April 29 (Bloomberg) -- ABB Ltd., the world’s largest maker of transformers, reported profit that missed analyst estimates and said it will deepen a revamp of its power-systems division to rectify disappointing results.
Power Systems, which manages big ticket contracts such as offshore grid connections, will cease bidding for orders to design and build solar power plants, Zurich-based ABB said in a statement today. The reevaluation of plans by the division’s new leadership will mean restructuring takes longer than expected, ABB said.
Chief Executive Officer Ulrich Spiesshofer, is pruning ABB’s portfolio with smaller asset sales as rivals General Electric Co. and Siemens AG tussle to acquire the power assets of France’s Alstom SA. Acquiring Alstom, currently the world No. 3, would propel Siemens to the world No. 1 in the global transmissions market over ABB, giving it more than a quarter of the world market, Fitch Ratings said yesterday.
“ABB assumes that Power Systems will continue to weigh on operating margins,” Richard Frei, an analyst as Zuercher Kantonalbank AG in Zurich, said in a note to clients. He downgraded ABB to marketweight from overweight. “Their outlook is expectedly cautious.”
Shares of the Swiss company fell as much as 7.9 percent and traded 5.3 percent lower at 21.81 francs as of 9:14 a.m.
Spiesshofer’s predecessor, Joe Hogan, spent more than $10 billion on adding electric motors, low-voltage gear and solar inverters among other products.
As a result of a three month review carried out by Power Systems head Claudio Facchin, ABB will hire “external resources” to help with the revamp of the power systems unit as well as reassessing the business model for offshore wind power connections, and making further management changes in the division.
Spiesshofer, in a video posted on YouTube, said he’s committed to make the power division stronger and more profitable.
“We are disappointed with the continued poor performance in Power Systems and are rigorously executing actions that go well beyond the previously-announced strategic realignment,” Spiesshofer said. Management is making “good progress” on a longer-term strategic plan for ABB that will be presented in September, he said.
First-quarter net income fell 18 percent to $544 million. The average estimate of 12 analysts surveyed by Bloomberg was for $719 million. Sales declined 3 percent to $9.5 billion, also missing estimates.
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