ABB 2Q Profit Falls Worse Than Expected as Dollar Reduces Sales

By John Revill

ZURICH--ABB Ltd (ABBN.VX), the world's largest power grid builder, Thursday said it is feeling more confident about the short-term outlook than it was three months ago despite the rising value of the dollar triggering a worse-than-expected decline in second-quarter net profit.

The Zurich-based company, which makes products ranging from transformers and circuit breakers to industrial robots, has been battling with a slowdown in its European and Chinese markets.

In China, ABB's second-biggest market after the U.S., demand for the components used in the rail and building industries has been faltering this year amid slower economic growth. In the second quarter, the country's growth pace was at its lowest in three years as the global economic turmoil spills over into China.

Despite this ABB said it had received higher orders and revenues in local currencies, although on a reported level the company had suffered from the translation of its results to U.S. dollars.

"The macroeconomic view remains uncertain, but the positive developments we've seen in China, the continued strength of the U.S. market and our resilience in Europe make us more confident about the short-term outlook than we were three months ago.", said Chief Executive Joe Hogan.

Net profit fell 27% to $656 million in the three months to June 30, below the $738 million forecast by analysts. Revenue fell 0.2 % to $9.66 billion, lower than $9.85 billion forecast in a Dow Jones poll of analysts.

ABB said utilities continued to invest in transmission grids, while industrial customers, especially in oil and gas, increased spending to secure reliable power and improve productivity.

But an unfavorable business mix impacted the operational profit margin, ABB said, while significant differences in foreign exchange rates compared with the second quarter of 2011 reduced US-dollar reported revenues by approximately $600 million and operational EBITDA by approximately $100 million.

ABB shares closed Wednesday at 15.79 Swiss francs, valuing the company at CHF36.55 billion. The stock has lost 10% in value since the start of the year.

-Write to John Revill at [e-mail]

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