Rotork, Bath’s biggest engineering business, today warned that the impact of the oil price collapse and political turmoil in Russia, Eastern Europe and the Middle East will hit its half-year sales and profits.
The international group, which makes specialist valves and flow control equipment for the global oil and gas industry, has suffered a fall in orders for its core products over the past three months as nervous firms in the sector slash investment in new equipment. 
In a trading update to shareholders today it blamed the 7.3% drop in group orders compared to the same quarter last year on “the effect of lower investment in the upstream oil and gas market and continued uncertainty in Russia, Eastern Europe and the Middle East as political tensions remain in these regions”.
As a result, it said its half-year results to the end of June will be lower than the pre-tax profits of £61.5m achieved in the first six months of last year on revenue of £278.5m.
Rotork’s shares dipped by 3% in early trading on the London Stock Exchange before recovering slightly.
Rotork said lower sales in Asia Pacific added its problems, meaning it had a slower start to the year than anticipated with revenue for the first quarter 6.7% lower than the same period last year.
However, it said despite what it called a “challenging” first quarter, its order book at the end of March was £196m, 6.5% higher than last December and it said it remained encouraged by current project activity levels.
Order intake for the first quarter in its controls division was 5.8% down on the same period last year despite strong demand in the Americas, India and the Middle East.
Its fluid systems division suffered a 29.9% fall in orders, reflecting the effect of project delays and general uncertainty in oil and gas.
“Whilst we expect the market to remain challenging, project activity is improving and we anticipate an improved position in Q2,” it said in its trading update.
There was better news in its gears division, where orders were 2% higher with growth anticipated in Asia and the Americas, and its instruments business, which continued to benefit from acquisitions and organic growth and racked up a first-quarter order increase of 128.3%.
Rotork said it continued to be highly cash generative and maintained a strong balance sheet with a high return on capital employed. Net cash balances at March 29 were £35.2m.
Looking ahead it said: “Project activity in the Americas and Asia Pacific remains encouraging and we see opportunities across our key end markets. We continue to anticipate a challenging trading environment in the short term with the timing of orders difficult to forecast. In the light of trading to date, the board currently expects first half results to be lower than the prior year.”
But it said its second half should be stronger, meaning its full year being in line with management expectations. However, UBS analysts cut their full-year forecast for Rotork's earnings before interest, tax and amortisation (EBITA) to £154m.
Rotork will announce its half year results for the period ending June 30 on August 4.
