Key Takeaways:
UK engineering firm Smiths Group PLC lowered its full-year revenue forecast to around 2% growth, citing disruptions in the Middle East that have impacted its largest division.
"Whilst this moderates growth in the near term, it is set against a backdrop of increasing global demand for energy security and resilience, and we are well positioned to support our customers," Chief Executive Officer Roland Carter said in a statement.
The revised guidance, down from a previous range of 3% to 4%, reflects a £10 million hit to revenue in the third quarter at its John Crane unit. The Middle East accounts for about 7% of the company's sales. For the nine months to May 2, group organic revenue was up just 0.2%.
Despite the lowered sales outlook, shares in Smiths Group rose 0.2% to 2,485.00 pence. The company maintained its forecast for an operating profit margin of slightly above 20%, suggesting cost controls are offsetting the revenue headwinds.
The third-quarter trading update showed flat organic revenue growth, a slowdown attributed to the conflict and a subdued US construction market. The John Crane seals and component business saw organic revenue increase by 2.8% even with the disruption, while the Flex-Tek heating components manufacturer reported a 3.9% decline against a strong prior-year comparator.
The guidance cut highlights the vulnerability of industrial firms to geopolitical instability in key energy markets. Investors will now watch for whether the disruption continues to impact John Crane's order book when the company reports its full-year results.
This article is for informational purposes only and does not constitute investment advice.
