ABB Ltd (ADR) (ABB) Buying Back $4 Billion in Shares Following Pruning of Assets

ABB Ltd (ADR) (NYSE:ABB) has announced it will buy back $4 billion of its shares in a sign of confidence in its operations and as a reward to shareholders. New ABB Ltd. Chief Executive Officer Ulrich Spiesshofer spoke with Bloomberg this morning about the buyback and the direction of the Swiss engineering company.


“Well, we have done very well on cash generation over the last quarters. We have also very successfully pruned our portfolio with some very attractive returns, so we have a lot of cash at the moment. And we let our shareholders participate in the very strong cash generation, and to the results of our portfolio pruning. This is also a signal of confidence in our own company, that we are buying our own stock for the future and for our next level strategy,” Spiesshofer said.

ABB Ltd (ADR) (NYSE:ABB) is flush with cash after recently pruning several noncore business assets, including the Meyer Steel Structures unit that was part of Thomas & Betts, whom they acquired in 2012. They sold that unit to Trinity Industries (NYSE: TRN) in June for $600 million.

The share buyback is an attempt to restore some investor confidence in ABB Ltd (ADR) (NYSE:ABB), whose shares are off 12.65% year-to-date on weaker demand in Europe and lowered medium-term growth projections by Spiesshofer, who took over as CEO 12 months ago. The CEO has trimmed revenue growth forecasts to 4% to 7% between 2015 and 2020, down from 7% to 10%.

ABB Ltd (ADR) (NYSE:ABB) supplemented the news of their share buyback today with the news that they have also landed two new contracts. The first is an $800 million deal to build a 160km high-voltage direct-current underwater power line through the Moray Firth in Scotland, connecting the southern and northern regions of that country. ABB Ltd (ADR) (NYSE:ABB) also landed a $103 million order for automation and electrical systems at a Brazil mine operated by Vale SA (ADR) (NYSE:VALE).

Shares of ABB Ltd (ADR) (NYSE:ABB) are up 1% in morning trading, and shares of ABB Ltd (ADR) (NYSE:ABB) subsidiary ABB India Ltd have also risen by more than 10% on the Bombay Stock Exchange on the news.

Disclosure: none