Sector movers: Rotork and Castings drag engineers lower, IMI subdued

Industrial engineering stocks were out of favour on Friday after Rotork and Castings disappointed with results and the market gave a muted reaction to a trading update from sector peer IMI.

Rotork, the actuator manufacturing and flow-control company, saw shares drop 3.8% at 2,404p in afternoon trade after revenues fell 1% in the third quarter due to the timing of deliveries.

Group order intake increased by 4.3%, but was down 18.2% in the fluid systems division due to strong comparatives and the loss of orders caused by the tightening of trade sanctions in Russia.

The company said it "continues to expect to make further progress in the full year", but margins are estimated to be flat on 2013.

Analyst Michael Blogg from Investec said the update was "disappointing" with Rotork's end-markets "variable". Blogg, who put his 'add' rating under review, said that consensus forecasts are likely to be "trimmed a little".

Meanwhile, while Numis Securities maintained its positive 'add' stance on the stock, the broker noted that oil prices - currently trading at a four-year low - "could be a negative looking forward". Oil and gas accounts for around 59% of Rotork's group revenues.

Casting's shares dropped over 7% after the iron castings and machining group gave a gloomy outlook, saying it is "difficult to forecast the outcome for the remainder of the year" due to weakness in Europe.

First-half sales slipped 3.5%, while an anticipated increase in volumes in the third quarter "did not materialise", it said.

Meanwhile, IMI's stock was broadly flat in the afternoon at 1,241p, having earlier dropped by over 2%, as the company said that organic growth eased to just 1% in the third quarter from 3% in the first half.

The company, which focuses on the control and movement of fluids in critical applications, said: "Overall results for the year are still expected to be broadly in line with current market expectations, despite market conditions being more difficult than anticipated particularly in Germany."

Others in the sector such as Corac Group, Bodycote, Renold, Weir, Optare and Fenner were also trading in the red.

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