ABB Profit Margin widens as Chinese Growth Offsets Slowdown

Wednesday, Feb 03, 2016

ABB Ltd, the Swiss maker of industrial robots that has activist Cevian Capital as a shareholder, reported a rise in fourth-quarter profit margin and said growth in China would continue in 2016.

A cost cutting program lifted the operating margin for earnings before interest, taxes and amortization 60 basis points to 11.7 percent in the three months through December, the Oerlikon, Switzerland-based company said in a statement on Wednesday. Net income fell 70 percent to $204 million, although that included $496 million of reorganization charges.

“In 2015 we continued to focus on growth opportunities in a disciplined way while mitigating the impact of market headwinds through capacity adjustments, productivity measures and cost reductions,” Chief Executive Officer Ulrich Spiesshofer said in the statement.

The maker of power transmission cables is grappling with a slowing Chinese economy and a U.S. oil and gas industry that’s reducing investment after a slump in crude prices. Orders fell 12 percent to $8.3 billion in the quarter, while low oil prices and foreign exchange effects would continue to affect earnings, ABB said.

The shares gained as much as 4 percent and traded 2 percent higher at 17.69 swiss francs as of 9:15 a.m. in Zurich, valuing the company at 41 billion swiss francs ($40 billion). That reduced the decline for the year to 1.3 percent.

The profitability level remained buoyant due to cost control and lower corporate costs, analysts at Vontobel wrote in a note.

“Macroeconomic and geopolitical developments are signaling a mixed picture with continued uncertainty,” ABB said. “Some macroeconomic signs in the US remain positive and growth in China is expected to continue, although at a slower pace than in 2015.”

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