ABB Shifts Toward Industrial Focus After Power Grids Sale

Swiss engineering company ABB fleshed out its latest revamp on Thursday, saying it would focus more on digital industries as it reported better-than-expected fourth-quarter earnings.

In its first results since it announced the sale of its $11 billion power grids business, ABB was upbeat about the prospects for its robotics and automation businesses as growth drivers.

Robotics was ABB’s star performer during the fourth quarter, reporting an 11 percent rise in revenues and racking up ABB’s highest divisional profit margin. The figures helped ABB, whose remaining products include industrial drives and electric vehicle chargers, report net profit of $317 million, beating estimates of $301 million in an Infront Data poll for Reuters.

The figure did not include a contribution from ABB’s power grids business, the division which it agreed to sell to Hitachi in December.

Chief Executive Ulrich Spiesshofer said ABB had sharpened its focus on the industrial side of its business, providing better profit margins, lower risk and less volatility in future.

“There will be a new center of gravity of ABB towards better growth and higher profitability after the separation of the power grids business,” Spiesshofer said. “There is a tremendous opportunity to grow in the future,” Spiesshofer said, noting ABB operated in a market valued at around $410 billion that would grow to around $550 billion by 2025. He said all of ABB’s business would get extra support from its Ability industrial software business, whose products help manufacturers build and run their factories more efficiently.

The new direction is the second strategy unveiled by Spiesshofer since he took over in 2013 and would put ABB in more direct competition with German rival Siemens, whose digital factory division dominates the market. The Swiss company has a market share of around 4 percent, behind Siemens’s 19 percent, Mitsubishi with 10 percent and Rockwell with 8 percent, according to analyst ARC’s estimates.

Spiesshofer’s positive view contrasted with that of robotic rivals like Fanuc and Kuka who have lowered their outlooks, citing U.S.-China trade frictions and slowdowns in the automotive and electronics sectors. As part of its new focus, ABB also announced a software partnership with France’s Dassault Systemes. David Humphrey, director of ARC, said ABB had started to make inroads into automation with its purchase two years ago of Austrian industrial automation company Bernecker & Rainer.

“ABB is a powerhouse company which has traditionally been strong in process industries like oil and gas, but they have neglected factory automation for many years,” Humphrey said. “They need to do more with software and grow their market share of control hardware. ABB is big enough and has the innovation strength to do this, but some acquisitions could also help them fill in the gaps.”