Spirax-Sarco said in its latest trading update that its organic sale growth is in line with expectations, its strong order book and that the group’s industrial production growth (IP) remains unchanged for the full year, despite strong headwinds on Wednesday.
Spirax-Sarco Engineering is a thermal energy and pumping specialist and in its Q1 trading update, it said IP for the quarter is 3.2% compared to 2021 as the economy recovers from the pandemic.
The group also reiterated that the full-year IP growth was lowed to 3.9% from 4.2% due to the impact of the geopolitical tensions in Ukraine and lockdowns in China.
The group handled the impact of rising War tensions and lockdowns resulting in inflationary pressure on the cost of its raw materials through active price management.
Spirax-Sarco has its Steam Specialties manufacturing facility in Shanghai which is currently operating at a “reduced capacity” due to lockdowns imposed in China since March 28, which has hurt its sales in China. The group expects sales to recover this year if China ceases its restrictions in the near future.
However, Spirax-Sarco reported organic sales growth in line with its expectations as a result of increased manufacturing capability and good handling of supply chain problems in all three of its businesses, where the order books record “all-time highs” as demand outnumbers sales.
Watson-Marlow’s sales to the Pharmaceutical & Biotechnology sector rose more than 20% which was in line with the group’s expectations.
In an attempt to quicken the delivery of its Digital Strategy, Spirax-Sarco acquired Cotopaxi and expects it to generate sales amount to £5m which is close to pre-pandemic levels.
However, the group assumed that it will have no contribution to operating profit as the revenue investments in digital capabilities will more than offset Cotopaxi’s operating profit, which was also the cause behind lower group operating profit margins in the first quarter.
Spirax-Sarco addressed its strong balance sheet due to a continued strong financial performance and cash generation. The group recorded a £10m increase from December 2021 to £141m in April 2022.
The final dividend of 97.5p will be paid on May 20 subject to shareholder approval, with a cash impact of £72m.
Outlook
As expected, the latest global IP growth forecast was reduced to 3.9% from 4.2% in its FY results in March as a result of growing geopolitical tensions hampering the company’s operations.
However, the revised IP growth forecast remains unchanged in the Q1 trading update due to a strong order book and the endurance the company has to face the supply chain constraints.
Spirax-Sarco Engineering expects to report its 2022 half-year results in August 2022.
Spirax-Sarco shares were trading up 0.5% to 10,890p after the group announced that global IP growth forecast remains unchanged for the year.
