* ABB Q1 net profit falls 35 percent to $652 million
* Misses average forecast of $702 million in Reuters poll
* Visibility for 2009 remains limited
* Aims to cut costs by $2 bln by end-2010, from pvs $1.3 bln
* Says more job cuts needed if orders continue to fall
* Shares fall 5 percent
(Adds details from conference call, updates shares)
By Katie Reid
ZURICH, April 23 (Reuters) - Swiss engineering group ABB gave a cautious outlook after it missed forecasts with a 35 percent drop in first-quarter profit, as industrial firms hesitated about buying equipment due to the economic downturn.
ABB, which sells power equipment to utilities as well as to oil and gas companies, said the business environment in March had improved but it was still too early to say whether the bottom of the market downturn had been reached.
"Visibility in ABB's markets for the remainder of 2009 remains limited," the group said in a statement, noting it will face a difficult comparison base in the second quarter, and is looking to cut even more costs.
ABB is expected to benefit from government stimulus packages designed to counter the slowdown, but said on Thursday it could not forecast when that would start to help the group or when the availability of funding would improve.
Shares in the group, which have gained about 15 percent this year, had slipped 4.9 percent to 17.12 Swiss francs by 0943 GMT, underperforming a 0.1 percent rise in the Dow Jones industrial goods and services index.
Net profit fell to $652 million, missing the average forecast of $702 million in a Reuters poll of 21 analysts.
ABB, which competes with Rockwell and Schneider, said it was now aiming to cut costs by $2 billion by the end of 2010, compared with $1.3 billion announced earlier.
ABB has already slashed 3,000 jobs, which included temporary, contract and permanent workers, and Chief Executive Joe Hogan told reporters on a conference call more job cuts would be necessary if base orders continued to fall.
"Revenue and EBIT were slightly below expectations while order intake was better than estimated," Jyske analyst Lars Terp Paulsen said.
"(It is) good news that they are expanding the cost cut programme. Still very limited visibility but small signs of improvement in March," he said.
ABB's results contrast with those at rival General Electric's Energy Infrastructure unit, which posted a 19 percent rise in profit to $1.27 billion.
The group confirmed its targets for the 2007-2011 period, excluding its Robotics unit, which needs further restructuring.
ABB is aiming for revenue growth of between 8 percent and 11 percent and for an earnings before interest and tax (EBIT) margin of between 11 percent and 16 percent in the mid-term.
However, JP Morgan analyst Andreas Willi said ABB would likely struggle to achieve its growth targets.
ORDERS BEAT FORECASTS
Orders at the group fell 16 percent to $9.15 billion, ahead of the average estimate of $8.21 billion forecast in the Reuters poll. Sales missed expectations with a 9 percent drop to $7.21 billion.
"The limited availability of financing for large power projects, especially in the private sector, and the uncertainty over raw material prices and other project costs continued to delay the award of new projects," ABB said.
ABB saw a first-quarter 18 percent drop in its smaller orders, which make up the bulk of sales and are more profitable than larger contracts as customers cut back on investments in products like robots as well as drives, motors and generators.
The group's operating profit margin fell to 12 percent in the first quarter, from 17 percent a year earlier.
Longer-term, ABB is well positioned to benefit as Europe and the United States replace ageing power systems, while heavy investment in China and India in power infrastructure should also boost the group.
The group, which had net cash of $4.8 billion at the end of the first quarter, down from $5.4 billion at end-2008, is still on the look out for bolt-on acquisitions, Hogan said. He added ABB's first priority would be to keep cash.
ABB trades at about 15-times expected 2010 earnings, a premium to Schneider, which trades at about 10-times, Thomson Reuters data showed. (Editing by Simon Jessop and Andrew Macdonald)