REG - Spirax-Sarco Engng - Trading Statement

SpiraxAnnouncement

17/11/2022 07:01

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221117:nRSQ6769Ga&default-theme=true

RNS Number : 6769G  Spirax-Sarco Engineering PLC  17 November 2022

News Release
 
Thursday 17(th) November 2022
TRADING UPDATE

Robust trading despite economic headwinds; profit guidance unchanged

 

Thermal energy and niche pumping specialist, Spirax-Sarco Engineering plc,
issues the following trading update in respect of the four months ended 31(st)
October 2022.

Economic Environment

As expected, the macroeconomic outlook has continued to weaken.  Global
industrial production growth(1) (IP) is now forecasted to be 2.9% in 2022,
lower than 3.5% forecasted in July, although still above pre-pandemic levels.
 For 2023, the IP forecast has also been revised downwards to 1.0%, from 3.2%
in July.

Trading

Underlying demand growth remained strong in the four months to the end of
October despite the weakening IP forecast, with orders in Steam Specialties,
Electric Thermal Solutions ("ETS") and Watson-Marlow's Process Industries
remaining above our expectations at the Half Year Results in August.

Demand from Watson-Marlow's customers in the Pharmaceutical &
Biotechnology sector started normalising in the second quarter of 2022,
reflecting lower COVID-19 vaccine demand.  This trend continued in the four
months to the end of October, with some customers rescheduling deliveries into
2023.

Following the successful management of global supply chain challenges, as well
as increases to our manufacturing capacity, Group organic sales grew strongly
in the four months to the end of October.

We remain focused on successfully addressing inflationary pressures through
active price management.  Steam Specialties' adjusted operating profit
margins in the period were ahead of our half-year expectations and offset
lower adjusted operating profit margins in ETS, where highly engineered
solutions with longer delivery lead-times were impacted by higher material
inflation.  Watson-Marlow's adjusted operating profit margin in the period
was lower than anticipated due to the rephasing into 2023 of higher margin
sales to Pharmaceutical & Biotechnology customers, which resulted in a
Group adjusted operating profit margin below that of the first half of 2022.

On 29(th) September, the Group completed the acquisition of Vulcanic.  For
the 12 months to 31(st) August and on a comparable basis, Vulcanic revenues
were €99.9 million, EBITDA was €19.9 million and EBIT was €17.8
million.  On 28(th) September the Group also announced the acquisition of
Durex, which is expected to close on 30(th) November.  For the 12 months to
31(st) August, Durex revenues were US$74.5 million, EBITDA was US$25.3 million
and EBIT was US$23.5 million.

On 15(th) September, ETS closed its loss-making Chromalox plant in Soissons
(France), three months earlier than anticipated.  The ongoing order book is
being deployed for fulfilment by neighbouring Vulcanic manufacturing
operations.

Currency effects had approximately a 3.5% positive impact on both sales and
operating profit in the four months to October compared to the same period of
2021, as sterling weakened against our basket of trade currencies.  If
current exchange rates were to prevail for the remainder of the year, we
anticipate close to a 4% positive impact on full year 2022 sales and profit,
compared with the full year 2021.

Financial Position

Following the completion of the Vulcanic acquisition, our net borrowings
(excluding leases) on 31(st) October were £391 million, up from £203 million
on 30(th) June.  Following completion of the Durex acquisition, net debt will
increase further resulting in a Group net debt to EBITDA ratio close to 1.5x,
on a pro-forma basis.

Outlook

Our guidance for the Group's full year 2022 adjusted operating profit,
excluding contributions from the recent acquisitions, remains unchanged.

For the full year 2022, we anticipate close to 15% organic growth for
Watson-Marlow's sales to the Pharmaceutical & Biotechnology sector, as
well as growth very significantly above IP for the remainder of the Group's
organic revenues.  Overall, including currency effects and excluding
contributions from acquisitions, revenues in the second half of the year are
trending slightly above the typical 52% of full year revenues.  Consistent
with the four months to the end of October, we anticipate the Group's full
year adjusted operating profit margin to be below that of the first half of
the year.

The Vulcanic and Durex acquisitions will add to Group revenue and operating
profit in 2022 as of their respective completion dates.

Looking ahead to 2023, the global IP forecast has been revised downwards to
1.0%, from 3.2% in July, while global inflation rates are forecasted to remain
high.  We remain confident in the Group's proven resilience in a weakening
macro-economic climate, underpinned by our strong order book carried forward
and our well-established price management practices to offset inflationary
cost pressure.  On the basis of current economic forecasts, we anticipate at
least mid-single-digit Group organic sales growth, together with a small
operating margin progression.

Spirax-Sarco Engineering plc expects to publish its 2022 Full Year results on
9(th) March 2023.

 

 

Enquiries:

Nicholas Anderson, Chief Operating Officer

Nimesh Patel, Chief Financial Officer

Tel:  +44 (0)1242 248 515

 

About Spirax‐Sarco Engineering plc

Spirax‐Sarco Engineering plc is a thermal energy management and niche
pumping specialist.  It comprises three world‐leading Businesses: Steam
Specialties, for the control and management of steam; Electric Thermal
Solutions, for advanced electrical process heating and temperature management
solutions; and Watson-Marlow, for peristaltic pumping and associated fluid
path technologies. The Steam Specialties and Electric Thermal Solutions
Businesses provide a broad range of fluid control and electrical process
heating products, engineered packages, site services and systems expertise for
a diverse range of industrial and institutional customers.  Both Businesses
help their end users to improve production efficiency, meet their
environmental sustainability targets, improve product quality and enhance the
safety of their operations.  Watson‐Marlow provides solutions for a wide
variety of demanding fluid path applications with highly accurate,
controllable and virtually maintenance-free pumps and associated technologies.

The Group is headquartered in Cheltenham, UK, has strategically located
manufacturing plants around the world and employs more than 9,900 people,
including more than 2,000 direct sales and service engineers.  The Company's
shares have been listed on the London Stock Exchange since 1959 (symbol: SPX)
and it is a constituent of the FTSE 100 and the FTSE4Good indices.

Further information can be found at www.spiraxsarcoengineering.com
(http://www.spiraxsarcoengineering.com)

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTQQLFFLFLEFBL