Trump rhetoric and Brexit trouble major engineering firm
By Andrew Merrell | 8th August 2018
One of the world's biggest engineering firms and a major Gloucestershire employer has flagged up the impact Brexit and President Trump's war of words is having on its business.
A lack of clarity surrounding the United Kingdom's exit from the European Union could "weigh heavily" on investment decisions and "confidence" going forward, it said.
Spirax Sarco, which employs an estimated 1,000 at its Cheltenham base, where the business has its world-wide headquarters, said the favourable exchange rates brought about by the Brexit decision were also now reversed.
Large orders were being affected by the White House's aggressive protectionist trade posturing, said the steam and electrical thermal energy solutions business which employs 7,200-plus world-wide.
However, before you go thinking this is a world-leading business getting its excuses in as it delivers its half year results, think again. Spirax Sarco delivered revenue growth of 28 per cent from £428.6m to £547.6m.
Adjusted operating profit before tax was up 24 per cent from £101.2m to £125.7m.
Its organic growth was boosted by "two significant acquisitions" in the shape of Gestra, a steam boiler equipment firm, and Chromalox, an electric heat and control products business.
Nicholas Anderson, chief executive of Spirax Sarco, said: "We are very pleased to report strong organic sales growth of seven per cent in the first half, ahead of global industrial production growth, and organic operating profit growth of 15 per cent."
In its statement announcing its half year results the firm said industrial production growth rates were remained relatively strong throughout the first quarter of this year, but began to slow in the second quarter.
"A lack of clarity surrounding post-Brexit trade agreements and growing rhetoric regarding trade wars and protectionism are beginning to impact investment confidence in the region," said the statement.
"Organic growth in the region was mixed with very good growth in Germany, Italy, Iberia and some of our smaller markets, such as Denmark and the Netherlands, somewhat off-set by contractions in France and the UK, with market confidence in the latter affected by Brexit uncertainty."
Customer appetite for small and medium-size projects "remained healthy" said the statement but "large project orders have begun to be affected by the uncertainty surrounding post-Brexit trade terms and concerns over the impact of protectionist rhetoric and actions from the USA".
It added: "The favourable currency tailwind, experienced following the UK's decision in June 2016 to exit the European Union, became a headwind in the period as sterling strengthened against the basket of currencies that we trade in."
Going forward the company remains confident its business plan would continue to deliver.
"We continue to implement our strategy for growth, which was set out in our 2014 Annual Report. Our strategy builds on the foundation of our robust, direct sales business model and focuses on doing better what we already do well, so that we can achieve growth that outperforms our markets."
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