August 7, 2014 / 10:41 AM / in 3 years

UPDATE 1-Sweden's Hexagon shares up after forecast of further growth

3 Min Read

* Q2 adjusted op profit 140 mln euros vs f'cast 138 mln

* CEO says organic growth should continue to improve

* Says Russia sanctions may hit sales in H2

* Shares up more than 3 pct (Adds quotes, shares, background, detail)

STOCKHOLM, Aug 7 (Reuters) - Swedish design and measurement technology group Hexagon AB posted forecast-topping earnings on Thursday and predicted improved growth through the rest of the year, on the back of strong demand from industrial clients.

Its shares, which hit a record 230.2 Swedish crowns earlier this year having more than doubled in value since late 2011, gained more than 3 percent to as high as 219.6 crowns.

Hexagon, market leader in a specialised sector including software and engineering hardware, said like-for-like growth in the second quarter reached 6 percent, helped by stronger sales in Europe, higher than the 5 percent seen in the first quarter.

"We stick to our belief of a gradual improvement in organic growth continuously during the year," Chief Executive Ola Rollen told Reuters, though sales to Russia may be affected by sanctions imposed in July.

"As it looks right now, most of that business will able to continue, but there is a risk after all," Rollen said.

Hexagon has about 3 percent of its sales in Russia and counts state-controlled energy groups Gazprom and Rosneft among its clients, Rollen said.

"This is a thicket of rules, and it isn't easy to tell how this embargo will pan out," he said, adding it was not yet clear whether any sales to those companies or others would be affected.

Speaking on a conference call, Rollen said the sanctions may reduce group sales growth by half a percentage point during the second half of the year.

Hexagon's sales in Russia mainly consist of software to help design facilities such as nuclear plants, mines and oil rigs, as well as products used to build infrastructure, such as high-speed rail links and highways, Rollen said.

Adjusted operating earnings at the group, which sells under brands such as Leica Geosystems as well as its own name, rose to 140 million euros ($187 million) from a year-ago 132 million against a mean forecast of 138 million in a Reuters poll of analysts.

Hexagon shares, which trade on a multiple of some 18 times forecast earnings against a peer average of 15.8 times according to Reuters data, were up 3.4 percent by 1031 GMT, outperforming the wider Stockholm market which rose 0.2 percent.

1 US dollar = 0.7475 euro Reporting by Sven Nordenstam; Editing by Mia Shanley and David Holmes

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