By John Revill
ZURICH (Reuters) -Swiss engineering group ABB needs to improve its performance, new Chief Executive Morten Wierod said on Thursday, after the company reported mixed third-quarter results.
The maker of factory robots and fast electric chargers, whose numbers are watched closely because they give an insight into the health of the broader economy, nudged its full-year profit guidance higher but lowered its revenue outlook after sales to machine builders in Europe struggled.
During the three months to Sept. 30, the first results since Wierod became CEO, ABB increased its operational core profit by 11% to $1.55 billion, slightly ahead of forecasts for $1.52 billion in a company gathered consensus.
But group sales, which increased 2% to $8.15 billion, fell short of the $8.34 billion forecast.
“In my view ABB is not yet firing on all cylinders,” said Wierod, who took over from Bjorn Rosengren in August.
“We are increasing our R&D and capex investments to support profitable growth,” said Wierod, who was previously the head of ABB’s electrification business.
ABB spent the equivalent of 4% of its revenues on research and development last year, trailing rivals like Germany’s Siemens, which spent 8%.
The company also needed to improve its approach to mergers and acquisitions, Wierod said, indicating a higher pace of deals in future.
During the third quarter the company’s electrification business offset weaknesses in its robotics and electric charging business, ABB said.
Business was strong providing components and products to data centres, utilities and infrastructure projects, although sales to European machine builders struggled.
For the full year, ABB said it expected comparable revenue growth to be “below 5%”, a slight downgrade from its previous comments in July for full-year sales to increase “around 5%.”
It raised its profitability expectations, saying it expected its operational EBITA (earnings before interest, taxes and amortisation) margin to be “slightly above 18%”, a small upgrade from the “about 18%” range the company said previously.
ABB’s shares were 3.1% higher in early afternoon trading after Wierod laid out his plans to accelerate growth via more acquisitions.
“CEO says that ‘ABB is not yet firing on all cylinders’, indicates in our view potential for higher growth and margin in the coming years,” said Olof Larshammer, an analyst at Danske Bank.
(Reporting by John RevillEditing by Tommy Reggiori Wilkes and Tomasz Janowski)
