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ABB says strategy shift paying off after third-quarter earnings earnings beat

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ABB says strategy shift paying off after third-quarter earnings earnings beat

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By John Revill ZURICH (Reuters) – Swiss engineering group ABB <ABBN.S> reported third-quarter earnings slightly ahead of expectations on Thursday and said its focus on higher-growing segments like robots for the food and beverage industry was working. The power transmission and automation company said net profit rose 1 percent to $571 million, beating analyst estimates of $553 million in a Reuters poll. Sales rose 6 percent to $8.72 billion, beating estimates of $8.52 billion, while new orders – a signal of future growth – were up 8 percent, in line with expectations at $8.16 billion. Chief Executive Ulrich Spiesshofer said the improvement, which followed a weak performance in the same quarter a year earlier, showed the strategy of focusing on segments like digital technology was having an impact. “The combination of a stronger market orientation and a focus on high-growth segments, such as electric vehicle charging, robotics and food and beverage, is paying off,” he said in a statement. ABB kept its assessment of 2017 as a “transition year”, although it was slightly more optimistic on future demand for its products which range from electrical power grids to circuit breakers. It upgraded its short-term outlook, saying the macroeconomic signs are “trending positively” in Europe and the United States, with growth expected to continue in China, an improvement from the mixed global picture it reported in July. The latest figures were boosted by comparisons with the weak third quarter of 2016, when new orders fell by 14 percent as customers stayed on the sidelines amid uncertainty around Brexit, the U.S. presidential elections and problems in Turkey. ABB, the world’s biggest maker of power grids, has been under increased shareholder scrutiny to improve its performance after higher raw materials prices and problems with overcapacity dented earnings during its second quarter. Cevian Capital, ABB’s second-largest shareholder with a 5 percent stake according to Thomson Reuters data, has also been keeping a sharp eye on ABB’s performance after its call to spin off the low-margin Power Grids business was thwarted last year. Spiesshofer, who has acknowledged shareholders’ concerns about returning cash, has responded by doubling down on the company’s digital strategy. It aims to sell more sensor-equipped machinery and services to its existing clients, as well as win new customers. He was rewarded with services and software orders rising by 11 percent during the third quarter, while the company’s overall operational EBITA margin improved to 12.9 percent from 12.8 percent a year earlier.

(Editing by Michael Shields)
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