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Spirax‐Sarco Engineering says margins higher than expected

By BFN News | 07:21 AM | Wednesday 12 May, 2021


Thermal energy management and niche pumping specialist Spirax‐Sarco Engineering said its margins in the year to date were higher than expected amid a strong performance at its Watson-Marlow unit. Organic sales growth in the four months through April was ahead of global industrial production, the company said in a trading update. It added that Watson-Marlow continued to experience 'exceptional' Covid-19 vaccine-related demand from customers in the pharmaceutical and biotechnology sector. Sales to those customer in the first four months of the year had outperformed anticipated growth of 35% for 2021. In the company's other divisions -- steam specialties, electric thermal solutions and Watson-Marlow's process industries sectors -- organic sales growth was ahead of industrial production over the same period. Spirax‐Sarco, however, said Covid-19 continued to disrupt global supply chains, leading to higher raw material and freight costs, although both remained within its expectations. 'The group operating profit margin in the first four months of the year was higher than previously anticipated for the full year 2021, supported by the strong sales growth and higher operational gearing,' it said. Currency effects had continued to have an adverse impact on sales and operating profit, compared to the same period of 2020, as sterling strengthened. The company continued to anticipate a currency headwind effect on full-year sales and profit of less than 4% and more than 4%, respectively. 'The world is recovering faster than previously anticipated from the adverse economic effects of the Covid-19 pandemic, supported by sizeable fiscal stimulus packages,' Spirax‐Sarco said. 'However, given the difficulties faced by many emerging economies in implementing their vaccination plans and the continued uncertainty surrounding the ability to resume normal international trading activities, it is plausible that these forecasts could be subject to revisions over the coming months.' The company said it now expected Watson-Marlow's organic growth in sales to the pharmaceutical and biotechnology sector to be over 55% in 2021 due to continuing strong Covid-19 related demand. 'We anticipate the group's other revenue streams will deliver organic sales growth in 2021 above the increased forecast for global industrial production growth.' 'Additionally, electric thermal solutions ended 2020 with a higher than-normal order book, which should add at least a further £8 million to sales in the year.' 'We are accelerating capacity expansion initiatives in Watson-Marlow and we continue to step-up our revenue investments, with these increased expenditures weighted towards the second half of the year.' 'Taken together with higher sales growth and the impact of operational gearing, we anticipate the full year drop-through from the organic increase in sales to operating profit to be close to 35%, which is above our previous guidance.' Story provided by StockMarketWire.com

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