ABB announces $4-bn share buyback

ABB Ltd chief executive officer Ulrich Spiesshofer, in an unexpected move announced a $4 billion share buyback after the stock undershot rivals including Siemens AG over the past year, Bloomberg reported.

The company's buyback programme would be funded through cash from recent divestments, Speisshofer told investors in London today.

The stock of the world's largest power-grid maker registered a 2.9 per cent gain in Swiss trading, cutting the decline this year to 6.8 per cent.

Spiesshofer, who took over from Joe Hogan in September 2013, has since then focused on smaller businesses from the portfolio of the Zurich-based company.

While a buyback would boost the share price, Spiesshofer might struggle to increase sales, says Kepler Cheuvreux analyst Hans-Joachim Heimbuerger.

According to Heimbuerger, with emerging markets accounting for half of the current sales and two-thirds from power, metals and mining, and oil and gas end-markets, the company would see continued growth challenges, at least in the short term.

The company meanwhile, set long-term targets, saying it planned to raise operational earnings per share by 10 to 15 per cent on a compound annual basis from 2015 to 2020. It also targeted boosting like-for-like sales by 4 to 7 per cent per year.

According to the company, it would steadily increase profitability, now measured in operational earnings before interest, taxes, and amortisation, within a range of 11 to 16 per cent.

Meanwhile, shares of its Indian arm, ABB India, rose 4.3 per cent on the buyback news, Reuters reported.

The buyback offer of the parent company is likely to boost sentiment for its global subsidiaries including India, according to traders.

According to BSE data, ABB Ltd held 75 per cent in ABB India via two units.

Meanwhile, ABB said in a statement, ''ABB is well positioned to access high growth segments in its customer end markets. In utilities, the strong emergence of micro-grids and the transformation towards a digital grid; in process industries such as oil and gas and mining, the design of facilities of the future; and in transport and infrastructure, the rapid growth of data center electrification and public transport, are only a few of the examples for high growth opportunities.''

''ABB will build on its success in increasing customer satisfaction to realize the benefits of these opportunities. This is seen in an increase in the customer satisfaction measure Net Promoter Score (NPS) of 30 percentage points over the last four years to 46 per cent in 2014 and the strong order momentum in the first half of the year. This momentum will be maintained and further enhanced by driving the application of the promising PIE approach to the next level.

Together with its strong focus on organic growth, the company will contribute to the shift in its centre of gravity with targeted risk mitigation of the identified business and portfolio risk profile.

It will achieve this by changing business models, improving planning and execution in operations, and strengthening the existing alignment between performance and compensation. This will result in lower volatility, as well as higher predictability and profitability.''