The stock market value of ABB was slashed by more than half yesterday following a profit warning issued late on Monday.
The engineering group - which employs 600 people in the Republic - said it would not reach its earnings target in 2002 as a hoped-for recovery in its markets for power and automation technology products had failed to materialise and cost cuts were taking longer than planned to show benefits.
ABB had been aiming for an operating margin of between 4 and 5 per cent in 2002, but it now expects no recovery until the third quarter of next year.
"Although we expected a profit warning ... we are disappointed by management's dramatic change in outlook," said Mr Fabrizio Cattaneo at Bank Julius Baer.
"Only five weeks ago, during his first conference call, newly appointed CEO Mr Juergen Dormann sent a strong message confirming ABB's targets and strategy," Mr Cattaneo added.
"\ profit warning has proved the sceptics right and seriously undermined the credibility of the new CEO," said Mr Hans Peter Lorenzen, an analyst at ABN Amro, in a note to clients.
Mr Dormann, a German who gained enormous respect at the helm of drugs groups Hoechst and Aventis, last month added the ABB chief executive title to the chairmanship he took in December, overturning the old guard in the group.
ABB stock slumped more than 60 per cent to an all-time low of 2.07 Swiss francs (€1.41), just 5 per cent off its high in February 2000. The company's bond prices also collapsed, with the 9.5 per cent euro bond due 2008 quoted at 44 per cent of face value compared to over 64 on Monday.
Debt rating agencies Moody's and Standard & Poor's both downgraded ABB debt, with Moody's putting it on the lowest rung of investment grade and warning it could cut further because of a weak performance and the need for refinancing $3.7 billion (€3.6 billion) of debt in the coming year.
Were ABB's debt rating to fall into junk grade - reflecting a higher risk that it will not repay - this would massively increase its financing costs.
A spokesman for ABB said the fresh downgrade did not affect a $3 billion short-term bank financing deal arranged in April after the cash crisis. - (Reuters)
