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ABB more confident about 2024 despite China slowdown
Global Banking & Finance Review®
Company
By John Revill
ZURICH (Reuters) -ABB expects faster revenue growth in the coming months, with growth in markets such as the United States and India helping mitigate a big drop in new business from China, the Swiss maker of factory automation and drives said on Thursday.
The maker of industrial robots and ship motors beat profit forecasts in the three months to the end of March and nudged up its profit margin outlook for the year.
This was despite a 5% drop in orders, as ABB lapped high comparisons from 2023 and struggled with an 18% fall in new orders in China – its second biggest market.
ABB shares were indicated to open 2.2% higher in premarket activity in Zurich.
The world’s second largest economy grew faster than expected during the first quarter, according to data this week, but worries remain about falling prices in its property sector and high local government debts.
Disappointing factory output and retail sales have also underlined persistent weakness in Chinese domestic demand.
Still, ABB remained positive for the year ahead, with the United States, India and other markets, including Australia increasing new orders.
ABB said it was also seeing high customer activity for its projects and systems businesses.
“Against high comparables, our Q1 performance shows the year has started off well with stronger than expected order momentum, record-high margin and strong cash delivery,” said Chief Executive Bjorn Rosengren.
“While ABB’s total orders declined in the first quarter, I feel even more confident about 2024 than I did coming into the year.”
The results of ABB, whose products and systems are used to electrify buildings and factories and charge electric vehicles, are seen a signifier for the health of the broader industrial economy.
The Swiss company reported January-March operational earnings before interest, tax and amortisation (EBITA) for rising 11% to $1.42 billion, beating analyst forecasts for $1.36 billion.
Revenue increased by 2% on a comparable basis to $7.87 billion, missing forecasts for $8.13 billion.
ABB said it expected revenue growth to accelerate to a mid-single digit percentage range in the second quarter and kept its full year sales outlook for an increase of about 5%.
It also gave more clarity on profitability, saying it expected its EBITA margin to be around 18%, an upgrade from the previous outlook for a slight improvement from the 2023 level of 16.9%.
(Reporting by John Revill, editing by Andrey Sychev and Tomasz Janowski)
Revenue growth refers to the increase in a company's sales over a specific period, indicating its ability to sell more products or services.
Profit margin is a financial metric that shows the percentage of revenue that exceeds the costs of goods sold, indicating the profitability of a company.
New orders refer to the total number of orders received by a company for its products or services during a specific period.
EBITA stands for Earnings Before Interest, Taxes, and Amortization, which measures a company's profitability by focusing on its operational performance.
Economic growth is the increase in the production of goods and services in an economy over time, often measured by GDP.
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