ABB Posts Profit Growth 
A logo stands on the roof of an ABB Ltd. plant in Baden, Switzerland. (Photographer: Stefan Wermuth/Bloomberg)

ABB Posts Profit Growth 

(Bloomberg) --

ABB Ltd., the world’s second-largest supplier of factory automation gear, reported its first profit growth for three quarters, driven by cost savings and demand in industries from food to packaging.

  • Orders at the supplier to Volvo increased 1% on a comparable basis, the Zurich-based company said Wednesday. Quarterly earnings were $710 million, in line with estimates.

Key Insights

  • The results highlight the challenges facing mining-equipment veteran Bjoern Rosengren when he takes over as chief executive next month. He can take heart from resilient demand for industrial automation and cost cuts kicking in, yet the threat of the coronavirus hangs over an already fragile Chinese market.
  • ABB’s forecast for stable or slightly better revenue in 2020 doesn’t include a “likely” impact from the viral outbreak. China is ABB’s No. 2 market, accounting for 15% of revenue.
  • Rosengren’s appointment is one of a slew of changes to streamline management as ABB strives toward a 13-16% margin goal. Stranded-costs and one-time expenses saw profitability weaken to 10.1% in the fourth quarter. Analysts predicted 10%.
  • ABB said its planned sale of a power-grid division to Hitachi Ltd. is on track and should generate a book gain of $5 billion after lower-than-expected tax leakage. The deal reflects its increased focus on software and digital technology over the past year, under the watch of Chairman Peter Voser. ABB is partnering with Ericsson AB and others to compete with rivals including market leader Siemens AG and Rockwell Automation Inc.

Market Reaction

  • ABB’s stock has climbed more than 20% in the past year. It gained a further 0.2% on Wednesday, as of 9:07 a.m.

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