ERNST E. ABEGGZURICH (AP) ¿ Swiss-based ABB Group, maker of power transmission and industrial automation equipment, saw third-quarter net profit rise 12 percent to over $1 billion, helped by a $380 million boost from reversing set-asides for taxes, antitrust fines and restructuring. The company recorded a net profit of $927 million during the July-September period of 2008, it said Thursday. Revenue during the third quarter this year fell 10 percent to $7.91 billion, while orders dropped 21 percent to $7.06 billion. Analysts at Zuercher Kantonalbank noted that without the boost ABB received from the release of provisions, results fell sharply below expectations. Shares in ABB closed 2.4 percent lower at 19.96 Swiss francs ($19.61) on the Zurich exchange Thursday. "Order trends were in line with what we saw in the second quarter, with steady demand in power and oil and gas but lower base orders in industrial markets," said ABB Chief Executive Joe Hogan. "We'll continue to focus on making sure our costs are in line with market demand, but at the same time stay aggressively positioned to capture the significant growth opportunities in power infrastructure, renewables, energy efficiency and emerging markets," he said.
The company expects to reduce costs by $1.3 billion this year, Hogan said in a conference call. Helvea analyst Alessandro Migliorini said savings could exceed targets, and the focus would shift from cutting sourcing costs to reducing its work force. ABB offered no outlook for the coming months, citing volatile market conditions through 2010, but said there remains worldwide demand for improved energy infrastructure. The company makes power transmission and distribution equipment and automation technology to control equipment in factories and utilities. "However, it remains unclear when and how quickly capital investments by customers will recover from the downturn," ABB said. "In addition, the volatility of raw material prices and the limited availability of project funding continue to influence the timing of many power and industrial investment decisions, especially among small to medium-sized companies." Orders with ABB's robotics, power products and automation divisions dropped, while its power systems division saw orders rise, thanks to large contracts in Brazil. ABB, which employs about 120,000 people worldwide, said it still faces regulatory probes that could result in further costs.
ABB was one of six companies fined by the European Union earlier this month for having secretly agreed to artificially raise the prices of their power transformers by not selling them in each other's markets. The transformers are used to modify the voltage in electricity transmission networks. The other fined companies were Alstom SA and Areva T&D SA of France, and Fuji Electrics, Hitachi and Toshiba of Japan. The fine of almost euro34 million (US$50 million) was lower than the amount ABB had set aside, said spokesman Wolfram Eberhardt. This allowed the company to reduce its provisions for that investigation, though it still faces an EU probe for alleged anti-competitive practices in its cables business, he said. Set asides for an ongoing tax matters in Russia, meanwhile, were increased, said Eberhardt. ABB previously announced it had informed the U.S. Department of Justice and the U.S. Securities and Exchange Commission about suspect payments made by employees of company subsidiaries in Asia, South America and Europe.