ABB raises prospect of more deals as it continues to reshape

ABB, the Swiss engineering conglomerate, has said its portfolio is “not cast in stone”, raising the possibility of more deals to reshape the company after it beat profit forecasts in the second quarter.

The industrial group, which makes factory robots and power grids to transmit electricity, on Thursday reported a 30 per cent increase in net income to $681m for the period, as orders rose 8 per cent on a comparable basis to $9.48bn.

Ulrich Spiesshofer, chief executive, said the performance in the period demonstrated that a transformation of the company undertaken in recent years was delivering. Since his appointment in 2013, Mr Spiesshofer has sought to streamline and simplify ABB as well as cut costs.

“We wouldn’t say now our portfolio is cast in stone,” he said. “We will continue to shape ABB, constantly look for opportunities to shift our centre of gravity and drive more growth.

“You will see us adding smaller and bigger pieces, and also divesting smaller and bigger pieces.”

The reorganisation of ABB has focused the group on four areas — power grids, electrification, industrial automation and robotics. It has involved acquisitions, such as the $2.6bn purchase of General Electric’s Industrial Solutions business last year, while also offloading activities like power cables.

Despite exceeding analyst expectations on profits and orders, ABB’s second-quarter revenues were sluggish, increasing just 1 per cent to $8.89bn. That was below its target range of 3 to 6 per cent.

With the company struggling to return to growth, ABB has come under pressure to carry out further portfolio restructuring from Cevian Capital, the large European activist fund. Last year, Cevian co-founder Lars Forberg joined the company’s board.

Analysts at UBS said the results demonstrated a “solid [profit] margin delivery despite weak top line growth”. Shares in the company gained 3.8 per cent on Thursday to SFr22.80.

“Large orders have reached historically low levels and look set to rebound from current depressed levels, supported by an ongoing recovery in process industries,” wrote analysts at Deutsche Bank. “The house is now in order and the group’s portfolio and cost structure look stronger than ever.”

As the US and China embark on a trade war, slapping punitive duties on billions of dollars worth of each other’s goods, Mr Spiesshofer reiterated that US tariffs on foreign metal could have a negative impact on its operations in the country, since it relies on imported steel for use in motors and transformers.

“These grades are only produced by a couple of suppliers in Japan and Korea. We need to make sure we have access to that,” he said.