Rotork slides as orders dip due to 'timings, deliveries'

Rotork, the liquid flow-control engineering specialist, reported a 4% drop in third-quarter order intake but said expectations for the full year were unchanged.

Reported orders were down 2% on an organic constant currency basis due to a 17.6% decline in the Fluid Systems unit and a fall of 1.3% in Control, which was said to reflect the variation in the timing of project orders and deliveries compared with last year. Order growth in the quarter of 11.9% was seen in the Instruments arm, while Gears were up 0.9%.

Revenue was up 8.4% in the third quarter to 28 October, or up 9.9% on an OCC basis. The order book remained strong at £204.1m, a 6% increase from last year.

Chief executive Kevin Hostetler said: "Based on our performance to the end of October and anticipated shipments in the remaining two months of the year, we continue to anticipate a robust financial performance in 2018 and management expectations for the full year remain unchanged."

Rotork said overall activity levels improved in the quarter, particularly in 'downstream' energy, led by the delivery of further phases of the large projects in the Far East.

Upstream, including exploration and production, was lower than the third quarter last year as was the power market.

Industrial process markets continued the strong performance seen in the first half, whilst midstream and the water industry showed modest growth in the quarter compared with the slight decline in the first half.

By geographic region, the strongest growth was seen in the Far East, while Eastern Europe saw a decline due to timings, and there was little year-on-year change in the Americas, Western Europe and the Middle East.

"Good progress" was reported on the growth acceleration programme, with restructuring costs down slightly and Hostetler saying the project had moved "from consultation and analysis to implementation and execution".

Three new directors have been hired, covering strategy, M&A and engineering, "to accelerate the development of our end-market strategy... address the most attractive adjacencies and ... bring a more uniform approach to innovation and product development opportunities", together with a further 15 engineers recruited in the period.

A plan to orient the business around market segments will begin to be phased in next year.

Three non-core businesses have been sold or closed since the half year, with site improvement plans developed for the group's eight largest factories, a refreshed central procurement team working on higher-value components used in the manufacturing process to try and drive more savings.

The balance sheet showed net cash of £12.2m, reversing the net debt position of £12.6m seen at the end of the last calendar year.

Shares in Rotork, having receded more than 21% since August's all-time high, fell more than 11% to 251.7p on Thursday morning.

The drop in order intake rocked investor confidence, said market analyst David Madden at CMC Markets. "The stock has been in decline since August, and if the negative move continues it could target 250p."