UPDATE 1-Alfa Laval margins miss again, sees flat demand

Tue Jul 17, 2012 3:01am EDT

Related Topics

* Q2 adjusted EBITA 1.29 bln SEK vs consensus 1.30 bln

* Core profit margin 16.5 pct vs consensus 17.4 pct (Adds detail, background)

STOCKHOLM, July 17 (Reuters) - Swedish engineering group Alfa Laval on Tuesday forecast flat demand in the coming months while low capacity utilisation continued to haunt some plants and put pressure on second-quarter weaker-than-expected profit margins.

The maker of pumps, heat-transfer products and fluid-handling equipment saw decent demand in the first quarter though margins suffered from weak product mix and capacity utilisation and costs for growing its sales force in emerging markets.

Alfa Laval said capacity and mix issues put pressure on margins again in the second quarter with its core profit margin stuck at a five-year low of 16.5 percent, well below the 17.4 percent seen by analysts and the year-ago 19.0 percent.

Worries about the strength of the global economy have also grown in recent months amid gloomy indicators and signs that the slowdown previously confined to indebted euro zone countries in mainly southern Europe has spread north in the region.

On this count, Alfa Laval struck a firmer note.

Order bookings at Alfa, whose products are used by sectors as disparate as food processing and nuclear energy production, rose to 7.90 billion crowns in the second quarter from a year-ago 7.42 billion, topping the 7.67 billion seen by analysts.

The company also said it expected demand during the third quarter to be on about the same level as in the second quarter.

Earnings before interest, tax, amortisation and other items (adjusted EBITA) dipped to 1.29 billion crowns ($182.85 million) versus a year-ago 1.34 billion to just undershoot the mean forecast in a Reuters poll of 13 analysts at 1.30 billion.

Adjusted EBITA is the company's standard measure of profitability and strips out items that distort comparison. ($1=7.0550 Swedish crowns) (Reporting by Niklas Pollard and Helena Soderpalm; Editing by Mike Nesbit)

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