Spirax-Sarco Engineering PLC Trading Update (5945T)
16 Novembre 2023 - 8:00AM
UK Regulatory
TIDMSPX
RNS Number : 5945T
Spirax-Sarco Engineering PLC
16 November 2023
Thursday 16(th) November
Trading Update
Subdued trading environment; return to growth expected in
2024
Spirax-Sarco Engineering plc issues the following trading update
in respect of the four months ended 31(st) October 2023.
Economic environment
Global industrial production growth (IP) in Q3 slowed to 0.9%
from 1.4% in Q2 and was significantly lower than Oxford Economics'
July forecast for Q3 of 1.5%. This reflects a weaker macro-economic
environment with IP in the key markets of Europe and Asia
(excluding China) now forecast to contract in 2023, while North
American IP is forecast to be broadly flat on the prior year.
Oxford Economics' latest forecast for 2023 global IP has softened
to 1.2% and there remains significant uncertainty driven by China
IP, which Oxford Economics forecasts at 4.7%, while the equivalent
CHR Economics forecast is 1.0%.
Weak demand from customers in the Semiconductor Wafer
Fabrication Equipment (Semicon WFE) and Pharmaceutical &
Biotechnology (Biopharm) sectors that impacted the Group's first
half results, has persisted in the past four months. We do not
anticipate any recovery in demand from these sectors (which
represented approximately 4% and 16% respectively of 2022
pro-forma(1) sales) in the remainder of 2023, with demand now
likely to improve during 2024.
Trading
In the four months ended 31(st) October, Steam Specialties
continued to grow despite the weakening macro-economic environment,
although as expected, organic sales growth was well below the very
strong 15% delivered in the first half.
Demand growth in the industrial process focused Divisions of
Electric Thermal Solutions (ETS) remained strong, driven by
decarbonisation products and solutions, leading to a further
increase in the order book. Growth in sales was below demand as
operational improvements to increase manufacturing output are
ongoing. Demand from industrial equipment customers in the Semicon
WFE sector has remained weak.
In Watson-Marlow, monthly demand from Biopharm customers has
remained broadly in-line with H1 with destocking activity
continuing. Demand from customers in the Process Industries sectors
has also been impacted by weakening macro-economic conditions.
As a result, sales growth for the four months ended 31(st)
October across all three Businesses was below our expectations,
with Group revenues for the ten months ended 31(st) October
marginally below the corresponding prior year period, excluding the
impact of acquisitions, disposals and currency effects.
Currency effects had an adverse impact on both sales and
adjusted operating profit in the ten months ended 31(st) October,
compared to the same period of 2022. If current exchange rates were
to prevail for the remainder of the year, we anticipate an
approximately 1.5% adverse impact on full year 2023 sales and
profit, compared with the full year 2022.
Financial position
Net borrowings (excluding leases) at 31(st) October were GBP702
million (30(th) June: GBP748 million), with the Group net debt to
EBITDA ratio at 1.8x (30(th) June: 1.8x).
Outlook
Excluding the currency effects set out above, compared to 2022
pro-forma sales of GBP1,734 million we anticipate Group full year
2023 sales to be lower by between 1% and 2%, with an adjusted
operating profit margin slightly improved on the 20.2% delivered in
the first half of the year, which is consistent with the lower end
of current market estimates(2) .
During the year, we have taken actions in all three Businesses
to appropriately right-size capacity and overhead support costs,
while also protecting our ability to respond to future growth in
demand.
Latest IP forecasts for 2024 by both Oxford Economics and CHR
Economics point to 2.5% growth. We continue to anticipate a
recovery in demand in our Biopharm and Semicon WFE sectors during
2024. While it is always challenging to predict the precise timing
and scale of demand changes, we remain confident in our continued
ability to drive growth above IP. Therefore, while it is too early
to provide guidance for 2024, we do anticipate a return to revenue
growth and improvement in adjusted operating margin in the coming
year.
For further information, please contact:
Nimesh Patel, Chief Financial Officer
Mal Patel, Head of Investor Relations
mal.patel@uk.spiraxsarco.com (+44 (0) 7392 263166)
(1) Pro-forma for the full twelve-month contribution of Vulcanic
and Durex Industries
(2) Consensus estimates as at 18(th) October: Sales GBP1,717m;
Adjusted Operating Profit GBP360m (range GBP345m - GBP389m) [
https://www.spiraxsarcoengineering.com/investors/consensus-forecasts
]
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