UK's Smiths Group beats profit forecasts, seeks sale of US asbestos liability

Smiths Group Exceeds Profit Forecast, Launches US Asbestos Liability Sale

Smiths Group's Financial Performance and Strategic Moves

Full-Year Operating Profit Surpasses Expectations

Sept 22 (Reuters) - British engineering firm Smiths Group beat expectations with its full-year operating profit on Tuesday and launched a process to sell its US asbestos liability, as the 175-year-old company completed a sweeping portfolio overhaul that netted more than £3 billion ($4.01 billion).  

Shares in Smiths were up more than 4% in early trade.

Transformation into a Focused Industrial Technologies Group

The results mark a first full-year performance for a slimmed-down Smiths, which has reshaped itself into a focused industrial technologies group serving energy, industrial and construction markets after shedding its detection and interconnect businesses under pressure from US activist investor Engine Capital.

Growth Outlook and Market Exposure

Smiths now expects to deliver its medium-term organic revenue growth target of 5%-7% more quickly, citing exposure to data centres following the acquisition of DRC Heat Transfer, favourable energy market trends driven by energy security concerns, and portfolio improvements at its Flex-Tek unit.

Challenges in the Current Market Environment

Originally known for precision watches and speedometers, Smiths, like many industrial firms, is operating in a challenging environment shaped by the Iran war. While aviation and security demand remains strong, other markets face supply chain disruptions, volatile energy prices and weaker customer investment.

Smiths' largest unit John Crane, which supplies components to a range of industries including oil and gas, absorbed an approximately £20 million hit from the conflict in the second half of 2026.

US Asbestos Liability Sale Initiative

Background on Asbestos Litigation

Smiths' John Crane unit is among numerous co-defendants in litigation relating to legacy products that contained asbestos. The company had set aside £153 million in fiscal 2026 to cover expected future legal costs and adverse judgements, down from £191 million a year earlier. 

Potential Impact of Liability Sale

A sale of its legacy US asbestos liability could remove the obligation from Smiths' balance sheet, increase free cash flow and reduce earnings volatility.

Analyst Consensus and Additional Information

The company's full-year adjusted operating profit of £399 million for the year ended July 31 came above a company-compiled analyst consensus of £388 million.

($1 = 0.7478 pounds)

(Reporting by Yamini Kalia in Bengaluru; Editing by Rashmi Aich and Louise Heavens)