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Investing.com -- Shares of Spirax-Sarco Engineering PLC (LON:SPX) fell by 4.6% on Wednesday as the company reported its first quarter results, which were broadly in line with expectations excluding the impact of foreign exchange headwinds.
The company’s intellectual property growth was noted at 2.5% for the quarter, although growth was only 1.7% excluding China and negative in key European markets.
Despite these challenges, Spirax maintained its organic sales growth outlook consistent with the previous year.
The end-of-April net debt was reported at £603 million, a slight increase from around £596 million at the end of the previous fiscal year.
The company observed varied demand trends across its divisions, with Watson_Marlow experiencing improved demand and ETS seeing strength in Process and improved Semiconductor orders.
However, the Steam segment was impacted by lower large project demand in China and Korea, where market conditions continue to be difficult.
While the organic sales growth outlook for the fiscal year remains unchanged, the foreign exchange headwinds have intensified, increasing the expected impact on EBITA from 4% to 6%.
This adjustment means that the comparable margin on current rates is now projected to be 19.4%, down from the previously anticipated 19.6%. Spirax anticipates a second-half bias to sales growth and margins.
Analysts at RBC commented on the company’s performance, stating, "Broadly inline start to the year with the only likely consensus change being the FX headwind. The need for an H2 pickup leaves some uncertainty though in the near term. We retain an Underperform rating with the valuation still at a notable premium to our wider coverage, our PT is 6000p."
This reflects a cautious stance on the company’s near-term prospects due to the increased FX headwinds and reliance on a stronger second half to meet growth expectations.