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Company raises full year profit guidance, lowers sales

outlook

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New CEO says company increasing R&D spending

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Q3 operating profit beats forecasts, sales miss

expectations

(Adds share price reaction, analyst)

By John Revill

ZURICH, Oct 17 (Reuters) - Swiss engineering group ABB

needs to improve its performance, new Chief Executive

Morten Wierod said on Thursday, after the company reported

mixed third-quarter results.

The maker of factory robots and fast electric chargers,

whose numbers are watched closely because they give an insight

into the health of the broader economy, nudged its full-year

profit guidance higher but lowered its revenue outlook after

sales to machine builders in Europe struggled.

During the three months to Sept. 30, the first results since

Wierod became CEO, ABB increased its operational core profit by

11% to $1.55 billion, slightly ahead of forecasts for $1.52

billion in a company gathered consensus.

But group sales, which increased 2% to $8.15 billion, fell

short of the $8.34 billion forecast.

"In my view ABB is not yet firing on all cylinders," said

Wierod, who took over from Bjorn Rosengren in August.

"We are increasing our R&D and capex investments to support

profitable growth," said Wierod, who was previously the head of

ABB's electrification business.

ABB spent the equivalent of 4% of its revenues on research

and development last year, trailing rivals like Germany's

Siemens, which spent 8%.

The company also needed to improve its approach to mergers

and acquisitions, Wierod said, indicating a higher pace of deals

in future.

During the third quarter the company's electrification

business offset weaknesses in its robotics and electric charging

business, ABB said.

Business was strong providing components and products to

data centres, utilities and infrastructure projects, although

sales to European machine builders struggled.

For the full year, ABB said it expected comparable revenue

growth to be "below 5%", a slight downgrade from its previous

comments in July for full-year sales to increase "around 5%."

It raised its profitability expectations, saying it expected

its operational EBITA (earnings before interest, taxes and

amortisation) margin to be "slightly above 18%", a small upgrade

from the "about 18%" range the company said previously.

ABB's shares were 3.1% higher in early afternoon trading

after Wierod laid out his plans to accelerate growth via more

acquisitions.

"CEO says that 'ABB is not yet firing on all cylinders',

indicates in our view potential for higher growth and margin in

the coming years," said Olof Larshammer, an analyst at Danske

Bank.