March 3, 2011 / 7:43 AM / 7 years ago

UPDATE 2-IMI hikes margin outlook, posts higher profit

* Profit up 44 pct to 304.4 mln stg (consensus 295 mln stg)

* Revenus up 7 pct to 1.91 bln stg , in line with consensus

* Targets 20 pct margins in core fluid controls businesses

* Raises final dividend 29 percent to 17p

* Shares up 5.2 percent

(Adds executive, analyst comments; updates shares)

By Adveith Nair LONDON, March 3 (Reuters) - British engineering firm IMI (IMI.L) raised its long-term margin outlook at its key fluid controls business, where the company plans to shift more manufacturing to low-cost economies.

The maker of power generation equipment and drink dispensers set a margin target of 20 percent for its fluid controls unit, compared with an earlier target of 15 percent.

“A combination of new products with higher margins, and continued investments in a lower cost supply chain, will enable us to deliver against those higher margin targets,” Chief Executive Martin Lamb said in an interview, after the company reported a 44 percent increase in full-year profit.

“Forty percent of our manufacturing today is done in low-cost economies,” Lamb said. “That is going to grow to about 55 percent or more over the next three or four years, up from less than five percent a few years ago.”

The fluid control businesses include manufacturing of indoor climate control systems, motion and fluid control systems, and also control valves for power generation plants and oil and gas producers.

Analysts at Investec said in a note the new targets, if achieved, “should propel IMI into the ‘quality’ league of Industrials.”

    Arbuthnot analysts said the target was “well within the group’s grasp.”

    Shares in Birmingham-based IMI rose 5.2 percent to 931 pence at 0930 GMT on Thursday on the London Stock Exchange, and were among the top percentage gainers on the FTSE 100 .FTSE.

    IMI said 2010 operating margins at its fluid controls businesses were 18.3 percent.

    This business, which accounted for more than a third of total group revenue, posted a 31 percent rise in sales helped by improving market conditions.

    IMI, which was promoted to Britain’s blue-chip FTSE 100 index in December, reported a pretax profit of 304.4 million pounds ($497.1 million), on sales 7 percent higher at 1.91 billion pounds.

    The strong results also prompted IMI to raise its final dividend 29 percent to 17 pence, making a total of 26 pence.

    ($1=.6124 Pound)

    Reporting by Adveith Nair; editing by Paul Hoskins

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