'AA-/A-1+' Ratings on ABB Asea Brown Boveri Ltd. Affirmed; Outlook Positive
LONDON (Standard & Poor's CreditWire) Sept. 5, 2000--Standard
& Poor's today affirmed its double-'A'-minus long-term
and 'A-1'-plus short-term corporate credit ratings on
Switzerland-based ABB Asea Brown Boveri Ltd. (ABB) and related entities
(except all insurance entities). The outlook was changed to positive from
stable. This follows improvements demonstrated since the announcement of
the new corporate structure in September 1998. Since the beginning of
1999, ABB has consequently been transforming its business portfolio,
aiming to increase value by shifting to higher value-added, more
knowledge-based activities and away from very asset-intensive businesses.
ABB is a leading global player in all of its business segments: power
transmission and distribution systems; automation; oil, gas, and
petrochemical equipment; and building technologies. The group also
maintains substantial financial service operations. The group's
strategy aims to increase its reliance on IT-driven technology solutions,
as well as strengthening its positions in high-tech systems and service
operations. Milestones of the transformation included the departure of ABB
from its power generation business, the sale of its 50% stake in rail
joint venture Adtranz, as well as expansion in the automation segment
through the acquisition of Alfa Laval Automation and Elsag Bailey Process
Automation.
Management has a strong record of maintaining the group's
profitability at a good level, considering the difficult market conditions
of some operations. The business profile restructuring, coupled with an
overall favorable economic climate, should support management in achieving
its target of 6%-7% average annual growth during 2000-2003 and an
operating margin of 12% by 2003. ABB has a low level of financial
indebtedness and a conservative financial profile.
Cash proceeds are expected to be reinvested in operations that do not
jeopardize the company's overall profitability and cash generation
capacity. ABB has some financial flexibility to carry out a more
aggressive growth strategy in the next few years, especially if supported
by further divestitures of non strategic assets.
OUTLOOK: POSITIVE
If ABB's ongoing restructuring efforts continue to be successful and
profitability improves further, while the group maintains a strong capital
structure and financial resources, the ratings may ultimately be raised. A
complete list of ratings is available on Ratings Direct, Standard &
Poor's Web-based credit analysis system, or by calling the Standard
& Poor's ratings desk on London (44) 20-7826-3540. -- CreditWire
| Credit Analyst: | Maria Bissinger, Frankfurt (49) 69-138709-40 |
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