ABB Ltd. (NYSE:ABB) reported a decline in profit due to previously announced charges at its Power Systems division and lowered a mid-term sales target because of weak global economic growth.

Net income declined 13 percent to $525 million in the fourth quarter, the Zurich-based company said in a statement today. The average estimate of 18 analysts surveyed by Bloomberg was $528.1 million. This year will be “challenging” for revenue growth and ABB predicts it will “return to its pre-2013 growth trajectory in 2015,” the company said.

The supplier of electricity grids and substations last month said it will book $260 million in charges from “operational issues” at its Power Systems division and delays to offshore wind projects as ABB is feeling the brunt of winter storms in the North Sea. As Chief Executive Officer Ulrich Spiesshofer, who took over in September, is grappling with the risks of offshore wind projects, he tasked the Power Systems division’s new leadership to work on a plan to improve performance.

“Poor demand is taking its toll on management’s expectations,” said Michael Hagmann, an analyst at HSBC Holdings Plc. The cut in the compound annual revenue forecast “suggests very little or no growth this year,” he said. HSBC has an underweight rating on ABB’s shares.

ABB’s North American headquarters are based in Cary and the company maintains a research presence at N.C. State University’s Centennial Campus.

Selective Orders

The stock was down 1.3 percent as of 9:06 a.m. in Zurich trading, valuing the company at 53 billion francs ($59 billion). Before today, ABB shares had gained 19 percent in the last 12 months, beating the 13 percent gain of the Swiss Market Index.

Fourth-quarter sales rose 3 percent to $11.4 billion, meeting the analysts’ estimates. ABB announced a dividend of 0.70 Swiss francs ($0.80).

The company said being more selective on projects at the Power Systems division also contributed to lowering the mid-term revenue target.

ABB predicts its compound annual growth rate of sales, excluding acquisitions, in the four years to 2015 will be 4 to 5 percent, compared to the previously communicated target of 5.5 to 8.5 percent. The company said its compound annual basic earnings per share growth will be at the lower end of its target of 10 to 15 percent. The company confirmed other mid-term targets.

Portfolio Check

“The reduction of the revenue target from 2011 to 2015 is unfortunate, but was foreseeable because of the earlier results and the weak demand picture for large orders,” Richard Frei, an analyst at Zuercher Kantonalbank in Zurich, said in an e-mail. Frei has an outperform rating on the stock.

After more than $10 billion of takeovers since 2010 which grew ABB sales by about a quarter, Spiesshofer is now casting a fresh eye over the company’s expanded operations and appointed manager Greg Scheu to head acquisition integration and North America in October.

“We are confident Power Systems will deliver higher, more consistent returns once certain legacy projects have been executed and actions to improve risk and project management are complete” Spiesshofer said in a statement today. ABB will present its strategic ambitions and long-term financial targets in September, he said.

Claudio Facchin was named head of the Power Systems unit in November, replacing Brice Koch who left to become chief executive officer of Swiss engineering company OC Oerlikon AG.

Mixed Signals

ABB’s rival Siemens AG reported a loss of 84 million euros in the three months through December at its power transmission unit, partly because of “continuing project execution challenges,” according to the Munich-based company.

Spiesshofer has pledged to prune ABB’s portfolio with selective smaller divestments, such as the sale of a generator- set business to Generac Holdings Inc. Under predeccesor Joe Hogan, ABB added electric motors, low-voltage products and solar inverters with three large U.S. deals.

Base orders worth less than $15 million, which form the majority of ABB order intake, rose with demand from general industry customers for breakers, switches, motors and drives. Utilities continued to spend cautiously and postponed some large investments, ABB said.

ABB said it sees positive signs in the U.S. and parts of Europe, balanced by some uncertainties because of quantitative easing and the speed and strength of economic development in the emerging markets, especially China.