ABB, the Swiss electrical engineering group that vies with Siemens for many big infrastructure contracts, said sales and profits rose in the first quarter, but margins remained under pressure amid intense competition in some markets.
The company, best known for its vast range of range of electrical drives and transformers, said net earnings climbed by 5 per cent to $685m on the back of a 6 per cent rise in sales to $8.9bn. The order backlog inched up to $10.4bn. But the closely watched operating margin slipped to 13.9 per cent from 15.7 against a 7 per cent year on year fall in operating profits to $1.23bn.
“As we guided after Q4, there was continued price pressure on revenues coming out of the order backlog and mix effects that impacted profitability”, acknowledged Joe Hogan, chief executive.
“But we could mitigate most of that through cost savings. We saw improved profitability in several businesses compared to the end of last year and we intend to build on that momentum to tap the many opportunities we see for profitable growth over the rest of the year”, he added.
Business in North America drove the rise in sales and orders. By contrast, business in southern Europe and China slowed, reflecting broader regional macroeconomic factors.
The group said North America was showing solid signs of recovery, while southern Europe remained highly uncertain. In China, a crucial market for ABB, demand in construction and transport remained subdued, with no obvious indications of an improvement.
Price pressures were expected to continue in the important power business, but ABB said it expected to offset such challenges by further cost cuts and productivity improvements. Cost savings amounted to $260m in the first quarter.
Meanwhile, the $3.9bn acquisition of US low voltage group Thomas & Betts, announced in January, remained on track, and the deal is expected to close in the second quarter.