Valve control maker Rotork buys South Korean company

Tue Mar 4, 2014 6:13am EST

(Reuters) - Valve-control systems maker Rotork Plc (ROR.L), fresh from a string of acquisitions that underpinned profit growth last year, has agreed to buy South Korean firm Young Tech Co Ltd for 64 million pounds ($107 million).

The FTSE-250 company, which makes actuators for the automation of industrial valves, is also seeking more acquisitions as demand from the oil and gas sector grows, Chief Executive Peter France told Reuters.

Rotork's shares rose as much as 5.5 percent on Tuesday, making it one of the top percentage gainers on the FTSE-250 Midcap Index .FTMC.

The Bath-based company, which also supplies valve-control systems to power and water utilities, has bolstered its profit through a string of acquisitions in the last few years.

Rotork will fund its purchase of YTC, which makes valve positioners and accessories, from its own cash pile and existing bank facilities, the company said.

Demand for the company's main product, valve-control actuators, has surged as oil and gas drillers come under increasing pressure to improve operational safety. Rotork said its sales to the oil and gas market rose 24 percent in 2013.

Speaking to Reuters after Rotork reported a jump in full-year profit, France said demand for electric actuators would rise as shale fields are developed and new storage tanks and oil and gas pipelines built.

He said Rotork, in addition to planning more acquisitions, would launch several new products in the first half of 2014.

Most of its acquisitions to date have been in the controls business, which includes actuators and accounts for nearly 60 percent of the company's total revenue.

The company's electric, pneumatic and hydraulic actuators and control systems are also used in the marine, mining, food, pharmaceutical and chemical industries.

On Tuesday, Rotork reported an 8.5 percent jump in full-year operating profit, discounting exchange rate fluctuations.

Adjusted operating profit for the year ended December 31 rose to 151.4 million pounds, while revenue increased 6.3 percent to 578.4 million pounds.

Last year alone, Rotork bought Italian company G.T. Attuatori and U.S. company Renfro Associates Inc, as well as actuator service company Flowco and actuator maker Schischek.

Though overall demand will be strong in 2014, France said some markets, including the Indian power market, might be weak.

The strength of sterling relative to the dollar and the euro will also weigh on 2014 earnings for a company that earns only about 7 percent of its revenue in Britain. Sterling gained 8.8 percent against the dollar between June 28 and December 31.

"Based on last year's rates, we are looking at a headwind of 4 percent from currency fluctuations (in 2014)," France said.

Investec analyst Michael Blogg said he would leave his 2014 estimates for the company "broadly intact".

"The platform carried forward from 2013 should offset any additional forex headwind," he wrote in a note to clients.

Rotork's stock, which underperformed the FTSE All Share Industrial Engineering Index in 2013, was up 5.1 percent at 2776 pence at 1036 GMT on the London Stock Exchange.

($1 = 0.5982 British pounds)

(Editing by Robin Paxton)

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