Swedish-Swiss engineering giant ABB said yesterday that its 2010 net profit fell 12 percent to $2.56 billion (1.9 billion euros), but insisted this year will be much better while announcing large cost cuts.
Sales slipped one percent to $31.6 billion in 2010.
The group issued an upbeat forecast for 2011, expecting improved demand in both emerging and mature markets.
“We see plenty of growth opportunities as we head into 2011 in both the short-term industry-driven businesses as well as later in the year when we expect utility spending on power equipment to begin a recovery,” chief executive officer Joe Hogan said.
“Long-term trends for increased energy efficiency and flexible, more reliable power infrastructure remain very strong.
“ABB will seize these opportunities with a leaner cost base, an enhanced product portfolio and a more customer-focused organization,” Hogan said, announcing plans to cut costs by more than $1.0 billion this year.
Emerging markets are set to be “significant drivers of growth” as they build up their electrical grids and expand industrial production in 2011.
“Demand in mature markets is also expected to improve,” the company said, as power production investment picks up after a 2-year slowdown.
Industrial customers in mature economies are expected to upgrade their manufacturing assets this year, while construction of ‘intelligent’ — more environmentally friendly — buildings could provide greater demand for ABB’s automation services.
A strong pick up in orders was seen in the fourth quarter, with a jump of 17 percent to $8.75 billion compared to the same period in 2009. Growth was largely driven by Europe, up 32 percent, and the Americas, which rose 25 percent.
For the full year, orders improved 6.0 percent to $32.7 billion. Notably, ABB’s biggest market, Europe, posted growth of 15 percent at $13.8 billion.
Some analysts were not impressed however. Bank Vontobel analysts said the “planned cost reduction indicates some struggle to protect margins due to competitive price pressure.”
It added that the quality of the results was “disappointing overall.”
While other analysts also pointed to continuing price pressure, they were more positive. Bank Helvea, for example, rated the stock a ‘buy’ and said most of ABB’s divisions had “exceeded our expectations.”
Zuercher Kantonalbank also noted that the cost savings for 2011 were above expectations.
The stock fell 2.11 percent to 22.69 francs in morning trade yesterday, underperforming a weak Swiss Market Index, which was down 0.19 percent.