By Caroline Copley
ZURICH (Reuters) - Swiss engineering group ABB VX:ABBN said it would again overhaul its struggling power systems unit after posting an unexpected fall in first-quarter profit because of its weak orders and charges related to wind and solar power projects.
The Zurich-based firm has been working for more than a year to try to turn around its least profitable division, which has incurred heavy costs for delays to offshore wind projects and faced tough price competition in Asia.
ABB will now halt bids for new turnkey solar power generation projects, reassess its business model for offshore wind power connections and implement further management changes. These come on top of previous measures in late 2012 to be more selective about projects.
"The Power Systems situation is very disappointing. We are not where we want to be and need to address this," Chief Executive Ulrich Spiesshofer said in a video message.
First-quarter net profit slid 18 percent to $544 million, missing the average forecast of $726 million (431.1 billion pounds) in a Reuters poll of 17 analysts.
Weak spending by utility customers and delays to projects has also dogged ABB's power rivals Siemens DE:SIEGn and Alstom
ABB's division, which makes subsea cable systems and power links to connect renewable energy to the grid, was the only one of Swiss firm's five units to post a loss in the first quarter.
Helvea analyst Stefan Gaechter said it was disappointing that the transformation of the division will take longer than originally planned and said he expected consensus earnings figures to be cut on the back of the results.
ZKB analyst Richard Frei lowered his rating on the company to "market weight" from "overweight."
Shares in ABB, which have underperformed the Swiss blue-chip index PA:SSMI so far this year, were indicated down 3.4 percent, according to bank Julius Baer
SLUGGISH LARGE ORDERS
Overcapacity in the mining industry and uncertainty over renewable energy policy in Europe has also delayed capital spending by mining and utility customers and depressed large orders - contracts worth over $15 million - at ABB.
Orders dipped 1 percent in the first quarter to $10.36 billion, just shy of the average forecast, as large orders fell compared with the previous year.
In February, the company lowered its target for mid-term sales growth and said revenue growth would be challenging this year due to a smaller backlog of orders at the end of 2013. [ID:nL5N0LI08I]
Revenues fell 3 percent to $9.47 billion, compared to the average analyst forecast for $9.76 billion
ABB stuck to its cautious outlook, saying uncertainty in emerging markets like China may offset more encouraging signs in the United States and parts of Europe.
"It's too early to call the world an upswing altogether," Spiesshofer said. "We have to manage costs very carefully and not get carried away with some signals already because it's still a very uncertain world out there."
(Editing by Sophie Walker)