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Wednesday, 24 July, 2002, 16:44 GMT 17:44 UK
Profits woe hammers ABB shares
An ABB manufacturing plant
ABB's profits have taken a heavy knock
Swiss-Swedish engineering group ABB has lost a quarter of its market value after reporting a steep decline in profits and rising debts over the first half of the year.

The company said on Wednesday that net profits for the six months to late June came in at $101m (60.6m), well below the $174m forecast by analysts, and down more than 60% on the same period one year earlier.

It added that net debt had risen to $5.2bn by the end of June from $4.1bn six months earlier.

ABB said the weak profits figure reflected hefty one-off costs stemming from restructuring operations, and forecast a stronger second half, citing a pick-up in new orders since April.

It also pointed out that the increase in its debt burden partly reflected currency fluctuations.

But investors' reaction was swift and merciless, pushing ABB shares down by 24.2% to 8.26 Swiss francs on the Zurich stock exchange.

Asbestos pressure

The decline came amid heavy selling pressure across most European markets.

Analysts said the increase in ABB's debts, which prompted fears of a downgrade in the company's credit rating, was of greater concern than its weak bottom line.

"I'd say on operational progress it's neutral and on the debt side there is some concern," said Michael Hagmaan at UBS Warburg in London.

Worries over a flood of new compensation claims for asbestos poisoning also weighed on ABB's share price.

ABB said 29,500 new claimants had come forward during the first half of the year, more than offsetting the 20,300 outstanding cases that it settled during the period.

The compensation claims have been filed against ABB's US subsidiary, Combustion Engineering, which supplied asbestos - a one widely-used construction material now known to cause serious respiratory diseases - during the 1970s.

ABB has set aside $940m for asbestos liabilities, although some analysts believe the firm's final payouts could be far higher.

See also:

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