Spirax-Sarco Engineering (LSE:SPX) PLC maintained its full-year guidance despite global supply chain challenges and forecast record levels of revenue, profit and operating margin for 2021.
The engineering company said growth in sales and profit will be underpinned by continuing strong demand and predicted that it will end the year with a record order book across all its three businesses.
The operating margin is expected to be lower as a result of revenue investments.
Spirax-Sarco noted that although global industrial production grew by 4% in the third quarter, recovering from the impact of COVID-19 in 2020, it contracted slightly from the second quarter due material shortages and rising costs resulting from supply chain disruptions. Forecasts for global industrial production have been revised down to 7.4% for 2021 from 8.6% predicted at the time of the company's interim results, while full-year 2022 forecasts have also been reduced to 4.3% from 5.0%.
The company said it is not immune to the challenges posed by the supply chain problems, with its businesses impacted by shipment delays.
Also, at the Electric Thermal Solutions unit, delays to operational improvements have resulted in lower sales growth than anticipated.
But the company said rising material and freight costs continue to be offset by internal efficiencies and price management practices.
The strength of sterling has also affected performance and if current exchange rates prevail for the rest of the year, there will be a 4% adverse impact on sales and profit compared to 2020.
Order growth was above expectations across the group in the four months to end-October.
The Watson-Marlow business saw the highest level of growth, driven by continued COVID-19 vaccine related demand from its pharmaceutical and biotechnology customers.
In Steam Specialties, demand growth was well ahead of global industrial production growth and orders received so far this year are above the comparative period in 2019, the company said.
In Electric Thermal Solutions demand has grown at an even faster rate than Steam Specialties, after adjusting for the US Navy order secured in 2020, the largest single order in Spirax-Sarco’s history.
Net borrowings at 31 October 2021 were £131mln, down from £193mln at the end of June.
Shares fell 5.79% to 16,020.00p in early trade.