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ABB’s Orders Show Some Industry Bright Spots Amid Robotics Slump

Published 10/23/2019, 03:35 AM
Updated 10/23/2019, 04:47 AM
ABB’s Orders Show Some Industry Bright Spots Amid Robotics Slump
GE
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(Bloomberg) -- Swiss industrial giant ABB Ltd. posted order growth in areas like oil and gas, overshadowing a slump in demand for robotics for the struggling car industry.

Overall orders fell 1% to a lower-than-expected $6.69 billion in the third quarter, according to a statement Wednesday. Growth at three of ABB’s four divisions was muted by a sharp 16% drop at the robotics and discrete automation unit.

“The outlook remains mixed,” Vontobel analyst Mark Diethelm wrote in note. The shares rose as much as 4.1%.

As a supplier of factory gear, Zurich-based ABB is exposed to the manufacturing slowdown that’s been gathering steam in recent months. At the same time, the company is undergoing an overhaul and top management shuffle, with the expected arrival March 1 of mining-equipment executive Bjorn Rosengren as the new CEO.

The results painted a blend of shrinking demand in some sectors and regions and growth in others. While orders were lower in Europe overall, including in Germany, and China, they rose in India and Japan, according to the statement. Revenue dropped in two divisions and rose in the other two.

“If you look at the overall market in robotics and discrete, we don’t see a significant change in that market at the moment,” Chief Financial Officer Timo Ihamuotila said on a call. “On the other hand, on some of our longer-cycle businesses we continue to see a strong pipeline, also in China.”

Global manufacturing has been shrinking for months, with the slump particularly pronounced in Germany, Europe’s largest economy. With a trade war between the U.S. and China still raging, industry executives from Germany to Japan and Russia have also complained of contracting business.

Chairman Peter Voser has taken over as interim CEO, and is overseeing a revamp of the business, including the sale of the bulk of the power-grid division to Hitachi Ltd. for about $6.4 billion and integration of a business acquired from General Electric (NYSE:GE) Co.

Key Earnings Highlights

  • Operational Ebita margin 11.7% vs. 11.5%
  • Ebita at $806 million missed $817.3 million average analyst estimate compiled by Bloomberg
  • Orders missed a $6.88 billion estimate; falling 5% in China, 2% in Europe, 1% in U.S.
  • The company confirmed its 2019 outlook
(Adds shares in third paragraph and comment from the CFO in sixth.)

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