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Zurich - Swiss engineering group ABB expects high oil prices and the Japanese earthquake to spur demand for energy-efficient equipment, helping it take in more orders than anticipated in the first quarter.
ABB, whose products are used by oil, mining and utilities companies, saw signs of a pick up later this year in its infrastructure business, which makes components such as transformers for big building projects.
ABB depends heavily on infrastructure spending and, and it has been trying to keep a firm grip on costs to offset price pressures from emerging market competitors. It said these pressures have lessened of late.
Chief Financial Officer Michel Demare said rising commodity prices were at once both a source of new business and a cost challenge, and that he expected them to stay elevated.
“High commodity prices are obviously generating a lot of mining, metals activities,” Demare said. “High oil prices are also generating a lot of investment in the area of renewables, energy efficiency.”
The Zurich-listed firm said it expected emerging markets to drive growth in coming years but that demand from mature markets was also set to increase. In the first quarter, emerging market orders rose 22 percent while mature markets were up 27 percent from a year earlier.
“A very strong result. ABB sees a continued favorable market development,” Christoph Ladner at Kepler Capital Markets said. “We confirm our ‘Buy’ rating.”
Nuclear to stay
The damage to the nuclear plant in Japan last month has revived debate about energy policy in many countries, and in Germany has led to a policy reversal and an immediate shutdown of several nuclear plants.
Yet Chief Executive Joe Hogan said he believed the Fukushima disaster would not prompt a large-scale turn away from nuclear power, though it likely would lead to more careful risk assessments.
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