Profits at Bath-based advanced engineering group Rotork tumbled by nearly a third in the first half of this year as the low oil price combined with political uncertainty across the world to hit its key markets.
The firm, which makes valves and actuators for the global oil and gas markets, warned that the rest of this year would be little better but said it was benefiting from an ongoing cost management programme.
Shares in Rotork, Bath’s largest manufacturer, closed just over 8% down on the day of the announcement having fallen heavily in early trading.
Pre-tax profits for the six months to June 30 were 31.9% lower at £38.3m on revenue down 3.7% to £263.9m as major customers shelved capital projects due to the low oil price and global turmoil.
Its order intake during the half year inched ahead by 2% driven by contributions from acquisitions made last year, it said.
However, chief executive Peter France said margins for the full year would be lower than in 2015 due to increased overheads, its product mix and pressure on prices.
Its adjusted operating margin for the half year fell to 19.2% from 23.7% in the first half of 2015.
He said the trading environment in the first half of the year had remained challenging, with the low oil price continuing to delay project activity and geopolitical tensions affecting certain key markets.
But he added that it had benefited from the weaker pound following the EU referendum while its cost management programme was progressing as planned.
“We expect to benefit further from these cost initiatives in the second half of the year and into 2017, and continue to examine opportunities to drive improvements throughout the business,” he said.
Measures to manage its cost base have included implementing global procurement strategies, value engineering its products and reviewing its overhead cost base.
These delivered the anticipated savings of £4.2m in the first half of the year, with the incremental benefit from sourcing initiatives contributing £2.9m and overhead savings the remaining £1.3m.
Mr France added: “In line with our strategy, we continue to invest in new and existing markets by opening new sales channels and developing new products.”
However, he added: “We anticipate that activity in the oil and gas markets will remain subdued, and the timing of order placement will be difficult to forecast.”
Rotork said its strategy of diversifying in terms of geography, end markets and products was proving successful and its expansion into the water, power and industrial processes markets had helped to counter the weakness in its core oil and gas markets, which now account for 51% of revenues.
Rotork invested £147.6m in six acquisitions last year to expand its product portfolio and technology, widen its geographical reach and give it access to new markets.
