Thursday April 23, 12:45 PM
Engineering giant ABB profits slump
ZURICH (AFP) - Swedish-Swiss engineering giant ABB (Virt-X: ABBN.VX - news) on Thursday said its net profit slumped 35 percent during the first three months of this year, and that it remained unclear when a turnaround may come.
"Visibility in ABB's markets for the remainder of 2009 remains limited," the group said, noting that net profit fell to 652 million dollars (500 million euros) in the first quarter compared to one billion dollars year-on-year.
The group said in a statement that the business environment in March has "improved but it is too early to say whether this represents a bottom to the market downturn."
To cope with the difficult environment, ABB said it would cut up to 2.0 billion dollars in costs by 2010, up from 1.3 billion as announced in December.
These savings are expected to come from cheaper sourcing, improvements in internal processes, as well as the adjusting to shifts in demand.
The group also highlighted the crippling effect of the tight financing environment, as clients postponed projects due to the difficulties of securing financing.
"The cost and scarcity of project funding have delayed many power investment decisions, and ABB is unable to precisely forecast when the various government stimulus programmes will have an impact or when the availability of funding will improve," it said.
Orders received in the first quarter fell 3.0 percent in local currencies, but when converted into US dollars, it reflected a slump of 17 percent.
Orders received from the Middle East and Africa helped to limit the overall slide in orders in local currency terms.
Weak demand also in the construction industry weighed on the group.
"Demand for ABB's industrial products and systems deteriorated in the quarter as global industrial production continued to contract and demand in the construction industry decreased further," ABB said.
While demand for power infrastructure remained steady during the period, the group said limited availability of financing for large power projects and the uncertainty over raw material prices was delaying the award of new projects.
Bank Vontobel described the results as mixed.
"We see no short term catalysts and the outlook/demand remains subdued despite an improvement in March," said the bank in a note to investors.
At mid-day trade, the stock was down 5 percent at 17.1 francs, underperforming the Swiss Market Index, which was trading flat.
The group in February said its annual profit slipped 17 percent to 3.12 billion dollars in 2008, after a steep drop in big orders from emerging markets in the fourth quarter.
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