LONDON (ShareCast) - (Sharecast News) - Steam, electrical thermal energy and peristaltic pumping solutions provider Spirax-Sarco Engineering updated the market on its trading for the period ended 31 October on Thursday, reporting that the global macro-economic environment for the group remained "positive".
The FTSE 250 company said the latest forecast for global industrial production growth for 2018 was 3.5% - marginally below the 3.6% forecast at the time of its interim report.

As in the first half of the year, Spirax said industrial production growth was weighted towards emerging economies, where the increase was forecast to be 4.9%, compared with 2.4% in the developed economies.

Much of that differential was said to be coming from China.

On the trading front, Spirax-Sarco said its organic sales growth rate in the four months to October increased "modestly" from that achieved in the first six months of the year, maintaining the good performance of the first half.

"In EMEA, organic sales growth in the four months to October was slightly higher than in the first half of the year with the segment benefitting from a strong order book at the beginning of the period," the board said in its statement.

"Organic growth in Asia-Pacific has continued to be strong with notably good performances from China and Australasia, although growth in Korea was flat in the period against a strong comparison in the prior year."

Spirax said the good organic growth seen in the Americas had continued, and was aided by a higher-than-anticipated devaluation of the Argentine peso in the period.

"Growth in the Watson-Marlow Fluid Technology Group continues to be strong, in line with that seen in the first half of the year."

The board said the integration of Gestra and Chromalox, which joined the group last year, continued to progress well.

It said their overall performance remained in line with its expectations, and consistent with their performance in the first half of the year.

The effect of those acquisitions was anticipated to increase the group's full-year sales by around 11%.

"Consistent with the first half-year performance, group operating profit is ahead of the comparable ten-month period at constant currency, both on an organic basis and when the effects of the above acquisitions are included."

Spirax-Sarco said currency effects were more muted this year than in the previous two years, and consistent with what it reported at the half-year, remained a headwind.

It said that if spot rates at 31 October prevailed for the remainder of the year, the negative impact of currency on sales and operating profit for the full year, compared with the 2017 full year, would be "slightly less" than the 3% and 5% indicated at half-year.

Movements in exchange rates were often volatile and unpredictable, the board noted, therefore the actual impact could be "significantly" different.

Looking at the books, Spirax said the business remained "highly cash generative", and it maintained a "strong" balance sheet.

At 31 October, the net borrowings of the group were £296m.

The interim dividend for 2018 of 29p per share was paid on 9 November at a cash cost of £21m.

"Industrial production growth rates are forecast to remain positive for the remainder of the year in both developed and emerging markets although predictions for 2019 are less clear, with forecasters indicating a slightly lower level of industrial production growth in 2019 than in 2018," the board said of the firm's outlook.

"We continue with our investment programmes in support of future growth and the implementation of our strategy to generate growth from our own actions to outperform our markets.

"We achieve this by being more effective in identifying and generating engineered solutions to help our customers with energy efficiency, sustainability, productivity, quality, cost reduction and compliance with ever increasing regulatory requirements."

Spirax said that, as always, it had limited visibility due to the short-term nature of its order book, it did have "good diversification" across market sectors and geographic regions, and remained focused on its strategies for growth, which, together with its fundamental strengths, stood it in "good stead".

"We still have much to do in the remainder of this year but our overall expectations for the full year are unchanged, and the board has confidence that the group will make further progress in 2018."

Spirax-Sarco said it expected to publish its preliminary 2018 results on 7 March 2019.

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