ABB To Raise Dividend, Reports Rising Revenue
02/14/2013| 01:20am US/Eastern
By John Revill
ZURICH--ABB Ltd .(ABBN.VX) Thursday said it would continue to manage costs conservatively amid lingering questions about the strength of the European and U.S. markets even as it reported fourth-quarter earnings that outpaced expectations.
The Swiss engineering group said net profit dropped 27% to $604 million, ahead of market expectations of $557 million. A one-time charge of roughly $350 million weighed on the results.
ABB, the world's largest builder of electric power grids, said orders in the Americas--which includes the big U.S., Canadian and Brazilian markets--grew 22% during the three months ended Dec. 31,with double-digit order growth posted for North America and Brazil. By contrast, orders from Asia dropped 27%, while orders from Europe edged 3% higher.
ABB, whose biggest competitors include Germany's Siemens AG (>> Siemens AG) and France's Schneider Electric SA (>> SCHNEIDER ELECTRIC), said revenue in the fourth quarter rose 4% to $11.02 billion from $10.57 billion a year earlier, boosted in large part by sales at newly acquired companies. The company also proposed a dividend of 0.68 Swiss francs, up from 0.65 Swiss francs a year earlier.
The results include a writedown to cover restructuring costs from a shake-up of the company's power systems division. The business, ABB's third-largest, closed its low margin engineering, procurement and construction operations in 10 countries.
Joe Hogan, ABB's chief executive, said economic pressure near-term in the developed world would weigh on the company, even as urbanization and industrialization of emerging markets provide opportunities in the long run. "There are still a lot of questions around the pace of growth in Europe and the U.S.," Mr. Hogan said in a statement, adding that it was unclear when China, another important market, would begin to rebound.
The Zurich-based company has become increasingly reliant on the Americas, where it has made several mid-sized acquisitions in recent years. The region has compensated for weak markets in Asia and Europe, where economic uncertainty and reduced government spending have crimped infrastructure investment.
Under Mr. Hogan, who joined in 2008 from U.S. competitor General Electric Co. (>> General Electric Company), ABB has embarked on an aggressive takeover strategy to add new product lines and increase its presence, particularly in the U.S. The company is roughly half way through a five-year plan that ends in 2015 to spend as much as $14 billion on small to mid-sized companies.
In January 2012, ABB said it would spend $3.9 billion on Memphis -based Thomas & Betts Corp. to increase its presence in the low voltage products market. The U.S. company makes circuit breakers and wiring accessories. Earlier, ABB spent $4.2 billion on industrial motors company Baldor Electric Company based in Fort Smith, Ark.
The acquisitions have boosted the importance of the Americas, which now represents about a third of ABB's orders, up from around a fifth in 2011. The U.S. is now ABB's largest market, followed by China and Germany.
Siemens last month reported a 12% fall in net profit during its fourth quarter after incurring charges at its high speed rail unit and a loss at its solar business. Schneider Electric is due to report its full-year earnings on Feb. 20.
ABB shares closed Wednesday at CHF 19.70.
Write to John Revill at firstname.lastname@example.org
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