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ABB issues another warning
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October 24, 2001: 3:56 a.m. ET
Third quarter profit slumps at Europe's biggest electrical engineering company
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LONDON (CNN) - ABB, Europe's biggest electrical engineering group, warned on Wednesday profit would not match last year's level as third-quarter earnings plunged.
The company, which announced plans to shed 12,000 jobs and issued a profit warning in July, said orders in the nine month period to September 30 fell eight percent as a sharp global economic slowdown began to bite harder.
ABB's markets worsened, especially after the devastating September 11 events which caused ABB to take a provision of $50 million for estimated reinsurance claims from the World Trade Center attacks.
ABB, which makes products like systems to power factories, electricity transmitters and pipelines and plant for the oil and petrochemical industries, is to step up plans to cut its workforce. The job cuts would cost $500 million to implement and result in annual cost savings of about the same amount.
"Seeing a decline in orders, ABB is accelerating its cost reduction programme which will lead to higher restructuring charges being taken in 2001," said the company. "ABB also expects base orders to be lower in the fourth quarter. As a result, EBIT (earnings before interest and tax) is now expected to be below last year, excluding capital gains for both years."
"We need to become leaner as fast as possible given the economic climate," said chief executive Joergen Centerman. "By taking more of the planned restructuring costs earlier we will reduce earnings now, but we build competitiveness and gain productivity improvements that pay back over time."
Third quarter net income slumped to $23 million, from $132 million in the same period a year ago. Nine-month sales rose nine percent to $16.87 billion while new orders were down three percent to $17.86 billion.
Net income in the first nine months of the year slumped by three quarters to $289 million from $1.224 billion. Analysts polled by Reuters expected nine month sales of $16.3 billion and a net profit of $325 million.
ABB stock, which has plunged more than 70 percent this year amid concerns an economic slowdown would hurt earnings and its exposure to asbestos claims in the U.S., slipped 0.4 percent to 13.45 Swiss francs in Zurich. 
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