Spirax-Sarco Engineering PLC (LON:SPX) shares slipped in early deals Thursday as the firm cautioned on a slowdown in the sector and moderated its growth forecasts for 2019.
In an outlook statement accompanying its full-year results for 2018, the FTSE 100 engineering firm said global industrial production growth, a “good indicator” of its market conditions, had slowed throughout the year to 3.3% from 3.6% and was likely to drop even lower in 2019 to around 2.6%.
READ: Spirax Sarco poised to buy French thermal solutions specialist Thermocoax
As a result, Spirax expected its organic sales growth for 2019 to “moderate” and that operating profit margins would be “at a similar level” to the year just gone at 25.9%.
The group also highlighted an “uncertain” currency outlook with Brexit negotiations continuing to cause volatility.
Strong 2018 results overshadowed
The cautious view overshadowed a strong set of figures for 2018, with adjusted pre-tax profits rising 11% to £254.6mln and revenues jumping 15% to £1.15bn while organic sales rose 7%.
There was also a 15% hike in the final dividend to 71p per share, taking the total dividend for the year 14% higher to 100p.
Across the company’s divisions its Watson-Marlow Fluid Technology business, which manufactures pumps and tubing, saw organic sales rise 9%.
There was also a strong performance from the company’s Steam Specialities arm, which reported organic growth of 7%. Steam boiler maker GESTRA, which Spirax acquired for £160mln in 2017 and is reported within the segment, performed ahead of expectations with a 10% increase in sales.
The company’s other recent acquisition, thermal technology firm Chromalox, which it bought for US$415mln (£315mln) back in May, grew 9%.
Thermocoax, a French thermal solutions group that Spirax had entered exclusive negotiations to buy for £139mln in February, would be folded into the Chromalox business and “significantly enhance” its electrical process heating capabilities, especially in Europe.
Nicholas Anderson, chief executive of Spirax, said the organic growth in the year had been ahead of global industrial production growth and that all three of its businesses had seen “strong organic sales growth”.
He added that the performance of GESTRA and Chromalox was in line with expectations.
Broker says results ‘in line’
In a note to clients, analysts at broker Peel Hunt said the company’s profits had been “bang in line” with consensus forecasts of £225.1mln.
They also seemed to shrug off the cautious outlook for the coming year, leaving their earnings per share forecasts “broadly unchanged” and retaining their ‘Add’ rating and 7,100p price target on the stock.
Shares were down 0.4% at 6,820p.