Disappointing Q1 heralds pessimistic forecast by IMI

BIRMINGHAM-based engineering group, IMI has warned economic conditions remain challenging after reporting a 1% fall in organic revenues during its first quarter.

It said on a reported basis, Q1 revenues were actually 4% down for the three months to the end of March. It said this reflected the ongoing adverse impact of exchange rate movements, although this was partially offset by a contribution from its latest German acquisition, Bopp & Reuther.
   
It has warned that based on performance for the year to date, allied with current market conditions, first half organic group revenues and margins are expected to be lower than H1 last year.

“We continue to expect an improved performance in the second half, however both organic revenue and margins for the full year are likely to be slightly below last year,” it said.  

It said its strategic plan remained focused on driving sustainable long-term growth and while it was currently experiencing headwinds, the plan remained on track and the various initiatives were progressing well. These include improving group manufacturing facilities through the application of lean processes, increasing investment in product development and implementing more efficient, streamlined structures, systems and processes across the organisation.  

The company said it would report in greater detail on the progress when it published its interim results in July.

At IMI Critical Engineering, Q1 organic revenues were down 4% and on a reported basis were down 5% at the end of March.

It said markets were proving more challenging than expected and order intake in the first quarter had been slower, with some projects being delayed into the second quarter.

“While we have not seen any cancellations of note and continue to expect a stronger performance in the second half some projects expected to ship this year could shift into 2016 which would impact full year performance,” it warned.

The division has been weakened due to its exposure to the Oil and Gas sector and the nuclear sector, which it described as “particularly disappointing” with order intake significantly down on the same period last year.  

H1 revenues are expected to be lower than the same period for last year, reflecting both the order intake profile last year and current market conditions.
 
Based on the current order book, it said it expected revenues to be slightly lower on an organic basis than in the same period in 2014 but continued to expect margins to show a significant improvement on the first half of the year.  

Precision Engineering revenues in Q1 were said to be flat on an organic basis and down 3% on a reported basis.

Industrial Automation revenues were similar to last year with growth in China being lower than expected reflecting the slowing economic conditions in that country.

In the Commercial Vehicles market it said it continued to experience good growth in both North America and Europe. Market conditions in Brazil, both in the Commercial Vehicle sector and more generally, have deteriorated and as a consequence it said it was taking actions to address the cost base.

Based on the current market environment, particularly in China and Brazil, it said it expected revenues in the first half to be broadly flat.

Hydronic Engineering was said to have made a good start to the year with organic revenues up 2% in the period but down 8% on a reported basis.

“We continue to make good progress with our new product development programme and a number of new products were launched at the ISH trade show in Germany at the end of March with initial positive feedback from customers.  Underlying market conditions across Europe continue to be mixed,” it said.