By John Revill

ZURICH (Reuters) -Swiss industrial group ABB on Thursday announced plans to spin off its entire robotics division in the biggest shake up at the company since it sold its power grids business to Japan's Hitachi in 2018.

The business is the world's second-biggest industrial robot maker after Japan's FANUC Corp and competes with rivals including Yaskawa and Germany's Kuka.

It generated sales of $2.3 billion in 2024, equivalent to 7% of ABB's total, but has struggled in recent quarters as the automotive sector - a big buyer of robots - has seen subdued demand.

As a result, the robotics division's profit margin of 12.1% last year was well below the group level of 18.1%.

ABB intends for the business to start trading as a separately listed entity in the second quarter of 2026, with shares in the new company distributed to ABB investors as a dividend.

CEO Morten Wierod said he saw limited synergies for the robotics business with the rest of ABB and that the business would benefit from being measured more directly against its peers.

"It is our view that a spin-off will optimize both companies' abilities to create customer value, grow and attract talent and both will benefit from a more focused governance and capital allocation," Wierod said.

The plan was supported by Investor AB, ABB's biggest shareholder with a 14.3% stake.

"The planned spin-off is an industrially logical step, creating two companies with further sharpened focus, strong potential for continued profitable growth and long-term value creation for their shareholders," said Investor CEO Christian Cederholm.

Bank Vontobel analyst Mark Diethelm said the spin-off would make ABB a pure electrification and automation company, which he saw as a positive development.

The announcement came as ABB reported better-than-expected profit during its first quarter, with operational earnings before interest, tax and amortisation (EBITA) rising 13% to $1.59 billion.

The figure, which beat analyst forecasts for $1.48 billion, was boosted by a higher profit margin and a 120 million Swiss franc ($147 million) gain from the sale of some property to the city of Zurich.

Sales rose 1% to $7.94 billion in the three months to the end of March, missing analyst forecasts for $8.16 billion in a company-gathered consensus.

($1 = 0.8167 Swiss francs)

(Reporting by John Revill; Editing by Miranda Murray, Mrigank Dhaniwala and Tomasz Janowski)