November 1, 2018 / 8:00 AM / a year ago

UPDATE 2-Sweden's Hexagon sees no slowdown yet in China

* Q3 organic sales growth 8 pct vs 7 pct mean forecast

* Double-digit growth in China and Western Europe

* CEO says hasn’t noticed much of a slowdown in China

* Shares rise 5.5 pct (Adds CEO and analyst quotes, context, share reaction)

By Johannes Hellstrom

STOCKHOLM, Nov 1 (Reuters) - Industrial technology company Hexagon got a boost on Thursday from strong demand in China and Western Europe which lifted its sales by more than expected in the third quarter.

The maker of measurement and positioning systems and software said its Chinese business had benefited from continued strength in manufacturing, automotive, power and energy, while it had seen “good development” across all its businesses in Western Europe.

That eased concerns that have been pressuring shares of many companies that a slowdown in the Chinese economy and Europe’s car market may crimp growth.

The stock rose 5.5 percent by 1123 GMT.

Quarterly sales rose 8 percent on an organic basis to 946 million euros ($1.08 billion), above the mean forecast for a 7 percent increase in a Reuters poll.

“We haven’t noticed much of the slowdown in China that is probably happening as we speak due to trade tariffs and so on,” Hexagon CEO Ola Rollen said on a conference call.

Hexagon, which competes to an extent with companies such as Trimble, Autodesk and Dassault Systemes , said its Chinese business grew 13 percent in the quarter while Western Europe grew 11 percent.

Western Europe and China respectively account for 29 percent and 17 percent of Hexagon’s sales.

Hexagon’s automotive business is mainly affected by shifts in car production technologies and designs of new models rather than global car production.

“And we haven’t seen a slowdown in the new design activity for electric vehicles, hybrids, new car models and facelifts,” Rollen said.

Looking into 2019, Rollen said customer activity still looked good in most segments.

“But having said that, this is an all-time high level for the global economy and you simply have to be much more watchful going into 2019.”

Capital goods analysts at Barclays retained their “overweight” recommendation.

“We see Hexagon as well-positioned to benefit from a long-term, structural trend towards the digitalisation of industry.”

Rollen said any demand slowdown in China would probably come with a time-lag, as the company is mainly exposed to local Chinese demand and less dependent on export-related business.

Several Swedish industrial suppliers, such as bearings maker SKF and metal-cutting tools firm Sandvik, have said that the slower automotive market in China is starting to impact sales, while industrial demand still remains firm.

Hexagon’s sensors and software are used for measurement and quality inspection in manufacturing processes and in engineering plant design. Its products are also used in areas such as infrastructure planning, construction, mining, agriculture and energy.

Adjusted quarterly operating earnings grew to 232 million euros in the three months ended September 30, up from 205 million euros a year earlier and above the 226 million mean forecast in the poll.

Hexagon’s North America business weighed on overall growth due to a decline in the public safety business which it said it was addressing to ensure an improvement in 2019. ($1 = 0.8786 euros) (Reporting by Johannes Hellstrom, Editing by Helena Soderpalm, Georgina Prodhan and Elaine Hardcastle)

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