ZURICH (Reuters) - ABB (ABBN.S) reported its best start to a year since 2015 on Thursday, easing the pressure on Chief Executive Ulrich Spiesshofer by showing his turnaround plan is making progress.
The company’s shares rose more than 4 percent after it beat profit, sales and order forecasts in the first three months of the year. It pointed to improvements in its power grids division, having resisted calls from shareholders to spin off its least profitable business.
Some investors, frustrated with the company’s tepid share price performance and stalled progress in recent quarters, had called for a separation of power grids whose products transmit electricity across long distances.
ABB opted to retain the power grids business after a strategy review in 2016. Spiesshofer said it was now on track to reach its profitability target this year before making further improvements within the company’s guidance range.
“We listen very carefully to all of our shareholders and we are always open to constructive dialogue,” Spiesshofer, in the top job since 2013, told reporters on a call.
“We have moved that [power grids] business from 4 percent to close to 10 percent operating margin and we continue that transformation under ABB’s leadership.
“The decision is taken, the portfolio is shaped, and now we execute and drive performance. The entire board with all its members and entire management are fully aligned on that.”
He was speaking after ABB reported net profit of $572 million for its first quarter, beating the average estimate of $562 million in a Reuters poll of 24 analysts.
Revenue rose 10 percent to $8.63 billion, also beating expectations. Operational earnings before interest, tax and amortization rose to $1.06 billion, while the margin of 12.3 percent was within ABB’s target range of 11 to 16 percent.
Revenue and operating EBITA were at the highest level since the first quarter of 2015, when ABB started implementing Spiesshofer’s Next Level strategy which has focused on exiting risky and low-margin businesses like engineering, procurement and construction work and off-shore wind projects.
ABB’s shares reacted positively, gaining 4.4 percent in early trading, the second-highest riser in the Stoxx European industrial sector index. .SXNP
Analysts noted some of the margin improvement was due to the effect of the weaker dollar, but were generally upbeat.
“Strong results strengthen our conviction that the consensus trend is turning upwards,” said Kepler Cheuvreux analyst William Mackie.
Spiesshofer said he aimed to maintain the upturn, and highlighted positive economic signals around the world which was a good sign for increased spending by customers.
ABB said its overall first-quarter order intake increased to $9.77 billion, beating estimates and the best figure in three years. Spiesshofer said order growth had come in all divisions, including power grids.
“2018 for ABB is the first year that all our markets are either steady or growing,” he said.
Reporting by John Revill; Editing by Michael Shields/Keith Weir