Big industrial orders lift ABB Q3, power worries

Big industrial orders lift ABB Q3, power worries

Zurich: Swiss engineering group ABB beat expectations with its third-quarter profit as large industrial orders flowed in once again, but investors fretted about when its transmission business would improve.

ABB posted a third-quarter profit of $774 million, beating a Reuters poll, thanks in part to an offshore wind farm order from the German grid, as well as orders from the solar power and the minerals and metals industries.

But shares in the group fell 1.5% to 21.23 francs at 0942 GMT, underperforming a 0.4% rise in the sector index, on disappointment that it had not brought forward its timeframe for improvement in the transmission business.

“The figures were good," a trader in Zurich said. “(But) the outlook wasn’t changed, which in the short term may not be enough."

ABB, whose business is dependent on customers’ capital expenditure plans, suffered a fall in industrial orders as a result of the global downturn.

The group has seen its short-cycle business, with products ranging from software to industrial robots, recover well and expects this trend to continue into 2011, echoing remarks made in September.

But for ABB’s longer-cycle units, which produce power transformers for utility companies, the outlook for the rest of 2010 remained mixed, ABB said, a view it also gave last month.

Third-quarter orders in the power products division, which includes transmission, fell 7% in dollar terms.

“Further upwards movement for the stock should be made somewhat more difficult by its uncertain outlook in the energy field," bank Wegelin said in a note.

Power Turnaround

Overall orders in North America, Europe and Asia rose by double digits, ABB said.

“We see plenty of opportunities for growth, especially in areas like renewable energy and industrial efficiency, and in the fast-growing emerging economies," chief executive Joe Hogan said.

ABB’s comment follows remarks from Germany’s Siemens, which has a market capitalization about twice that of ABB’s and expects fourth-quarter operating profit to be higher year-on-year.

Smaller French rival electrical equipment-maker Schneider has also raised its guidance.

ZKB analyst Richard Frei, who said the results showed a positive strong recovery, expects transmission orders to recover some time in the middle of 2011.

“Perhaps towards the middle of the year the recovery signs for the systems business should become evident," he said.

In China the power products unit posted a fall in orders, reflecting rising competition from Chinese players and the government’s “buy local" policy that has been posing a challenge to many foreign industrial companies.