13.00 hours CET, September 11, 2002
I want to talk to you today about my views on the way forward for ABB. There should be no surprises, since I do not foresee any change in strategy and I have no intention to change the customer-centric organizational structure. What I want to do is to speed up its implementation. You know what our targets are for the current year. Let me repeat them: flat revenues, EBIT margin between 4-5 percent, stronger cash flow from operations in the second half and net debt reduction of at least 1.5 billion US dollars. We are on track to meet these targets. Our targets for EBIT margin and revenue growth through 2005 also remain unchanged. Last Sunday I had my first meeting with my colleagues on the Executive Committee which was very productive. Together we are committed to delivering the promised performance. I told them that I am committed to the leadership of ABB and that I will fully devote my time to the company and I really look forward to working closely with the operational team to meet our targets and speed up the implementation of our strategy. Let me take you through how I view the future of ABB. First, continuity is a major theme. A great deal has already been achieved in refocusing ABB on its core businesses and we need to build on these achievements. When I took over as CEO at Hoechst in 1994 I made it clear what was expected in order to transform the organisation and improve performance and this was successfully achieved. My role as leader then and now is to empower my colleagues in operational management so that they are fully aware of their responsibility to translate the strategic framework into operational performance and be accountable for the delivery of revenue growth and for cost control in order to create value for our customers, for our shareholders, and for our people. Moving on to strategy. As you know, ABB’s strategy is to build on our strong position in power and automation technologies for utility and industry customers. The Board has given this strategy full backing and remains committed to it. I have said that I want to see a speeding up in the execution of strategy. What do I mean by this? Let me give you two examples: first we will move more responsibility for the day-to-day running of the business to where the business itself is conducted. As a result, accountability for revenue generation and cost control rests with front-line management. Second, we will apply more rigour and discipline in the follow-up of implementation steps. These actions exemplify my attitude to leadership. When it comes to the ABB portfolio, it is clear that it is still too broad. The successful divestment of Structured Finance announced last week served two purposes: reduction of net debt and focus on our core industrial activities. The already announced divestment of Building Systems expected in 2003 is in line with this continued focus on the core businesses. Even after the sale of Building Systems, the portfolio will require further streamlining. However you should not expect more fundamental disposals. I want to make it very clear here today there are no plans to sell any whole division or larger single unit besides Building Systems. There may be some fine-tuning as we continue to review how our businesses fit with the core strategy. When we reach decisions we will communicate them. I also want to address restructuring. The 2001/2002 program will be completed by year-end. We are on track to meet the targets we have already communicated for cost and staff reductions, delivering 500 million US dollars in annual cost savings. No new or additional restructuring programs of significance are planned post-2002, however ongoing restructuring in order to remain competitive is a factor in a business of ABB’s size. And it is a normal leadership task. We are on track to meet our financial targets for 2002 and 2005 - I should remind you as we have already said that EBIT in the second half of the year will be stronger than the first and within the second half the last quarter is traditionally strong for ABB, while the third quarter is normally weaker because it comprises the holiday months of July and August in Europe. We expect the same trend this year. Besides my comments on operational performance there are three additional items on my agenda. First - asbestos. This is not an issue that is limited to ABB and a few other companies. It is a widespread problem. There seems to be an increasing understanding in the US of the implications of asbestos exposure for business and the US economy. We welcome the moves in Washington aimed at finding a fair solution. In the meantime we are not changing the way we deal with the issue. We continue to identify and quickly settle valid claims and dispute claims that appear to be baseless. The second item is the balance sheet. In March, steps were announced to strengthen the balance sheet to reduce reliance on short-term capital markets lengthen the debt maturity profile and reduce net debt by at least 1.5 billion dollars by the end of the year. Much has already been achieved. Net debt is being cut by asset disposals. The balance sheet will be further strengthened by additional asset sales and improved cash flow and operational earnings which will reduce net debt and strengthen the equity base. Finally, I am conscious of the need to restore the confidence of both our debt and equity investors. Our Q3 figures will be announced on October the 24 th , and on November the 8th we will be holding our annual analyst day covering strategy and divisional targets. While I want to develop personal relationships with the investment community, I am sure that you will understand that my first priority at this time is on delivering operational performance. After the analyst day in November I will be able to meet more of you on a personal basis as part of my commitment to continuing the improvement in transparency and communication. Overall, the theme of my remarks today is continuity and speed, accountability and delivery. Thank you ladies and gentlemen. Peter and I will be happy to take your questions.