Strong Profit and Revenue Growth for ABB in Q3

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By Pierre Bertrand

Switzerland-based technology company ABB has announced impressive financial results for the third quarter, with a significant increase in profit and revenue. The company attributes this success to favorable pricing and efficient backlog conversion. However, despite these positive figures, ABB’s performance fell slightly short of analyst expectations.

In Q3, ABB recorded a net profit of $882 million, which is a substantial leap from the $360 million profit reported in the same period last year. This increase can largely be attributed to the booking of a nonoperational provision related to the Kusile power-station project in South Africa.

ABB’s revenue for the quarter saw a growth rate of 8% on a reported basis, amounting to $7.97 billion. The company’s operational earnings before interest, taxes, and amortization also experienced a healthy increase, rising by 13% to $1.39 billion, resulting in a margin of 17.4%.

Despite this positive performance, ABB did not meet analysts’ expectations. According to the consensus provided by the company, analysts had predicted a profit of $919 million and revenue of $8.1 billion.

In terms of order volume, the quarter saw a decline of 2% compared to the previous year on a reported basis, totaling $8.05 billion. This decrease can be attributed to declines in ABB’s electrification, motion, robotics, and discrete automation businesses. Notably, orders for the latter saw a significant slump of 26%. On the other hand, ABB’s process automation business reported a 20% increase in orders.

ABB stated that while short-cycle businesses faced challenges due to inventory adjustments and normalizing order patterns among channel partners, the strong demand for project and systems-related businesses, particularly those linked to medium voltage offerings, more than compensated for the decline.

Looking at regional order trends, orders in the Americas increased by 9% on a reported basis, while orders in Europe and Asia fell by 11% and 5% respectively. ABB attributed the decline in European orders to softer markets, including the impact of customers normalizing inventory levels. Additionally, last year’s high comparable supported by the timing of large customer orders also played a role.

For the fourth quarter, ABB expects to achieve low to mid single-digit comparable revenue growth and a slightly lower operational Ebita margin of around 16%, compared to Q3.

The company has also clarified its yearly guidance, projecting comparable revenue growth in the low teens, as opposed to the previously stated minimum of 10%. Furthermore, ABB expects its operational Ebita margin to be in the range of 16.5% to 17%, surpassing the previous estimate of above 16%.

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