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Spirax-Sarco builds up steam but warns about slowing industrial growth

Global industrial production growth is forecast to slow to 2.0% for 2019, down from a previous estimate of 2.6% and the 3.3% seen last year
Spirax-Sarco specialises in the control and management of steam and fluids

Steam-control specialist Spirax-Sarco Engineering PLC (LON:SPX) continued to look worriedly at slowing global industrial growth, even though organic sales levels remained "strong" in the first four months of the year.

Ahead of its annual shareholder meeting, the FTSE 250 engineer said the further lowering of global forecasts for industrial production growth to 2.0% for 2019 meant it was keeping its overall expectations of organic growth and trading margins for the full-year unchanged.

READ: Spirax-Sarco shares cool as it cautions on industry slowdown, moderates growth forecasts for 2019

In March, Spirax had also warned that global industrial production, a “good indicator” of its market conditions, was likely to drop to around 2.6% in 2019, having had slowed from 3.6% to 3.3% last year.

With organic sales close to the 7% seen in the second half of the previous year, organic operating profits got off to a better start than last year, with operating margins consistent with management’s expectations for them to be maintained over the year.

Sales growth in the Asia Pacific region was said to have been “particularly strong”, Europe, Middle East and Africa had seen a “modest benefit” from customer stockbuilding ahead of what was then a Brexit deadline of 29 March, while the Americas were flat.

Sales growth at US-based Chromalox was positive but lower than the Steam Specialties business, albeit against a solid start in the prior year. Pumps business Watson-Marlow had an “excellent start”, helped by biopharma growth.

On the outlook for the rest of the year, Spirax said: “While, as normal, our short order book provides only limited visibility, the group's fundamental strengths stand us in good stead to continue to deliver growth that outperforms our markets.”

The business remains highly cash generative and net debt was £203mln as of 30 April. 

Spirax shares were little moved on Wednesday morning at 8,395p.

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