Spirax-Sarco Falls on Strength of U.K. Currency: London Mover
Spirax-Sarco Engineering Plc (SPX) fell the most in the FTSE 350 Index after saying performance in the four months through April was hurt by an economic downturn in Latin America, higher input costs and a strengthening U.K. currency.
The stock declined as much as 7.6 percent after the world’s biggest maker of steam-driven pumps said that full-year sales converted to pounds would be cut by more than 3 percent should sterling continue to strengthen. It was the biggest intraday drop since December 2008.
Trading “remains difficult” in Europe, while faltering growth in Latin America, including a decline in Brazilian industrial production, is weighing on earnings, the company said today. Spirax-Sarco, based in Cheltenham, England, designs steam systems used to provide heat in manufacturing and makes pumps used in applications from mining to wastewater treatment.
“The share-price fall reflects the continuing headwind as regard to foreign exchange, raw material inflation and signs of slowdowns in Latin America,” said Dominic Convey at Peel Hunt, the only analyst with a sell recommendation among 15 who share data with Bloomberg. He reduced his rating in February, citing potential short-term underperformance and the Euro’s weakness.
“It’s a high-quality company as well-positioned as its competitors to cope with some obvious short-term headwinds,” Convey said today. Spirax-Sarco’s engineered-solutions customers span industries from brewing to pharmaceuticals, and it gets no more than 1 percent of revenue from any single company, according to its 2011 annual report.
Sterling reached its strongest level against the euro in 3 1/2 years yesterday, at 79.63 pence per euro, amid the region’s debt crisis. That hurts profit at Spirax-Sarco, which took almost 40 percent of 2011 sales from Europe, the Middle East and Africa.
“We believe that economic conditions in Europe will remain sluggish and therefore we are intensifying our focus on cost reduction and operating efficiency,” Spirax-Sarco said today. “We remain focused on our strategic priorities to drive sales growth, especially in emerging markets.”
To contact the reporter on this story: Colm Heatley in Belfast at firstname.lastname@example.org