ABB To Exit Three Divisions With Revenues Of $1.75 Billion

ZURICH: ABB plans to offload three business units that generate $1.75 billion in sales, the Swiss engineering company said on Thursday, equivalent to 6% of its annual revenue.

The company is “exploring all options” to exit turbocharging, mechanical power and power conversion, the company said ahead of its first investor day under Chief Executive Officer Bjorn Rosengren.

ABB, whose products range from electric ship motors to factory robots, has been carrying out a review of its operations since Rosengren took over in March. The former Sandvik boss has said ABB has been weighed down by a business model that was too complicated.

Slimming down and disposing of businesses is the current trend in industrial companies, with rival Siemens floating its turbines business earlier this year and selling its Flender gear box unit.

Earlier this year, ABB completed the sale of its power grids business to Hitachi, and said it would return cash proceeds of $7.6 billion to $7.8 billion to investors.

Rosengren said all three business units were “high quality” with profit margins above the group margin corridor of 14% to 16%. Among the options being explored are complete sales or spin offs.

“In this process, we will seek the best value-accretive solution for ABB and those businesses and not put ourselves under time pressure,” said Rosengren, adding portfolio reviews would remain in place.

No deals are yet in place, although ABB is open to selling to industry buyers, investors or trying to separate and float the businesses.

ABB’s mechanical power transmission unit makes products including bearings used in industrial food processing operations and belted drives for conveyors in giant coal mines.

The business, called Dodge, had 2019 sales of $575 million with 90% of it coming from the Americas.

The biggest unit in the clear out is turbocharging which had sales of $800 million, with half of its business in Europe. The unit is a big supplier to the marine industry where its products boost performance of big diesel engines, including those in giant ocean-going ships.

The power conversion unit supplies the telecoms sector with clients including Verizon and AT&T. It had sales of $375 million in 2019, three quarters of which was in North America.

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