They warned today about smaller orders that are deteriorating. 2009 will be a tough year for everybody. At least they got some large orders the last few days and are cutting costs. I don't think they will do any large acquisitions right now. The stock is currently up 2.34% (16.57 CHF) in Switzerland.
" By Goran Mijuk and Hans Schoemaker Of DOW JONES NEWSWIRES
ZURICH -(Dow Jones)- ABB Ltd. (ABB) Thursday warned that falling orders, high commodity prices and foreign-exchange losses will hurt its first-quarter operating profit even though the Swiss engineering company won some large orders.
The warning comes as ABB disclosed a $490 million oil and gas infrastructure order in Algeria. The order follows project award wins in the past two weeks worth nearly $1 billion for power-transmission networks in Kuwait and Ireland.
"Despite the significant boost to orders resulting from these awards, market conditions for the company as a whole remain challenging," the company said, adding that smaller orders, which make up the bulk of ABB's operations, were declining.
ABB has benefited from infrastructure demand in the Middle East, Asia and the U.S. over the past three years as emerging countries built new sites while power networks were upgraded in industrialized regions, spurring the company's annual orders and sales often by more than 20%.
The economic downturn, which has also affected many of ABB's competitors, such as France's Schneider Electric SA (SU.FR) and Germany's Siemens AG (SI), has eaten into its order book and sales figures and profits have declined. In the fourth quarter of 2008, because of a restructuring and legal charges, net profit fell almost 90% to $213 million from $1.75 billion.
To counter the trend, ABB in February launched a $1.3 billion cost cutting plan under its new chief executive, Joe Hogan. The company is attempting to reduce overheads and staff costs by moving production to lower-wage countries, for example.
But these efforts won't help ABB to buck the generally deteriorating trend in the capital-intensive industry because high commodity prices are keeping costs at elevated levels and currency swings continue to put pressure on ABB's finances.
"The volatility of major commodity prices and exchange rates in the current quarter is also expected to have a negative impact when comparing quarterly operational profit performance," ABB warned.
Analysts said that the warning was partly expected as the company's past performance has been excellent. In the first quarter of 2008, ABB posted a near-90% jump in net profit to $1 billion from $537 million as a weak dollar underpinned otherwise still-buoyant demand for power networks and automation projects. Its operating profit was up 65% at $1.35 billion from $819 million.
"Profitability is going to suffer," said Alessandro Migliorini, analyst at brokerage Helvea, who rates the company at neutral. He said the drop in small orders was worrying as these orders helped ABB drive profit and cash flow.
Shares of ABB, which have lost about 40% of their value in the past 12 months, Thursday traded flat at CHF16.24 in a broadly firmer market. "
I expect that the dollar will do poorly against the Swiss franc in the next year, which should help the value of this stock. The company is a solid holding at these prices. It really has very little room to go down. I've already made about 30% off it, despite the weak market, but I am loath to sell it because I think there is more upside.