Photographer: Martin Leissl/Bloomberg

ABB Wary of Hailing Recovery After First Order Growth Since 2015

Updated on
  • Quarterly orders rise 3 percent; momentum isn’t strong: CEO
  • Swiss company sees 2017 as a ‘transitional’ year for business

ABB Ltd. said the first signs of order growth in two years are not enough to call a turnaround as dwindling demand from the oil-and-gas industry and an increasingly uncertain political situation weigh on the outlook.

Quarterly orders rose for the first time since the first three months of 2015, increasing 3 percent from a year ago, the Swiss maker of industrial robots and power systems said in a statement. Yet momentum ‘isn’t that strong yet,” Chief Executive Officer Ulrich Spiesshofer said on a call with journalists on Wednesday.

“We’ll absolutely sustain the ambition” to maintain growth, the CEO said. “What the markets give us, I can’t say in this uncertain world.”

The impact of weaker oil prices on the energy industry is one of the factors hampering Spiesshofer’s attempts to ramp up growth after years of restructuring. Increased uncertainty stemming from the U.K.’s decision to leave the European Union as well as geopolitical tensions in other parts of the world are also overshadowing global markets, leading to what’s likely to be a “transitional year,” the company said.

Spiesshofer’s comments echo those of German rival Siemens AG, which last week also gave a cautious outlook for orders and warned that a fourth-quarter decline would extend into 2017.

The shares fell 3.1 percent to 22.60 swiss francs as of 3:07 p.m. in Zurich, the steepest decline since Oct. 27. That values the company at 50 billion francs ($50.2 billion).

Resilient Grids

One bright spot in ABB’s earnings was the performance of the power-grids unit, where orders rose 15 percent due to the award of large contracts. The company has spent much of the last year resisting calls by activist investor Cevian Capital to spin off the unit, yet Spiesshofer has been determined to keep the business.

“The bigger picture today is that ABB has returned to growth – despite all of the lingering order concerns,” Morgan Stanley analyst Ben Uglow wrote in a note to clients.

Net income for the three months through March was $489 million, the Swiss industrial company said. That undershot the average $543.9 million estimated by analysts in a Bloomberg survey.

A $92 million increase in estimated costs for warranties on products designed and sold by solar business Power-One, acquired by ABB in 2013, weighed on net income, the company said. ABB bought the unit to try to bolster its position as a maker of solar inverters, the technology behind a solar-power panel system.