ABB upbeat as demand for efficient systems grows

22nd July 2010, Comments 0 comments

Swedish-Swiss engineering giant ABB issued an upbeat forecast on Thursday, saying demand was recovering for technologies delivering energy efficiency and productivity.

"We feel more confident about the recovery in most of our markets than three months ago and believe that our short-cycle businesses will continue to perform well over the rest of 2010," said Joe Hogan, ABB's chief executive.

"After the worst economic recession seen in decades, customers are returning to invest in the energy efficiency solutions, for both power and automation, to enhance their efficiency, productivity," he added.

"We expect customer capital expenditures, especially on the power side, to recover later in 2010 and into 2011," said Hogan, as the group published its second quarter earnings.

ABB reported that compared to the same period last year, its net income fell 8 percent to 623 million dollars during April to June.

However, its orders grew 5.0 percent to 7.665 billion dollars during the second quarter, compared to the same time last year.

The growth in orders was led mainly by gains of more than a fifth recorded by the company's automation divisions amid a global economic recovery.

Hogan observed that customers were still delaying orders, but "the backlogs for power systems (is reaching) record highs."

The group announced on July 16 its largest ever power link order, a contract worth 700 million dollars from Germany's transmission grid operator Transpower.

Besides energy efficiency infrastructure, the group also noted greater demand from the minerals, pulp and paper and marine sectors.

"Most customer spending in these industries, however, is focused on equipment upgrades, replacement and service rather than capital expenditures for new capacity," it said.

Between April to June, the biggest jumps in orders came from the Middle East and Africa, up some 27 percent in local currencies, with the minerals as well as oil and gas sectors showing demand.

Orders in Asia also grew due to industrial automation equipment.

In fact, the group booked some 51 percent of its orders in the emerging market in the second quarter, Hogan pointed out.

"The emerging market growth story continues," he said.

Bank Vontobel's analyst Panagiotis Spiliopoulos described the profitability of the second quarter as "strong" and noted that the group was more optimistic in its outlook than at the end of the first quarter.

"The wording of the outlook has improved," he noted.

Zuercher Kantonalbank analyst Richard Frei said ABB had "clearly surpassed expectations."

In mid-morning trading, ABB shares were showing a gain of 2.95 percent to 20.23 francs, outperforming the Swiss Market Index, which was up 0.53 percent.

© 2010 AFP

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