UK engineer Smiths Group trims revenue outlook on hit to Middle East sales
Smiths Group Lowers Revenue Forecast Amid Middle East Disruptions
By Ankita Bora
May 21 (Reuters) - Britain’s Smiths Group cut its annual revenue forecast on Thursday and warned of a slow recovery for its Middle East business as the Iran conflict disrupted shipments and deliveries to customers in the region.
Impact of Middle East Conflict on Operations
Smiths could not fulfil some existing orders and customers were unable to accept deliveries or place new orders at normal levels, CFO Julian Fagge told analysts.
John Crane Unit and Revenue Hit
The conflict hit Smiths' John Crane unit, which supplies components to a range of industries including oil and gas, causing a £10 million hit in the quarter and contributing to flat group organic revenue in the three months ended May 2.
Logistics and Regional Challenges
Iran effectively closed a key transit route through the Strait of Hormuz in response to U.S. and Israeli attacks that started the war on February 28.
"We have 10 facilities in the region and all of those facilities are significantly impacted by events (in the Middle East)," said Fagge.
Revised Revenue Outlook and Future Projections
Smiths now expects annual organic revenue growth of around 2%, down from an earlier forecast of 3% to 4%, assuming continued disruption to its Middle East sales, which account for 7% of total sales.
Slow Recovery Ahead
Fagge said the company anticipates a similar impact on its John Crane business in its fourth quarter ending July. He cautioned that any recovery would take time, with no “sharp bounce back.”
Market Response and Strategic Adjustments
The company's shares were nevertheless up 0.6% at 1037 GMT, outperforming the FTSE 100 after the group maintained its annual profit outlook. It expects a headline operating profit margin slightly above the 20% it guided towards earlier, supported by its cost‑cutting efforts.
Portfolio Reshaping Initiatives
The FTSE 100 company has been reshaping its portfolio through the sale of Smiths Interconnect and the planned divestment of Smiths Detection under its Acceleration Plan.
Currency Exchange Rate
($1 = 0.7445 pounds)
(Reporting by Prerna Bedi and Ankita Bora in Bengaluru; Editing by Sonia Cheema, Elaine Hardcastle)
