FX head-winds getting stronger at Spirax-Sarco

Unfavourable exchange rate movements have seriously slowed the organic growth sales rate this year at Spirax-Sarco Engineering, the peristaltic pumps specialist.

The group said the organic sales growth rate for the first four months of the year was 6%, but total sales were up just 3%, largely due to unfavourable exchange rate movements which have become more pronounced in recent weeks.

"We note that sterling has recently strengthened and, if current exchange rates prevail, this would reduce sales on translation by over 3% for the full year," the group said.

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At constant currency, operating profit was modestly ahead of the comparable period in 2011. Higher material costs, lower volumes in the firm's main European factories, economic woes in Latin America and the sale of two small businesses all proved a drag on profits growth.

The group's markets in Asia continue to show good strength in the main and North America is benefiting from increased project activity and continued investment in the oil sands developments of Western Canada. However, trading conditions remain difficult, as expected, in the group's core European markets while the market environment in Latin America reflects the slower economic growth in the region and the decline in industrial production in Brazil.

"We remain focused on our strategic priorities to drive sales growth, especially in emerging markets, to generate benefits from our increased investment in research and development over the last few years and to improve operational excellence. We believe that economic conditions in Europe will remain sluggish and therefore we are intensifying our focus," the company said.

The company had a net cash balance of £29m at April 30th (December 31st: £12m).

Having traded broadly in line with expectations in the first four months of the year the group reckons that, assuming market conditions do not deteriorate further, it will make further progress this year.

The market is clearly concerned about the exchange rate impact, however, and also the confirmation of difficult market conditions in Europe and Latin America; the share price fell 4.54%, or 98p, to 2,061p by 08:46.

NR