ABB profit dips as economic uncertainty hits orders

ZURICH Thu Oct 25, 2012 5:55am EDT

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ZURICH (Reuters) - Swiss engineering firm ABB (ABBN.VX) is cautious about the coming months after the euro zone crisis and slackness in other major economies translated into a fall in orders in the third quarter.

Net profit at the company, which competes with the likes of Siemens (SIEGn.DE) and General Electric (GE.N), dipped 4 percent in the quarter to $759 million compared with an average analyst forecast for $764 million. Orders fell 5 percent to $9.295 billion, short of the $9.958 billion expected in a Reuters poll.

"I get concerned that a lot of the macro-economic signals point down right now, so we have to stay on our toes," Chief Executive Joe Hogan said.

Yet Hogan was keen to look beyond current economic turbulence to sketch out good longer-term prospects built on rising demand for energy efficiency and urbanization, saying he had grounds for "cautious optimism".

ABB, which makes components for the oil and gas industry and big infrastructure projects, has faced tough competition on prices and weak demand as clients postpone big capital expenditure projects and governments tighten their belts.

In the third quarter, demand differed depending on the market, with orders from the United States rising 13 percent and those from China steady, while they slumped 64 percent in Germany and 39 percent in India.

ABB shares were down 0.7 percent at 0845 GMT, compared with 0.5 percent rise in the sector index .SXNP.

Although the fall in ABB's orders was negative, its comments about the strength of the U.S. market and the stabilization of orders in China were positive, said Kepler Capital Markets Christoph Ladner.

"Despite the claimed limited visibility, we believe that an order backlog covering more than nine months of sales puts ABB in a relatively good position," Ladner said.

Analysts at Sarasin said the results were too heavily dependent on the fruits of an acquisition spree Hogan has embarked upon since taking over in 2008, with electrical components-maker Thomas & Betts a big contributor.

ABB bought the U.S. firm this May for $3.9 billion, in a bid to boost its offering of automated products like industrial robots and enhance its profile in the United States. It bought motor maker Baldor Electric in 2010,

The fall in ABB's orders in the third quarter would have been larger without the Thomas & Betts buy.

Hogan, a U.S. citizen, has said no more big deals are planned this year.

(Reporting by Catherine Bosley; Editing by David Cowell and Hans-Juergen Peters)

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