ABB confident of taking a slice of $500bn Saudi mega-city project action
Swiss engineer posts better than expected results and has been in talks with royal family over huge planned NEOM development
The Swiss engineer ABB is upbeat on its chances of winning significant work arising from the US$500 billion mega-city project in Saudi Arabia, as the firm on Thursday posted its strongest growth in new orders for more than two and-a-half years.
The chief executive Ulrich Spiesshofer returned from meeting members of the Saudi royal family to present ABB's third-quarter earnings, which came in slightly ahead of analysts' forecasts.
During his trip, Mr Spiesshofer discussed Saudi Arabia's plan to create a business and industrial zone, named NEOM, extending across its borders into Jordan and Egypt, the biggest project yet in a series of efforts to free the kingdom of its dependence on oil exports.
ABB, with three factories and a long history in Saudi Arabia, is well positioned to provide automation and power to high-tech industries setting up in the area, Spiesshofer told reporters, declining to quantify the value of projects ABB could bid for.
"There's a wide range of opportunities and we will do our best to participate in that in the appropriate way," Mr Spiesshofer said.
He was speaking after ABB reported results slightly ahead of expectations and brightened its outlook for the global economy.
The power transmission and automation company said net profit rose 1 per cent to $571 million, beating analyst estimates of $553 million in a Reuters poll.
Sales rose 6 per cent to $8.72bn, beating estimates of $8.52bn, while new orders - a signal of future growth - were up 8 per cent, in line with expectations at $8.16bn and the fastest growth rate since the first quarter of 2015.
Analysts from Morgan Stanley described the results as encouraging, although Barclays said investors may have been hoping for more in light of the easy comparisons with last year when orders dropped 14 per cent.
ABB's stock reacted positively to the earnings update, gaining 3 per cent in early trade, and was one of the top performing stocks on the Euro Stoxx industrial goods and services index. The stock is trading at its highest level since September 2008.
Mr Spiesshofer acknowledged the easier comparison base, but said ABB was gaining momentum with small orders worth under $15m rising in all regions and in all business areas.
"That means the ship of ABB is really going into a growth mode altogether," Mr Spiesshofer said. "Our many initiatives are paying off."
The improvements showed the strategy of focusing on higher-growth areas such as digital technology, robotics and food and beverage markets, was working, he added.
"Going into 2018 ... with the slightly more favourable market development that we are witnessing," he said, "I am confident that our ambition to accelerate growth momentum will pay off."
Updated: October 26, 2017 02:14 PM