swiss engineering group ABB, facing weak demand due to the economic slump, is looking to emerging markets for future growth, the group said at an investor event in Zurich. The seller of power equipment to utilities and oil and gas companies said around 75 % of its growth in the last five years had come from emerging economies and this trend was likely to continue. ABB, the world's biggest supplier of transformers for electricity grids, is well placed to benefit from heavy investment in power infrastructure in China and India where it has been present for more than 100 years. China, ABB's largest market, has seen annual growth rates of 21 %, on average, between 2003 and 2008, and customers there include ThyssenKrupp, BASF and Royal Dutch Shell, Chief Financial Officer Michel Demare said at the news conference. ABB has identified a potential $40 billion market in China and a $10 billion market in India, Demare said. The group is grappling at the moment with waning demand from its customers, who are hesitating about spending on equipment, and CEO Joe Hogan said he had yet to see a rebound of ABB's markets. Hogan also repeated it was still not clear when government stimulus packages designed to counter the slowdown would help the group, but he said there was more financing available for the group's customers than six months ago.
ABB was on track to deliver savings of $1 billion this year and another $1 billion in 2010 as part of its $2 billion savings cost programme introduced this year to cushion weaker industrial, construction and automotive markets, Hogan said. ABB, which competes with Germany's Siemens and France's Areva in electricity transmission and distribution equipment, also sees more growth coming from a push for greater energy efficiency as well as from a shift to more renewable sources of energy. ABB, which had net cash of $5.7 billion at the end of June, was still looking for acquisition opportunities, Hogan said, adding the group would be prepared to go for a bigger deal if it made strategic sense.
