ABB boss wants business co-operation to lift profit
By Caroline Copley
ZURICH (Reuters) - Swiss industrial group ABB ABBN.VX beat expectations for third-quarter profit and said it would seek closer co-operation between its businesses and push ahead with cost cuts to boost growth.
Presenting his first results since taking over as chief executive in mid-September, Ulrich Spiesshofer said better collaboration between ABB's divisions should help improve performance in uncertain markets.
"It's clear we can do more to make our customers more competitive, to improve our own productivity and to accelerate profitable growth," he said in a statement.
Like rivals Schneider Electric SCHN.PA of France and Germany's Siemens SIEGn.DE, ABB is facing a dearth of large orders as industrial customers delay spending in a weak global economy.
ABB, which makes products as varied as power grids for utilities, robots and transformers used on electric trains, hopes that expanding services such as maintenance and technical support will help shield its business from economic cycles.
Orders fell 2 percent to $9.09 billion in the third quarter, slightly below the average forecast in a Reuters poll of analysts, as delays to large-scale projects offset strong growth in China and Germany, two of its biggest markets.
The fall in orders reflected lower spending by utility companies and mining customers, partly due to overcapacity and economic uncertainty. Large orders, over $15 million, dropped 43 percent.
U.S. heavy equipment maker Caterpillar Inc CAT.N blamed weak spending by miners for lower-than-expected profit on Wednesday, while Finnish engine maker Wartsila WRT1V.HE said on Thursday customers were delaying investment.
Cost control and an improving early-cycle business, which includes products like industrial robots and circuit breakers, lifted ABB's net profit 10 percent to $835 million in the quarter, beating the average forecast for a 4 percent rise.
Revenue rose 8 percent to $10.54 billion, also beating estimates.
"ABB looks a compelling story into year end/2014 having significantly underperformed the sector over the last five years," said Morgan Stanley analysts.
Shares in ABB trade at 15.1 times forward earnings, a premium to Siemens's SIEGn.DE 13.2 times and Alstom's ALSO.PA 8.9 times. The stock was up 3.5 percent at 22.72 Swiss francs by 0953 GMT, outperforming a 0.7 percent gain in the industrial goods and service sector index .SXNP.
After shelling out more than $10 billion on acquisitions in recent years, the Swiss group is now focusing on integrating those purchases, which include U.S. groups Baldor and Thomas & Betts as well as solar energy company Power One PWR.O.
On Tuesday, the company named Greg Scheu to lead its business in North America, which is now the company's largest market by geography.
ABB is focusing on high-growth areas such as solar, subsea oil and gas production and electric vehicles and wants to expand in existing markets by introducing new products to its customers.
It will still consider acquisitions to fill gaps, such as for technology, and to bulk up in markets where it is not one of the top players.
ABB said it would continue to make savings equivalent to 3-5 percent of its cost of sales each year.
For the period 2011-2015, it aims to increase sales at a compound annual growth rate of 7-10 percent organically, aiming to outpace economic and market growth.
Editing by Erica Billingham