ABB-Powerful Forecast

ABB Ltd., the Swiss power technology company, has raised its outlook for the next five years, forecasting strong demand for new and upgraded power infrastructure in China, India and the Middle East.

The electrical engineering company is now targeting sales growth of between 8 percent and 11 percent. Operating profit, meanwhile, should rise at an annual rate of between 11 percent and 16 percent.

Both the figures are significantly above ABB's previous sales growth and margin expectations, but in line with market forecasts. ABB had widely been expected to lift its targets amid a global infrastructure boom and investors had already priced in their forecasts.

The company predicted its Asian market will expand by more than 50 percent by 2011, twice as much as in Europe and the Americas. The market in the Middle East and Africa is expected to increase 40 percent.

"Initiatives to optimize our global footprint will continue to bring both cost and growth benefits," said Chief Executive Fred Kindle. "At the same time, we will look for value-creating external growth opportunities."

The new targets from ABB, which has been performing strongly since facing near bankruptcy in 2002 amid a global economic downturn and costly asbestos litigation in the United States, are really strong.

This also shows how much ABB has improved over the past few years. Importantly, ABB's healthy position could enable it to make major acquisitions or pursue a multibillion dollar takeover in the automation sector, where ABB already is already a global leader. ABB could raise as much as $10 billion to sponsor a takeover.

A global economic downturn could still slow the company's growth, even though a feeling of rosiness prevails at present.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints

Investment bankers upbeat on India

India is largely insulated from the subprime crisis and will continue to see mergers and acquisitions, said investment bankers, speaking at a banking seminar.



“Indian corporates are largely under-leveraged and we will not see any drying up in the financing of large Indian contracts. Pricing of these deals may, however, be higher than what has been in the last few years,” said Tarun Kataria, Head, Investment Banking & Markets, HSBC, speaking at a FICCI-IBA seminar.

He added that the uncertainty due to a global credit slow down could continue for a while. Deals that are stuck will get repriced and restructured.

India may benefit

India, however, stands to benefit since most acquisitions are cash transactions and there are few leveraged buy-outs.

In 2007, there were more outbound deals in India than inbound ones both in terms of number and value. “There were 121 outbound deals for $27.98 billion while there were 51 outbound deals for $27.98 billion. This includes the Tata Steel-Corus and Hindalco-Novalis deal,” said R. Sridharan, MD and CEO, SBI Capital markets

Around 57 per cent of merger and acquisition deals (in terms of value) involved Europe and 34 per cent North America.

Investment bankers believe that the liquidity position in Asia, particularly India, is comfortable.

“However, globally, there is a backlog of $300 billion worth of loans, which are waiting to be syndicated,” said Nalin Nayyar, Managing Director-India investment banking, Lehman Brothers.