Alfa Laval Advances Most Since April After Orders Beat Estimates

Alfa Laval AB shares rose after the world’s biggest maker of heat exchangers reported second-quarter orders that beat analyst estimates and said demand in the current quarter would rise from a year earlier.

The company expects large orders in the process technology business, whose customers include the energy and food-producing industries, Chief Executive Officer Lars Renstrom said today on a conference call. The stock rose as much as 4.2 percent in Stockholm, the biggest intraday advance since April 23.

Demand this quarter will roughly match the previous three months, making it “slightly better” than the third quarter last year, Renstrom said. Second-quarter orders fell 4.4 percent from a year earlier to 7.56 billion kronor ($1.15 billion), the Lund, Sweden-based company said in a statement today.

“Second-quarter orders were good, 3 percent above consensus” and all regions showed sequential growth, except North America, where projects were postponed, Andreas Koski, an analyst at Nordea Equity Research, said in a note today.

Nordea kept its hold recommendation on the stock with a 153 kronor price target.

Alfa shares traded 1.6 percent higher at 149 kronor as of 2:51 p.m.

Marine Business

The marine and diesel division has benefitted from increased interest in scrubbers as well as growth in orders on a broad basis in China, Renstrom said on the call. Alfa Laval, which competes with Helsinki-based Waertsilae Oyj in marine exhaust and water cleaning gear, doesn’t expect large scrubber orders in this quarter, so the unit will see “somewhat decreasing demand,” he said

Second-quarter net income fell to 641 million kronor from 718 million kronor a year earlier, hurt by currency effects. As the krona has weakened, the negative effect for the full year is now forecast at 125 million kronor, less than an earlier prediction of 195 million kronor, Chief Financial Officer Thomas Thuresson said during the call.

Sales in the second quarter declined 3.3 percent to 7.55 billion kronor.

Demand in North America is being held back by lack of skilled personnel in the oil and gas sector, resulting in clients postponing projects, Renstrom said. The company is assessing North American demand “quarter by quarter.”

While a “wait-and-see mode in China has eased somewhat,” the company “has to take one quarter at a time,” Renstrom said.

Alfa Laval maintained its target to increase sales via acquisitions by 3 percent to 4 percent this year and there are “a number of discussions ongoing,” Renstrom said.

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