February 5, 2019 / 7:17 AM / 7 months ago

Alfa Laval hit by weaker than expected demand for ship fuel cleaners

STOCKHOLM (Reuters) - Swedish engineering group Alfa Laval missed forecasts for new orders on Tuesday, hit by weaker than expected demand for ship exhaust cleaners and sending its shares sharply lower.

Demand for so-called marine scrubbers has boosted orders for Alfa Laval in recent quarters as ship companies prepare for stricter sulphur emissions regulations at the start of next year. Scrubbers strip out sulphur as fuel is burned.

However, CEO Tom Erixon said shipowners were taking a bit longer to make downpayments, though he forecast higher sequential demand for both the group and its marine unit in the current quarter, and remained confident about future prospects.

“The order shortfall in the marine division, relative to expectations, was particularly surprising given the strong order inflow at Wartsila recently,” said JP Morgan analysts, referring to the higher fourth-quarter orders reported last week by Alfa Laval’s bigger Finnish rival.

At 0930 GMT, Alfa shares were down 5.5 percent at 197.55 Swedish crowns.

The Swedish firm said order intake for its fourth quarter was 11.56 billion crowns (973.93 million pounds), below analysts’ average forecast of 11.94 billion crowns. This included 4.44 billion of orders at its marine unit, against an expected 4.99 billion.

The company, which also makes machinery such as heat exchangers, separators and ballast water treatment equipment, posted adjusted earnings before interest, taxes and amortisation of 1.79 billion crowns, also short of the expected 1.98 billion due to margin pressure in its energy division.

Alfa said in November the market for scrubbers could be bigger than its previous 2018-2026 forecast of 5 billion euros (4 billion pounds).

Erixon said the company still held that view as it had continued to fill its order books for 2020 and 2021 since then, and as it did not expect recent bans in some ports on discharge of scrubber water to impact demand.

“Our feeling is that, despite the quarterly variations in order intake, interest has remained high,” he said.

Reporting by Esha Vaish in Stockholm; Editing by Niklas Pollard and Mark Potter

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