ABB’s strong start and raised guidance dispel industrial gloom

By John Revill

ZURICH (Reuters) -ABB Ltd raised its full-year guidance for sales and profit on Tuesday, dispelling some of the recent gloom which has gathered around the industrial sector.

The Swiss maker of factory robots and chargers for electric vehicles said it had seen a strong start to the year as it reported first-quarter profit and revenue both ahead of forecasts.

“During the quarter we have been very strong from the beginning and through the quarter in most of our segments,” Chief Executive Bjorn Rosengren told reporters.

“We have increased our order book significantly during this quarter as we continue to see a strong market,” he added.

Rosengren said the start to the year made him “very comfortable” about doubling ABB’s full-year sales guidance to an increase of at least 10%, up from 5% previously.

The maker of industrial drives and motors, which competes with Germany’s Siemens and France’s Alstom (EPA:) also expects to raise its full-year profit margin.

Its shares rose 3.6% in early trading in Zurich.

The positive outlook offset recent sector concerns about subdued demand, due to rising interest rates – which undercuts demand for goods – and buyer resistance to higher prices.

The JP Morgan Global Manufacturing Purchasing Managers Index dipped to 49.6 points in March, data showed earlier this month, the seventh successive month the forward-looking indicator has been below the no-change threshold of 50 points.

Production at U.S. factories fell more than expected in March, but eked out a modest gain in the first quarter, while industrial activity in Japan and China also struggled.

Still, Rosengren pointed to an uptick in orders, up 9% on a comparable basis, as growth in India and South America compensated for dips in the United States, China and Germany.

The company has also overcome supply chain bottlenecks, meaning it was able to work through its order backlog to deliver products to customers, he said.

ABB’s guidance upgrade came after the company increased net profit by 72% to $1.04 billion in the three-month period ended March, beating forecasts for $877 million in a company-gathered consensus of analyst estimates.

Operational earnings before interest, tax and amortisation increased by 28% to $1.28 billion, beating forecasts for $1.15 billion. Revenue also came in ahead of forecasts, rising 13% to $7.86 billion.

“ABB reported a very strong set of Q1 results,” said Berenberg analyst Phil Buller.”This implies continued underlying demand growth for ABB’s products and services which continues to stand in stark contrast to the typically reliable leading indicators, such as the PMIs.”