22nd Nov 2016 11:46
LONDON (Alliance News) - Shares in valve actuators maker Rotork PLC surged on Tuesday as it said revenue for 2016 will hit the top end of market expectations and as it said signs of improvement have emerged in battered oil and gas markets.
As oil and gas operators have trimmed spending, cancelled projects and generally slashed costs, Rotork has suffered knock-on effects on order intake and pricing, given it generates half its revenue from the sector. Among oil-field services firms, Rotork has been hit particularly hard by the downturn as its products have relatively simple functions, putting constraints on its ability to offset weaker orders and pricing with higher-margin repair work.
But on Tuesday the company said order intake in the third quarter to the end of September rose 22% year-on-year and edged up 0.1% in organic, constant currency terms. Revenue increased rose 29%, or by 5.3% on an organic basis.
Rotork said it continues to expect margins for 2016 to be lower year-on-year, albeit in line with market expectations, but revenue is set to be at the upper end of market expectations thanks to the currency boost and to orders set to ship in the last months of the year.
Shares in Rotork were up 11% to 221.50 pence on Tuesday, one of the best performers in the FTSE 250.
Rotork's two units most exposed to the oil and gas sector, Controls and Fluid Systems, both suffered in the first half but signs of improvement have started to materialise.
Controls, its electrical actuators and control systems division, saw order intake in the quarter to the end of September rise 20% year-on-year or by 4.3% on an organic, constant currency basis. Rotork said certain parts of the oil and gas market have started to brighten, notably in the Middle East, Asia and North America.
Fluid Systems, the company's pneumatic and hydraulic actuators unit, saw order intake rise 4.8% in the third quarter, though order intake shrunk 8.6% on an organic basis. Midstream and downstream markets are showing signs of improvements, though Rotork said it is still seeing projects take longer than normal to convert into orders.
Still, the 8.6% organic decline in order intake still was an improvement on the 17% decline reported in the first half.
Order intake for Rotork Gears, a gearbox supply business, rose 34% in the third quarter year-on-year, though intake fell 9.1% organically. The group said its US business performed well for the division and better signs emerged in Asia.
Rotork Instruments, meanwhile, which makes flow, pressure control and diagnostic products, saw order intake rise 66% in the third quarter and rise 19% organically, driven by new product launches and acquisition contributions.
By Sam Unsted; [email protected]; @SamUAtAlliance
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