FY 2011 guidance was repeated: growth y/y in sales and EPS before amortization.
3Q11 was good:
The press release mentions that 3Q11 was good, owed to solid order intake, many product introductions, new investments in e.g. greenfields, and ongoing focus on efficiency improvements. We believe 3Q11 sales rose organically in both divisions, at circa 5-6% in Flow Control (1H11: 9.2% thanks to easy comps in 1Q11), and circa 5-8% in Industrial Services (vs. a non-sustainable 22.9% in 1H11). As such, we believe there was sales and earnings growth y/y in 3Q11, but we can not back our assumptions by facts.
The 1H11 trends continued in most markets, except for semi equipment, which slowed down in 3Q11. Automotive continued its solid performance, partly due to expansion by various clients. Precision machinery and turbine did well, metalectro-, energy- en defencemarkets were in line with 1H11. New greenfields are developed in the US, Poland, India, and China (in order of stage of development), and they should gradually start contributing to sales. The material technology part of the division was strengthened through the acquisitions of DEC en GB, which should add total sales of € 30m p.a.
Market trends were still mixed, as in 1H11. Developments were positive in district heating, gas, beer & soft drinks, fire protection, energy-efficiency systems, and in various industrial markets. Renovation, maintenance and commercial buildings were in line with 1H11; while the new build segment remained challenging. Germany and France developed well. In Eastern Europe the favourable trend continued, particularly in district heating, gas and plastic piping systems. Scandinavian was in line with the first six months. Conditions were challenging in the Benelux and the UK. The industrial markets in the USA were good. Spain, Portugal and Italy remained difficult. Flow Control continued to intensify cross-selling, innovation of existing and new products and key account management.
The trading update was in line with our expectations. No numbers, but confirmation of trends in various end markets. As such, our stance on today’s news is neutral. We leave our estimates and TP unchanged.