* Q1 net profit $664 mln vs poll f'cast of $710 mln
* CEO cautious over 2013 outlook
* Cost savings boost operating margin
* Shares rise 2.9 pct, outperform sector
(Recasts, adds CEO quotes, margin, shares)
By Caroline Copley
ZURICH, April 24 Swiss industrial group ABB
will step up cost-cutting measures to boost
profitability in what it expects to be a tough second half of
the year after first-quarter profit fell short of expectations.
The company was hit by slowing growth in the United States
and hesitant spending by European clients, but Chief Executive
Joe Hogan boosted margins with $260 million of savings through
sourcing and productivity improvements.
"What we're positioning for is a very flat kind of 2013
versus 2012," Hogan said in a video message.
"We're ready for a better second half of 2013, but we
certainly aren't spending in anticipation of that."
In the results statement, Hogan said that ABB will "continue
to focus on the cost-growth balance" for the rest of the year.
His comments echo German rival Siemens, which
this month said that it had yet to see signs of a second-half
Manufacturing studies published on Tuesday also fanned
concern that the global economy is losing steam as growth in
Chinese factories slowed to a crawl, reflecting weak demand from
a fragile U.S. economy and a euro zone mired in recession.
ABB, the world's biggest supplier of industrial motors and
power grids, said first-quarter net profit fell 3 percent to
$664 million, hurt by softer demand for early cycle products
such as drives and motors.
Analysts in a Reuters poll had forecast net profit of $710
The company reported first-quarter orders up 2 percent to
$10.49 billion, buoyed by electrical-components maker Thomas &
Betts, which ABB bought in 2012 for $3.9 billion to boost
exposure to North America. Excluding new businesses, orders were
down 4 percent.
Hogan's tight grip on costs, however, increased ABB's
operating margin by 1.1 basis points to 15 percent in spite of
the tough environment, helping the shares to shrug off the
The shares, which trade at 13.9 times estimated earnings
over the next 12 months and at a premium to Siemens's 11.3
times, were up 2.9 percent at 21.09 Swiss francs by 1045 GMT.
Since taking the helm in 2008, Hogan has also loosened ABB's
purse strings for acquisitions and stocked up on businesses with
new technologies and fast-growing markets.
On Monday ABB said it would buy U.S solar energy company
Power One Inc for $1 billion and said it expects the
takeover to increase earnings per share from the first year of
(Editing by David Goodman)