ABB restructures after posting lower profits
The stock price of Swiss-Swedish engineering giant ABB headed into a tailspin on Tuesday after the company said its net profit dropped in the first quarter and announced a major overhaul of its struggling power systems unit.
During the first three months of the year, ABB, a top player in the global electrical engineering sector, saw its net profit plunge to $544 million, an 18 percent drop from the first three months of 2013.
That number, which fell far short of the analyst expectations, was dragged down by $333 million in depreciation and amortization during the quarter, including $100 million linked to acquisitions.
ABB, which counts Germany's Siemens and Alstom of France as its main competitors, said its sales fell three percent during the January-March period to $9.4 billion, as overall orders slid one percent and large orders plunged 12 percent.
Analysts polled by the AWP financial news agency had expected the company to rake in $738 million in net profit and $9.7 billion in sales.
Following the earning's announcement, ABB saw its share price tumble 6.9 percent to 21.46 francs a piece in late morning trading, as the Swiss stock exchange's main SMI index swelled 0.53 percent.
"ABB will need to show its ability to take the right measures to satisfy investors again," J. Safra Sarasin analyst Oskar Schenker said in a note, decrying the weak order bookings, and also poor performance in ABB's power system's unit.
Company chief executive Ulrich Spiesshofer acknowledged that the unit, which saw sales plummet 22 percent during the quarter, was a disappointment.
"We are disappointed with the continued poor performance in Power Systems and are rigorously executing actions that go well beyond the previously-announced strategic realignment," Spiesshofer said in the earnings statement.
He said the company had already launched "a number of corrective decisions," including management changes and a halt in bids for solar engineering, procurement and construction projects.
Spiesshofer warned though that the long-planned transformation of the unit would take longer than originally expected, but added: "we remain confident that the outcome will be a strong and competitive business."