FTSE 100 cites steam management and engineering company Spirax-Sarco (LON: SPX), which saw its stock decline on Wednesday, as the company noted the prolonged impact of the symbiotic pandemic on industrial activity.
In the second quarter, industrial production (IP) fell 12%. This rose to a 4% decline in the third quarter from the previous year, but the company said its second consecutive month of growth in August and September has been “significantly slower.”
Spirax-Sarco said the trading “continues to withstand” even against a challenging macroeconomic background. All of the facilities remained open, and the decline in organic sales in the four months leading up to the end of October was less noticeable than in the first half.
Its steam-specialized business benefited from China’s IP contraction and reduced IP growth. Its electric thermal solutions business has seen similar trends, with the continued decline in its Chromalox products being offset by growth in its Heat Cox offering. Finally, the company said that Watson-Marlow Fluid Technology Group is enjoying a strong sales of the Biopharmaceutical Sector.
The group’s operating profit remained “slightly below” for the same period last year, and the company noted that the currency’s impact continues to have a “negative effect” as Sterling maintained its strength against the basket of trade currencies.
A statement from Spirax-Sarco stated the following about its outlook: “After reaching a low point where Global IP contracted 12% in the second quarter, macroeconomic conditions improved in the third quarter, with global IP contracts being 4%. IP is currently projected to be contracted at 5.5% overall in 2020.”
“However, in August and September, the number of IP growth rates has been significantly slower, with high infection rates in Europe and further lockdowns in levels in Europe. The impact on fourth quarter IP growth due to the revival of Covid-19 remains uncertain, but these factors could further slow the IP recovery rate for the final quarter of 2020, as was expected in the six-month results announcement in August.”
Following the news, Spirax-Sarco shares fell about 4.5%, down to 11,370.00pa on 11/11/20. Analysts currently hold a consensus on the stock, with the target price of 8,549.23p is about 25% below the current level.
