ABB Ltd. shares slumped the most in four months after the Swiss industrial company that is under pressure from an activist investor said third-quarter orders dropped more than analysts expected.
Orders, seen as an indication of future revenue, fell 14% in the third quarter, reflecting the timing of large orders and lower short-cycle volumes, the Oerlikon, Switzerland-based company said in a statement Thursday. The intake was $7.53 billion compared with an average estimate of four analysts of $8.28 billion.
The results show a significant miss in expectations for orders, Morgan Stanley said in a note.
Deteriorating markets and orders could increase pressure on CEO Ulrich Spiesshofer, who is facing criticism from activist investor Cevian Capital, ABB’s second-largest shareholder. Cevian has been pushing the company to spin off its power-grids unit. ABB, the world’s largest maker of power grids, decided this month to keep the business after completing a review of it.
Customers hesitated to place orders for power grids before the Oct. 4 capital markets day, when the company said it would keep the business, ABB said. Operational earnings before interest, taxes and amortization dropped 3% to $1.05 billion. Analysts surveyed by Bloomberg estimated $1.04 billion.
The Swiss company also announced Chief Financial Officer Eric Elzvik will resign in the second quarter next year “to pursue career opportunities outside ABB,” the company said in the statement. He will be replaced by Timo Ihamuotila, the CFO at Nokia Oyj.
Modest growth and uncertainties surrounding U.S. elections and the U.K.’s withdrawal from the European Union are weighing on the market for the company, ABB also said.
Brexit “had a massive effect” on UK orders, Spiesshofer said during a conference call with reporters Thursday. The U.K. market is “not totally broken in the long term, but there definitely is a dampening effect in the short term” because of Brexit, he added. The leitmotif from ABB’s clients in the U.K. is a “let’s wait and see” what happens, he added.
Operational Ebita margin widened by 0.1 percentage point to 12.6%, the company said. Margins in the power-grid business widened by 1.70 percentage points.
“We continue to run the company with discipline, realizing growth opportunities where possible whilst driving earnings and cash growth,” Spiesshofer said in the statement. “We are committed to unlocking value for all shareholders as a more focused, agile company building on our industry-leading digital offering.”
By Alice Baghdjian, with assistance from Hanna Hoikkala.
