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US elections, Brexit hits customer demand for ABB; shares slip 6%

ABB's third-quarter orders slipped 14 percent on weak customer demand with CEO Ulrich Spiesshofer telling CNBC on Thursday that the Brexit vote and the upcoming U.S. elections were to blame.

Cost-cutting

Logos of ABB AG sit on display outside the company's semi-conductor plant in Lenzburg, Switzerland.
Gianluca Colla | Bloomberg | Getty Images
Logos of ABB AG sit on display outside the company's semi-conductor plant in Lenzburg, Switzerland.

The fall in customer orders is in spite of a cost-cutting program that helped boost the Swiss power transformer maker's profit margin.

Spiesshofer told CNBC: "The market environment was characterized by a massive dampening effect of Brexit here in Europe, the run up to the U.S. elections (also) has a dampening effect. There was a lot of uncertainty with what would happen with the business and customers were very hesitant to place orders."

'Cautiously optimistic'

Zurich-based ABB reported net profit of $568 million for the three months ended Septermber 30, down from $577 million a year earlier. The figure beat forecasts of $555 million in a Reuters poll. Orders fell to $7.53 billion, from $8.77 billion.

ABB clarified that it would be keeping its power grids division and Chief Executive Spiesshofer believes it has now "turned the page" explaining that ABB "knows what it is doing now with the business".

He added: "With the increased customer confidence and the certainty with what we are doing with this business, I'm cautiously optimistic that we will go in the right direction again."

Transformation complete

ABB's operating earnings before interest, taxes and amortization, its measure for profitability, rose to 12.6 percent from 12.5 percent, it said, amid a cost-cutting program and efforts to partner with other companies to reduce risks on big projects that in the past had hit the bottom line.

Spiesshofer was quick to point out the positives for the Swiss engineering group and told CNBC that ABB had completed the transformation of its market orientation through all of its businesses.

He went on to say, "we have now four simply-to-be described businesses and each of them is now number one or two in their respective markets in the world."

Nokia CFO to join ABB

The company named Timo Ihamuotila as its new chief financial officer, to replace Erik Elzvik, who "will pursue career opportunities outside of ABB" starting in April.

Spiesshofer said hiring Ihamuotila, the former Nokia CFO, was as a direct result of the transformation of ABB. He added, "Timo brings a fantastic set of experiences in really transforming companies in a digitalized industry."

ABB shares were trading 6.18 percent lower early in the European trading day.

—Reuters contributed to this report.