ZURICH: Swiss engineering group ABB said profits of all its businesses would suffer in the first quarter because of the fallout from the coronavirus and due to plunging oil prices.
The maker of industrial robots, factory drives and chargers for electric cars ditched its financial guidance for the year.
Shares of ABB, which generates 12% of its sales from the oil, gas and chemicals sector, were indicated to open 3.9% lower at the open.
The stock went ex-dividend yesterday.
“Although it is not yet possible to determine the exact impact of Covid-19 on ABB’s first quarter results, ABB expects revenues to decline in all its businesses relative to a year ago, while orders are somewhat less impacted, ” ABB said.
Profitability would also decline as the company struggled with lower production volumes, said the company.
ABB said it expected its Robotics & Discrete Automation business, which was already facing lower demand from the automotive sector, to have 20% fewer orders and sales during its first quarter compared with a year earlier.
The company said it had applied for the short-time working scheme at some plants in Switzerland, where the government helps pay the wages of staff who are not working full time.
The company, which employs 144,000 people globally, has not made any job cuts so far as a direct result of the virus outbreak which has infected 720,000 people and killed 33,000 around the world.
“ABB continues to monitor the situation around Covid-19 and its impact on the company to be able to take further appropriate action as necessary, ” a spokesman said.
ABB’s warning comes after LafargeHolcim the world’s biggest cement maker warned on Friday about a downturn in the construction industry caused by the virus.
ABB had in February said it expected weaker growth in Europe and the United States, adding China - its second biggest market with 15% of its sales - may be impacted by the virus outbreak.
Since then, the company said trading conditions had declined, hit by the weakening oil price which reduces the ability of customers to pay for new investments.
ABB’s board of directors and executive committee had decided to take a voluntary 10% pay cut for the duration of the crisis, with the money going towards efforts to fighting the virus, chief executive Bjorn Rosengren said.
The former Sandvik boss, who took over at ABB at the beginning of the month, has an annual compensation package of 1.7 million Swiss francs, before bonuses.— Reuters
ABB said it had the financial liquidity to withstand the downturn, and was also cutting back on travel, marketing and operating expenditures.
The $11 billion sale of its Power Grids division to Japan’s Hitachi was still on track to be completed by the end of the second quarter, it added. (Reporting by John Revill Editing by Michelle Martin and Silke Koltrowitz)