STOCKHOLM Engineering group Alfa Laval (ALFA.ST) said on Tuesday it expected flat demand in the second quarter after first-quarter order intake and earnings fell more than expected.
The maker of pumps, heat-transfer products and fluid-handling equipment, has seen a global slowdown weigh on demand in recent quarters, though the impact of an especially sharp decline in ship building has tapered off.
Alfa Laval, whose products are used in a wide range of sectors, from food processing to nuclear energy production, said oil and gas-related business had supported demand in eastern Europe and North America, but that other regions were slower.
"Order intake from Asia was flat as a consequence of a continued cautious attitude among the customers in China," Alfa said. "Western Europe, including the Nordic countries, had growth in the base business, but decreased in total due to fewer large orders.
Earnings before interest, tax, amortisation and other items (adjusted EBITA) fell to 1.07 billion Swedish crowns ($163.90 million) from a year-ago 1.13 billion, short of a mean forecast of 1.15 billion in a Reuters poll.
Adjusted EBITA is the company's standard measure of profitability and strips out items that distort comparison.
"We expect that demand during the second quarter 2013 will be on about the same level as in the first quarter," it said.
Its shares edged down by 1.5 percent on the news while the benchmark Stockholm index .OMXS30 was up 1.4 percent.
Order bookings at the group fell to 7.16 billion crowns in the period from a year-ago 7.90 billion, lagging a mean forecast for 7.53 billion seen in a Reuters poll of analysts. The outcome represented a 5 percent fall, excluding currency swings.
Low capacity utilisation put pressure on profitability at Alfa Laval last year. While use at plants has improved, a weaker product mix has continued to weigh on a profit margin that now rests well below historic peaks above 20 percent.
Alfa Laval's core profit margin fell to 16.3 percent in the first quarter. Analysts had expected the margin to remain steady at 16.5 percent in the quarter. ($1 = 6.5285 Swedish crowns)
(Reporting by Niklas Pollard and Johannes Hellstrom, editing by Patrick Lannin)