Sales and EBITA will increase y/y and EPS (before amortization) will be in line with that of 2012, barring unforeseen circumstances. Capex will also be similar to that of 2012.
Trends in 3Q13 improved over 1H12:
During 3Q13, orders, backlog, sales and profits rose vs. 3Q12, according to management. Both Industrial Services and Flow Control realised organic sales growth. This implies an improvement over 1H13 when organic sales growth was slightly negative, owed to a combination of a weak 1Q13 (partly due weather-related delays in Flow Control) and a sequentially better 2Q13.
Trends in Flow Control:
Buildings Europe remains tough and compares with the first six months. Increasing recovery was visible in residential and retail in Buildings North America. The Climate Control activities have been further combined and coordinated; many new products/system initiatives have been implemented and good progress has been made. Industrial, Oil & Gas showed a varied picture; district energy, beer and soft drinks, and North America performed well, while gas projects in Russia continued to show a delay.
Trends in Industrial Services:
Industrial Services realised good orders, sales and profits. German automotive, machine build, and turbine & aerospace industries remained at a good stable level, while semiconductor improved further. There was a gradual improvement in demand of French key accounts in automotive, and metal & electronics.
Current trends are in line with our expectations. We have pencilled in organic sales growth of 3% for 2H13 for both activities. Recent news flow from Flow Control peers suggests this should be feasible. A scan of Industrial Services’ end markets post 2Q13 earnings season showed no material change in trading conditions vs. 1Q13, except for better momentum in semiconductor, but that should not be a surprise following ASML’s 3Q13 results,which showed solid growth in order intake and backlog. We leave our estimates, target price, and rating unchanged.