ABB sees gradual improvement during 2021 after cautious start

By John Revill

ZURICH (Reuters) – ABB expects a gradual improvement in customer demand during 2021, the Swiss engineering company said on Thursday, although the return of COVID-19 restrictions towards the end of last year had increased market uncertainties.

The maker of industrial robots and drives, which posted a surprise net loss during its fourth quarter, said it was seeing positive developments in some sectors.

But while customers in construction, distribution, consumer electronics, and food and beverage were doing well, demand from the oil and gas, conventional power generation and marine power industries remained subdued, ABB said.

“In the fourth quarter, market conditions improved compared to the third quarter,” said Chief Executive Bjorn Rosengren. “That said, some key end-markets remained challenging, input costs rose, and uncertainty due to COVID-19 related restrictions increased as the quarter progressed.”

ABB expects orders to turn positive in the second quarter after they fell 1% in the last three months of 2020 on a comparable basis.

The maker of factory electrification systems reported both revenue and operational earnings before interest, tax and amortisation (EBITA) ahead of market expectations during its fourth quarter.

The company said it expected operational EBITA margin to “clearly improve” through the year. Its shares were up 1% in premarket activity.

But it reported a surprise net loss of $79 million, missing analyst expectations for a profit of $104 million as it paid back bonds early and pumped $130 million into its underfunded pension schemes.

Cash flow was also hit by a $115 million charge to settle an investigation into improper payments surrounding a South African power plant.

ABB is a signifier for the health of the broader economy, with companies ordering more drives and controllers when they want to ramp up production.

Its caution contrasted with optimism at German rival Siemens, which on Wednesday raised its 2021 guidance, citing a quicker-than forecast-rebound in the automotive and machine-building sectors.

ABB’s Rosengren said ABB was on course to deliver its decentralised business model, adding plans to sell its turbocharging, mechanical power and power conversion businesses was progressing.

(Reporting by John Revill; Editing by Michael Shields and Carmel Crimmins)