ABB Q2 Profit Climbs, But Orders Weak; To Start Share Buyback; Stock Up

(RTTNews) - Shares of ABB Ltd.(ANN.L, ABB) were gaining around 3 percent in the early morning trading in Switzerland after the engineering company reported Wednesday that its second-quarter net profit grew significantly on the absence of prior year charges. Meanwhile, Operational EBITA, revenues and orders declined, heavily impacted by COVID-19 pandemic.

Looking ahead, the company said, "A lot of uncertainty remains and we still see some challenging quarters ahead. ….Potential easing of COVID-19 impacts remain subject to considerable uncertainties. Against this background, ABB expects some improvement in year-on-year order decline already in the third quarter. Revenues are expected to remain strongly impacted on a year-on-year basis, at best recovering somewhat in the fourth quarter."

Separately, ABB said it will launch its previously announced share buyback program on July 23, until the company's Annual General Meeting on March 25, 2021. The decision follows the completion of the divestment of its Power Grids business to Hitachi on July 1. The share buyback program is for capital reduction purposes.

ABB initially intends to buy 10 percent of its issued share capital through this share buyback program as part of its plan to return net cash proceeds of $7.6 billion-$7.8 billion from the sale of Power Grids to shareholders.

The company will buy back a maximum of 180 million shares, in addition to those already held in treasury. The corresponding maximum buyback amount of 4.2 billion Swiss francs for this program is based on ABB's share price on July 21. The maximum number of shares that may be repurchased under the program on any given trading day is 2.19 million.

ABB also announced the appointment of Theodor Swedjemark to the Executive Committee as Chief Communications Officer. Swedjemark has held the position on an interim basis since March 1.

For the second quarter, Group net income attributable to the company was $319 million, up 398 percent from last year's $64 million. Basic earnings per share were $0.15, higher than $0.03 a year ago.

Net income from continuing operations was $395 million, compared to prior year's loss of $54 million, mainly due to the absence of the solar inverters charge.

Operational earnings per share were $0.22, compared to $0.34 a year ago. On average, three analysts polled by Thomson Reuters expect earnings of $0.10 per share. Analysts' estimates typically exclude special items.

Operational EBITA declined 21 percent to $651 million from $825 million last year.

Revenues dropped 14 percent to $6.15 billion from prior year's $7.17 billion. On a comparable basis, revenues fell 10 percent. Analysts expected revenues of $5.63 billion.

Orders declined 18 percent on a reported basis and 14 percent on a comparable basis to $6.05 billion.

Alongside the sharp drop in short-cycle demand that lowered product volumes, system installation and service activities faced extensive mobility restrictions, the company noted.

The order backlog was 1 percent lower on a reported basis at the end of the quarter, while it grew 5 percent on a comparable basis.

In Switzerland, ABB shares were trading at 24.04 Swiss francs, up 3 percent.