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UPDATE 2-ABB sees growth in small orders and some signs of recovery
April 20, 2017 / 6:07 AM / 8 months ago

UPDATE 2-ABB sees growth in small orders and some signs of recovery

* Q1 order intake down 3 pct, but smaller orders up 2 pct

* Sees early signs of recovery in sectors hit by energy downturn

* Q1 net profit tops expectations, boosted by one-off gain

* Company posts best organic sales rise since Q2 2015 (Recasts, adding CEO comments, analyst, market reaction)

By John Revill

ZURICH, April 20 (Reuters) - Swiss engineering group ABB reported a rise in smaller orders and signs of recovery in some sectors hit by recent cutbacks by oil and gas companies, saying these were a better guide to the future than a drop in volatile big-ticket orders.

The transmission and industrial automation company said on Thursday its overall order intake fell 3 percent in the three months ended March 31, when adjusted for currencies and divestments, halting an uptick at the end of 2016.

But ABB Chief Executive Ulrich Spiesshofer said he was encouraged by the 2 percent growth in base orders - projects under $15 million - which he said were the most reliable indicator of growth in the business.

Sales adjusted for currency fluctuations and divestments also rose by 3 percent, ABB’s best performance since the second quarter of 2015.

“Base orders in three of our four divisions are up,” Spiesshofer told reporters. “Large orders are lumpy, they fluctuate from quarter to quarter, and this quarter had lower larger orders ... This is something I wouldn’t take as the overall sentiment.”

Before the fourth quarter of 2016, ABB’s order book had fallen for six straight quarters, putting pressure on the company to turn around its fortunes and catch up with rivals such as Germany’s Siemens.

Analysts said the order downturn was expected, and ABB’s stock rose 2 percent in early trading following earnings that beat forecasts.

A $200 million gain from one-offs including selling its high voltage cable business to Denmark’s NKT Cables last year, helped ABB lift net profit by 45 percent to $724 million, ahead of forecasts of $489 million in a Reuters poll.

Revenue fell 1 percent to $7.85 billion, though it rose 3 percent after stripping out the effect of divestments and currency fluctuations. The performance was highlighted by Barclays analyst James Stettler as ABB’s highest sales performance in two years.

In recent quarters, ABB has been wrestling with reduced orders from process industries such as oil and gas where customers have reacted to lower raw materials prices by postponing or cancelling investments in new equipment.

Oil prices will likely continue to influence ABB’s results during 2017, the company said, while political uncertainties linked to developments such as Britain’s exit from the European Union would also weigh.

But Spiesshofer said he was seeing the “first signals of market stabilization in some process industries, as well as some growth signals in early-cycle businesses.”

The company said some macroeconomic signs in the United States remained positive, while growth in China was expected to continue. The two countries are ABB’s two largest markets. (Reporting by John Revill; Editing by Christian Schmollinger and Mark Potter)

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