October 25, 2018 / 6:24 AM / 8 months ago

ABB reports slight Q3 profit beat, sees positive global growth

ZURICH (Reuters) - ABB reported slightly better-than-expected third-quarter profit on Thursday as the engineering company said its growth was improving around the world.

The logo of Swiss power technology and automation group ABB is seen in front of a logo of General Electric in Baden, Switzerland September 25, 2017. REUTERS/Arnd Wiegmann/File Photo

Increased global trade tensions and tariffs between the United States and China along with an economic slowdown in China and disruption across the automotive supply chain have weighed on capital goods makers in recent months.

But ABB said macroeconomic signs remained robust in Europe and were trending positively in the United States, with growth expected to continue in China.

Chief Executive Ulrich Spiesshofer said the Swiss company, which makes products ranging from industrial robots to power transmission systems, was seeing demand pick up, particularly in its robotics and industrial automation businesses.

ABB’s total orders in Europe rose 15 percent during the quarter, while in the Americas they rose by 9 percent, the company said. Asia grew by 4 percent, although Chinese demand increased at a faster rate of 13 percent, ABB said.

“We demonstrated sustained growth, with total and base orders improving in all regions and all divisions,” said Spiesshofer in a statement.

ABB said net income rose to $603 million, beating the average estimate of $592 million of 22 analysts polled by Reuters.

ABB’s revenue increased 3 percent on a comparable basis to $9.26 billion, missing estimates of $9.34 billion.

Power Grids, ABB’s second-largest but lowest margin business unit, increased its profit margin to 10 percent - within its 10 to 14 percent target range. During the first two quarters of this year it was at 9.7 percent.

Reuters reported last week that ABB had begun looking at future options for the division, which makes transformers and substations, including selling a majority stake.

“Power Grids continues its transformation with good order momentum,” Spiesshofer added.

Power Grids’ troubles have weighed on ABB’s share price this year, with ABB’s stock on Wednesday dropping its lowest level since November 2016 as investors remained unconvinced by the company’s turnaround.

The stock has lost 18 percent in the last 12 months, underperforming the Stoxx 600 Industrial Goods & Services Index which is 9.5 percent lower.

“If ABB were to spin off or divest the Power Grids division, that could trigger a rerating of the stock. Simplifying the business is always a positive,” said Fabio Riccelli, a fund manager at the European Dynamic Growth Fund of Fidelity.

Reporting by John Revill and Oliver Hirt; Editing by Michael Shields

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