Europe News

ABB's net profit falls 70% after cost cutting: CEO

CNBC with Reuters
ABB profit drops 70%

Power equipment maker ABB said fourth-quarter net profit fell more than two-thirds as the company booked restructuring charges meant to cut costs amid slumping demand for transformers and motors.

ABB Chief Executive Ulrich Spiesshofer told CNBC on Wednesday that the company had shown "very strong cost discipline in cost-cutting in 2015" in difficult trading conditions.

"You see a large charge coming in the fourth quarter that hits our bottom line but this is basically the result of us doing homework and making sure the company is lean and agile to fight the market, to make sure we're close to our customers, in a pretty difficult environment."

ABB Chief Executive Ulrich Spiesshofer.
Photo: ABB

ABB's fourth quarter net profit fell 70 percent to $204 million, just above the analyst forecasts for $192 million. Fourth quarter sales fell to $9.4 percent, against the average analyst forecast for $9.2 billion.

Cost reductions and productivity improvement helped the company increase its margin however, with the operational earnings before interest, tax and amortization (EBITA) margin increasing 60 basis points to 11.7 percent. Spiesshofer said that ABB's ambition was to "continuously raise the margin and drive profitability."

"We will continue to drive margin quality through fantastic innovation, being close to our customers, delivering growth in the segments where it's possible and being very disciplined on the cost side."

Sales of ABB's equipment for power installations have been hammered by falling demand in China where the government is scaling back infrastructure projects amid a glut of industrial capacity. It booked $496 million in restructuring charges in the quarter.

Follow CNBC International on Twitter and Facebook.