ZURICH (Reuters) - Switzerland’s ABB Ltd ABBN.VX beat forecasts for net profit and order intake and said business was improving in China, sending its shares to their highest in a year and a half.
The world’s biggest supplier of industrial motors and power grids, sensitive to cyclical swings in the global economy, said it would focus on cutting costs to offset near-term uncertainty about growth in Europe and the United States.
However Chief Executive Joe Hogan was more upbeat about China, contrasting with comments from German rival Siemens AG (SIEGn.DE) which said last month it did not expect the global economy to provide any tailwinds this year, with weakness in China and recession in the euro zone dragging on demand.
Hogan said demand in China grew 10 percent in the fourth quarter across almost all of ABB’s units, making him optimistic for the year as a whole.
“ABB shows clearly a better business development than some European competitors,” said Christoph Ladner, an analyst at brokerage Kepler Capital Markets.
Hogan has sought to cut costs to combat a sluggish global economy that has sapped demand for factory equipment and prompted clients to postpone big capital expenditure projects.
He said in a video message ABB would have to carefully balance costs against growth prospects and would cap capital investment growth at around the inflation rate, after spending grew almost 70 percent over the past three years.
Shares in ABB, which trade at 14.5 times estimated 2013 earnings compared with 13.6 times for Siemens and 13.4 times for French competitor Schneider (SCHN.PA), were up 4.3 percent by 0847 GMT, against a 0.2 percent firmer European sector .SXNP.
The stock rose as high as 20.75 francs, its highest since July 2011.
Tough price competition in Asia, uncertainty over wind farms and a backlog of low-margin orders weighed on ABB’s two power units in 2012.
The company said in December it would be more selective about projects in its power systems unit in an attempt to make the division more profitable.
It is also concentrating on consolidating acquisitions from a spending spree over the past few years. Orders have been supported by electrical-components maker Thomas & Betts, which ABB bought in 2012 for $3.9 billion to boost exposure to North America.
Despite the global weakness in the fourth quarter, orders at ABB rose 4 percent to $10.5 billion, with a 41 percent jump in orders from the Americas offsetting a 25 percent drop in Asia. That beat the average estimate of $9.8 billion in a Reuters poll of analysts.
Its order backlog at the end of December rose 7 percent from a year earlier to $29.3 billion.
Fourth-quarter net profit fell 27 percent to $604 million, hit by a $350 million charge, flagged in December, to revamp its power systems unit. Analysts in a Reuters poll had forecast profit of $532 million.
The company, which also makes components for the oil and gas industry, said it was targeting cost savings and productivity improvements equivalent to 3 percent to 5 percent of cost sales every year. It cut costs by $1.1 billion in 2012.
It said it would pay a dividend of 0.68 francs per share compared with 0.65 francs a year earlier.
Editing by Chris Gallagher and David Holmes