ABB upbeat on growth despite profits fall

Swedish-Swiss engineering giant ABB on Thursday said its 2010 net profit fell 12 percent to $2.56 billion but insisted this year will be much better while announcing large cost cuts.

ABB upbeat on growth despite profits fall

Sales slipped one percent to $31.6 billion in 2010.

The group issued an upbeat forecast for 2011, expecting improved demand in both emerging and mature markets.

“We see plenty of growth opportunities as we head into 2011 in both the short-term industry-driven businesses as well as later in the year when we expect utility spending on power equipment to begin a recovery,” chief executive officer Joe Hogan said.

“Long-term trends for increased energy efficiency and flexible, more reliable power infrastructure remain very strong.

“ABB will seize these opportunities with a leaner cost base, an enhanced product portfolio and a more customer-focused organization,” Hogan said, announcing plans to cut costs by more than $1.0 billion this year.

Emerging markets are set to be “significant drivers of growth” as they build up their electrical grids and expand industrial production in 2011.

“Demand in mature markets is also expected to improve,” the company said, as power production investment picks up after a 2-year slowdown.

Industrial customers in mature economies are expected to upgrade their manufacturing assets this year, while construction of ‘intelligent’ — more environmentally friendly — buildings could provide greater demand for ABB’s automation services.

A strong pick up in orders was seen in the fourth quarter, with a jump of 17 percent to $8.75 billion compared to the same period in 2009. Growth was largely driven by Europe, up 32 percent, and the Americas, which rose 25 percent.

For the full year, orders improved 6.0 percent to $32.7 billion. Notably, ABB’s biggest market Europe, posted growth of 15 percent at $13.8 billion.

Some analysts were not impressed however.

Bank Vontobel analysts said the “planned cost reduction indicates some struggle to protect margins due to competitive price pressure.”

It added that the quality of the results was “disappointing overall.”

While other analysts also pointed to continuing price pressure, they were more positive.

Bank Helvea rated the stock a ‘buy’ and said most of ABB’s divisions had “exceeded our expectations.”

Zuercher Kantonalbank also noted that the cost savings for 2011 were above expectations.

In morning trade, the stock fell 2.11 percent to 22.69 francs, underperforming a weak Swiss Market Index, which was down 0.19 percent.

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Swedish banking giants report mixed fortunes

Swedish bank Nordea on Thursday posted falling profits in the second quarter while competitor Handelsbanken announced growing figures for the same period.

Swedish banking giants report mixed fortunes
Handelsbanken CEO Pär Boman. File photo: TT

Nordea's net profit fell by 11 percent to €686 million ($928 million), compared to €771 million a year earlier.

"Interest rates continue to come down and the general level of economic activity as well as volatility is low," Nordea chief executive Christian Clausen said in a statement.

"We have seen continued strong activity in our savings area and in the corporate advisory business."

Revenue was almost stable at €1.368 billion, compared to €1.391 billion for the same period last year.

"Low loan growth and interest rates also put pressure on our net interest income," Clausen said.

The bank said that its cost-cutting plan was "progressing as planned" and that it expects to see the results by the end of 2014 and onwards.

Nordea said it has saved €300 million since the launch of the cost-reduction measures at the beginning 2013.

The second quarter looked better for Handelsbanken, which posted profits increasing by 9.0 percent compared to a year earlier to 4.034 billion kronor ($590 million).

Revenue reached 6.704 billion kronor, slightly above the 6.653 billion kronor the bank posted in the same period of 2013.

The loan loss ratio was 0.07 percent, the same as last year.

Handelsbanken is Sweden's largest bank in terms of deposits.

Between April and June, its liquidity reserves stayed above 800 billion kronor, as the bank continued its expansion in the British market.

"The bank has decided to establish a fifth regional bank in the UK, with its head office in Leeds," Handelsbanken said in a statement, adding that this would start in the first quarter of 2015.