Azernews.Az

By Bloomberg

ABB Ltd., the world’s largest maker of power grids, reported better-than-expected profit in the second quarter and said the company will continue to battle slowing demand in China and the U.S. The shares gained.

Net income declined 7.5 percent to $588 million, the Zurich-based company said in a statement on Thursday. That beat the $577 million average estimate of 16 analysts in a Bloomberg survey. Revenue fell 10 percent to $9.2 billion as both smaller and large orders dropped.

“Targeted measures to increase productivity and simplify the organization are bearing fruit,” Chief Executive Officer Ulrich Spiesshofer said in the statement. “Our order development reflects a tougher market environment and weaker demand in oil and gas, China and the U.S.”

The executive, who is facing investor pressure to improve profitability, has focused on turning around the power-systems unit since taking over at ABB in 2013. Activist investor Cevian Capital AB, which has built a 5.1 percent stake in ABB, may be pushing for a breakup or other changes, a person familiar with the matter said this month.

ABB shares gained as much as 4.8 percent, the most since June 4, and traded 3.4 percent higher at 20.32 Swiss francs as of 9:14 a.m. in Zurich. The pared declines for the year to 1.2 percent, valuing the company at 47 billion francs ($49 billion).

“Expectations were low going into the quarter,” Fredric Stahl, a Zurich-based UBS analyst, wrote in a note to clients. Operating profit was “ahead of consensus on the back of better profits in process automation and low voltage.”

Asia Steady

Spiesshofer had cautioned that the company was facing a difficult second quarter as Chinese demand weakened, though orders held steady in Asia amid growth in India, Saudi Arabia and Australia, ABB said Thursday. Orders also advanced in Europe, and fell in the Americas in the period, ABB said.

The power systems unit reported earnings before interest, taxes and appreciation of $42 million in the second quarter, building on a return to profitability in the previous three- month period. While that made it the least profitable of the five businesses, it showed the greatest improvement, having made a $57 million loss a year earlier. Companywide Ebita fell 3.2 percent to $1.06 billion.

ABB is already reducing costs by scaling back the number of administrative regions and introducing a new information- technology system. Restructuring costs will total between $250 million and $300 million this year, the company said in April.