July 25, 2019 / 5:34 AM / 7 months ago

UPDATE 2-ABB cautions on China as robotics sales flag

* Q2 revenue up 7%, orders up 4%

* Robotics orders down 14%

* Flags weakness in some sectors in China

* Net profit hit by divestiture

* Expects slight growth in annual revenue (Recasts, adds CEO, analyst, shares)

By John Revill

ZURICH, July 25 (Reuters) - ABB Ltd on Thursday warned that slowing demand from automakers in China, its second-biggest market, was hitting its robotics business.

The Swiss engineering company joined a list of top European firms flagging a slowdown in autos including Germany's Daimler and supplier Continental.

"In the robotics and discrete automation market we saw significant decline in business," Chief Financial Officer Timo Ihamuotila told reporters, blaming weaker demand from automakers.

ABB said robotics and discrete automation sales fell 9% and orders were down 14% in the second quarter to June 30. The auto sector has come under pressure this year with sales softening and manufacturers working on the transition to electric vehicles.

Demand for cars in Europe is 3.1% down in the year to date while Mercedes maker Daimler this week also flagged a sharp slowdown in China.

ABB had previously said it expected growth in China, but Ihamuotila said it was now seeing a "mixed picture", noting demand from computer and consumer electronics makers was also softening, with Chinese orders down 3% in the quarter.

"On the other hand we grew strongly in electrification and in industrial automation in China. We therefore view the outlook as mixed, rather than one of broad-based contraction," said Ihamuotila.

ABB's electrification business posted a 22% increase in revenue, boosted by strong demand from data centres, rail and electric vehicle infrastructure.

Overall, second-quarter sales rose 7% to $7.17 billion versus the $7.19 billion expected by analysts.

Orders rose 4% led by growth in the United States and despite a 3% fall in Europe. ABB said it expected its order backlog to deliver "slight growth" in revenue and improved profitability over the full year.

Operating EBITA for the second quarter of $825 million was slightly ahead of the $813 million expected by analysts.

It reported a 91% fall in net profit to $64 million hurt by an earlier flagged $455 million hit from handing over its loss-making solar inverters business to Italy's FIMER SpA.

Analysts had expected a net profit of $2 million, a company-gathered consensus showed.

"We do not believe expectations were high going into results and the small beat is helpful," said Wasi Rizvi, an analyst at RBC Capital Markets, adding the company had a long to-do list.

The shares rose after the earnings but were down 1.1 percent at 1100 GMT.

ABB is in the middle of selling its power grids business to Japan's Hitachi and reorganising its remaining operations into four divisions.

It is now exploring options for its Integrated Direct Current Power business.

Chief Executive Peter Voser said ABB would continue its review of businesses which generated $3 billion in annual sales.

The former Royal Dutch Shell CEO, who is also ABB's chairman, took over temporarily as head of ABB in April after Ulrich Spiesshofer left suddenly.

Voser has pledged a turnaround after years of unsatisfactory performance. ABB shares have fallen nearly 20% in the last five years.

"Reviewing means if it is not working to your liking you either fix it or look for different solutions.... by selling it or maybe joint venturing it," Voser said.

"Portfolio management will be a key cornerstone going forward."

Reporting by John Revill, editing by John Miller and Jason Neely

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