* Second overhaul at the power systems unit in as many years
* Charges for offshore wind and solar power projects weigh
* Net profit falls by almost a fifth to $544 mln
* CEO declines to say whether interested in Alstom
* Shares drop 7 pct, underpeform sector
(Adds CEO comment on Alstom bid battle, large orders, updates
By Caroline Copley
ZURICH, April 29 Swiss engineering group ABB
said it would intensify work to overhaul its power
systems unit after posting an unexpected fall in first-quarter
profit because of the unit's weak orders and costly delays to
wind and solar power projects.
Shares in the Zurich-based firm dropped seven percent after
more than a year's work to turn around its least profitable
division failed to yield results. First-quarter net profit fell
18 percent to $544 million, missing the average forecast of $726
million in a Reuters poll of 17 analysts.
ABB will now stop bidding for certain new solar power
generation projects, review its business model for offshore wind
power connections and change some management. This comes on top
of measures in late 2012 to be more selective about projects.
External experts will also be called in to help restructure
the unit, which is still incurring charges for failing to meet
deadlines on some offshore wind and solar power projects - power
equipment takes years to install and usually comes with hefty
downpayments - and is facing tough price competition in Asia.
"The Power Systems situation is very disappointing. We are
not where we want to be and need to address this," Chief
Executive Ulrich Spiesshofer said in a video message.
Weak spending by utility customers and delays to projects
have also dogged ABB's power rivals Siemens and
Alstom, and contributed to an industry-wide review of
its business that in turn has sparked a bid battle between
General Electric and Siemens for Alstom's power turbines
ABB, which competes with Alstom in the areas of
transformers, high-voltage products, substations and network
management systems, declined to comment on whether it would also
make an offer to its French rival.
"We are observing the Alstom situation at the moment and at
the time we have something to say about it we will come out with
some comment," Spiesshofer told reporters.
He said ABB remained committed to its power systems business
and would "fix it to get it back to prosperity." The company has
not set a timeframe for the revamp and said it was not clear
whether they would need to make further provisions.
The division, which makes subsea cable systems and power
links to connect renewable energy to the grid, was the only one
of Swiss firm's five units to post a loss in the first quarter.
Helvea analyst Stefan Gaechter said it was disappointing
that the transformation of the division will take longer than
originally planned and said he expected consensus earnings
figures to be cut on the back of the results.
ZKB analyst Richard Frei lowered his rating on the company
to "market weight" from "overweight."
Shares in ABB tumbled to the bottom of the Swiss blue-chip
index, down 7 percent at 21.42 francs by 0854 GMT.
SLUGGISH LARGE ORDERS
Overcapacity in the mining industry and uncertainty over
renewable energy policy in Europe has also delayed capital
spending by mining and utility customers and depressed large
orders - contracts worth over $15 million - at ABB.
Orders dipped 1 percent in the first quarter to $10.36
billion, just shy of the average forecast, as large orders fell
compared with the previous year.
Spiesshofer said he expected large orders to remain sluggish
in the short-term but was "quite optimistic" in the medium to
In February, the company lowered its target for mid-term
sales growth and said revenue growth would be challenging this
year due to a smaller backlog of orders at the end of 2013.
Revenues fell 3 percent to $9.47 billion, compared to the
average analyst forecast for $9.76 billion.
ABB stuck to its cautious outlook, saying uncertainty in
emerging markets like China may offset more encouraging signs in
the United States and parts of Europe.
"It's too early to call the world an upswing altogether,"
Spiesshofer said. "We have to manage costs very carefully and
not get carried away with some signals already because it's
still a very uncertain world out there."
(Editing by Sophie Walker)