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ABB warns on Q4 amid weak power demand, project delays

<p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Swiss engineering group ABB told investors on Wednesday it would miss fourth-quarter profit expectations due to weak orders at its power division and delays on wind projects in the North Sea. ABB said its power division would take $260 million in charges, bringing its fourth-quarter net profit expectations to $525 million, well short of analysts&#39; average forecast of $924 million, according to Thomson Reuters data. Most of the charges were due to storms delaying construction for offshore wind farms, which are among the most expensive renewable energy projects, while $50 million was due to past legal issues, losses from selling and discontinuing some activities. Chief Executive Ulrich Spiesshofer said ABB was still &quot;seeing uncertainty in the market on the power side&quot;, with stiffer regulation and project delays causing orders in the unit to soften last year.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The power unit is also aiming to be more selective about the offshore wind power projects it takes on to increase returns. &quot;The division&#39;s new leadership is assessing the progress and targets of the realignment, and we expect to provide an update when we announce the fourth-quarter and full-year results (on Feb. 13),&quot; Spiesshofer told investors. ABB has appointed Claudio Facchin as unit head to replace Brice Koch, who began as boss of OC Oerlikon last week.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;This is a setback for ABB in turning around the power systems division,&quot; said Bank J. Safra Sarasin analyst Michael Studer, who said the unit may be &quot;kitchen-sinking&quot; charges into its accounts following the management change. </span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Wholesale power prices have plunged in recent years due to generation overcapacity as Europe&#39;s weak economy has curbed energy demand. In addition, cheap U.S. coal has been pouring into Europe, making gas-fired generation uncompetitive. European utilities have mothballed or closed more than 21 gigawatts (GW) of capacity over the past 18 months and focused on new sources of income, including renewables and energy efficiency. Like rivals Schneider Electric of France and Germany&#39;s Siemens, ABB is also facing a dearth of big orders as industrial customers delay spending in a weak global economy.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">For the period 2011-2015, ABB aims to increase overall sales at a compound annual growth rate of 7-10 percent organically, aiming to outpace economic and market growth. After spending more than $10 billion on acquisitions in recent years, the group is now focusing on integrating those purchases, which include U.S. groups Baldor and Thomas &amp; Betts as well as solar energy company Power One. The company, which makes products as varied as robots, power grids for utilities, and transformers used on electric trains, hopes that expanding services such as maintenance and technical support will help shield its business from economic cycles.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Source-On Request</span></span></span></p>