UPDATE 3-ABB says downturn hits orders, makes Q4 provision

(Adds analyst comment, shares)

By Katie Reid

ZURICH, Dec 19 (Reuters) - Swiss engineering group ABB (ABBN.VX) said orders in October and November had weakened as tighter credit conditions are making it more difficult for clients to finance projects, pushing shares lower.

Volatility of major commodity prices and exchange rates in the fourth quarter was expected to hit earnings before interest and tax (EBIT) due to the mark-to-market treatment of hedging transactions, ABB said.

The group said, however, it would post a fourth-quarter net profit despite an $850 million provision and would meet 2008 growth targets of 15-20 percent in power and in excess of 10 percent in automation in local currency revenues.

By 0825 GMT, shares in ABB, which have already lost some 50 percent of their value so far this year, had fallen 3.5 percent to 15.44 Swiss francs, underperforming a 1.2 percent drop in the Dow Jones industrial goods and services index .SXNP.

"It is possible that things will get worse at ABB. Order intake was flat in the Q3," said ZKB analyst Richard Frei.

"There is a risk that we will see a decline in orders in the Q4 or Q1 as the large systems were missing in the current quarter and base orders are weaker. But thanks to their larger order backlog their capacity utilisation in 2009 will be fine," he said.

ABB, which sells power equipment to utilities as well as to oil and gas companies, had not seen any significant cancellation of orders, but said it was launching a programme to cut costs by $1 billion as the economic envrionment worsens.