ZURICH (Reuters) - Swiss power and automation group ABB (ABBN.S) snapped a two-year order decline in the fourth quarter due to improvements in its U.S. and China markets, but said uncertainties in the global market had left it unsure of maintaining the recovery.
Chief Executive Ulrich Spiesshofer said macroeconomic and geopolitical developments made him cautious about calling the orders improvement a turning point, even as the maker of products ranging from transformers to industrial robots said the outlook in the United States and China was looking brighter.
“We will absolutely sustain the ambition to drive the order momentum going forward, but what the markets give us I cannot say in this uncertain world,” Spiesshofer told reporters on a call. “The world is full of uncertainties at the moment.”
The shares were down 2 percent at 1004 GMT.
ABB said orders, an indicator of future profit, rose 0.2 percent to $8.277 billion in the three months ended Dec. 31 from the same period a year earlier, helped by improvements in the United States and China, its two biggest markets.
The orders figure, which beat the average estimate of $8.129 billion in a Reuters poll of analysts, rose from $7.53 billion in the previous quarter, ABB’s weakest period for orders in nearly seven years.
ABB has been hit in recent quarters by falling sales as customers in the oil and gas sector and utilities have held back on investing in new products. The company has responded to the downturn by cutting costs and exiting low margin and risky projects such as construction and offshore wind generation.
A slew of projects worth $842 million, including one to provide an 1,800 km (1,118 mile) power link connecting southern and central India, has helped.
“The orders intake was driven by big orders in Power Grids,” wrote Zuercher Kantonalbank analyst Richard Frei in a note to investors. “You can’t forget that these kinds of projects are erratic. 2017 is going to be another transition year, which doesn’t surprise us.”
Meanwhile, base orders worth less than $15 million each fell 4 percent from a year earlier, hurt by declines in the company’s Electrification Products and Power Grids business.
“If you look on the base orders side, the sentiment in some of the markets is still a little cautious,” Spiesshofer said.
ABB’s sales during the quarter fell to $8.99 billion, just missing the average estimate of $9.01 billion in a Reuters poll. Net profit rose 140 percent to $489 million, compared with the poll average of $545 million.
ABB’s earnings were hit by the default of a Turkish distributor of low and medium voltage products and currency losses due to the devaluation of the Egyptian pound, which together wiped $30 million from the company’s operating profit.
However, Morgan Stanley analyst Ben Uglow said despite lingering order concerns, “the bigger picture today is that ABB has returned to growth”.
“Clearly, should this continue, market expectations of a $100mn year on year improvement in operational EBITA will prove (much) too conservative,” he wrote in a note.
Reporting by John Revill, editing by John Miller and Susan Thomas