LONDON (ShareCast) - (ShareCast News) - Oxford Instruments has lowered its expectations for the 2016 financial year due to superconductor price pressure and tough industrial conditions in China, yet said operating profits were ahead of the same period last year.


Although the cost cutting as part of the last year's restructuring has helped maintain percentage gross margins, the slow start to the year flagged in June has meant that orders and sales for the year to date are below the same period last year on a constant currency organic basis.

However, orders in June and July have been "significantly" ahead of the first two months of the year, the company said, and the nanotechnologies and services businesses have remained robust despite the challenging macroeconomic backdrop.

But, in the statement released ahead of its annual shareholder meeting, directors said: "However we have reduced our expectations for the full year primarily due to the changing market dynamics in our superconducting wire business described above and the difficult trading environment for our Chinese industrial products division."

Pricing pressure in super-conducting wire for MRI scanners, where traditional customers are being squeezed by new entrants in Asia, is estimated to cost £2.5m in profit in the full year.

Broker Investec observed that market conditions continued to be mixed and gradual improvement in some areas continued to be spoiled by issues in other areas and said it expected to reduce our EPS estimates by between 7% and 10%.

"We expect to cut our estimates for the reduced profit in superconducting wire, plus a little more for softer demand for other Industrial Products in China."

Analysts at N+1 Singer said the profit downgrade for the group "looks set to be greater than 5% - the negative impact from superconducting wire - but not into double digits".

"We believe that this represents the 11th consecutive quarter of downgrades to consensus forecasts for the group. While the shares are already on a discount to the sector, we would expect further weakness today and would not look to turn more positive until there is evidence of stabilisation in trading."

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