UPDATE 2-ABB says Europe demand helping to offset China slump

* Europe’s thirst for technology driving sales

* China, oil and gas, mining remain weak

* Shares rise 4 percent (Recasts story to focus on Europe, cost cuts)

ZURICH, April 20 (Reuters) - Swiss engineer ABB said that demand in Europe for energy efficient technology and cost cuts had helped it to beat first quarter profit forecasts despite weaker demand from Chinese customers and the oil and mining industries.

ABB Chief Executive Ulrich Spiesshofer, under pressure from activist investor Cevian Capital to improve performance, has been cutting jobs at businesses making motors, drives, transformers and oil-industry measurement products to help offset falling sales.

“2016 will be characterized by continued market headwinds and uncertainties,” Spiesshofer said on a call.

“Therefore, we need to focus on tapping the growth opportunities that are there and realizing the benefits of our new leaner structure.”

Investors reacted positively and ABB shares rose 4 percent by 0820 GMT, extending their gain this year to more than 12 percent.

Cevian, which owns just over 5 percent of shares, has said Spiesshofer must “hurry up” reforms at ABB.

Spiesshofer highlighted Europe, often maligned for sluggish economic growth, as a bright spot for ABB’s products including power cables needed to connect transmission systems in Britain and Norway.

While Europe’s economy remains uncertain, demand for energy-efficient products is helping to drive investments.

“If you look at our base (European) orders, they’re up 6 percent in an overall uncertain economy, and that just speaks how well our technologies really fit the requirements that Europe still has,” he told CNBC in an interview.

Since last month ABB has announced nearly $500 million in orders from European utilities to help integrate renewables into the European and UK grids.


The Zurich-based company said on Wednesday that profit fell 11 percent to $500 million in the three months to the end of March, compared to a Reuters poll of analysts that had forecast profit dipping to $426 million.

Sales slipped 8 percent to $7.9 billion, compared with a forecast of $8 billion.

Still, ABB’s cost cuts helped boost its operational earnings margin before interest, taxes and amortization by nearly 1 percentage point to 12 percent.

ABB has been laying off workers in the United States at factories that serve the upstream oil business, as well as trimming capacity at its Discrete Automation and Motion business that makes motors and drives.

That business boosted its profitability by about 1 percent, compared to the fourth quarter of 2015.

“The company continues to deliver on cost cutting,” said James Stettler, a Barclays analyst, in a note to investors. (Reporting by John Miller; Editing by Biju Dwarakanath and Keith Weir)