STOCKHOLM (Reuters) - Swedish engineering group Alfa Laval (ALFA.ST) reported quarterly core earnings just above market forecasts on Thursday but said it expected demand to fall in the second quarter due to disruption caused by the coronavirus.
Although some businesses have remained open in Sweden, the company’s global footprint makes it susceptible to the spread of the coronavirus, which has crippled cross-border supply chains and halted commerce worldwide.
“The financial performance in the first quarter was stable with order intake, sales, and operating income on about the same level as last year,” said CEO Tom Erixon in a statement.
“Its pretty clear where the world is going and it will effect us as well,” he told reporters on a call, referring to the coronavirus.
The company said first-quarter adjusted operating profit (EBITA) rose to 1.75 billion Swedish crowns ($173.16 million)from 1.73 billion a year-earlier, beating the 1.71 billion analysts’ mean forecast according to data from Refinitiv.
Alfa Laval, a maker of products such as heat exchangers, separators and ballast water treatment equipment, said order intake dropped to 11.88 billion crowns from 12.2 billion a year ago but beat the 10.67 billion seen by analysts.
Erixon said demand in Q1 was strong in key end markets, such as heating, ventilation and air conditioning (HVAC) and biotech and marine pumping systems.
China recovered enough after its lock-down to record an order intake above that of the first quarter of 2019, he added.
However, the company faces problems in its supply chain.
“Right now our main concern is related to India, we have a supply base there...and things are turbulent and tricky, so in terms of trouble-shooting, the focus is on India at this moment,” Erixon said, also referring to coronavirus restrictions.
Shares in the company were up 0.30% by 1157 GMT.
On April 3, the company withdrew its proposed dividend for 2019 to preserve cash.
It had already announced a cost-cutting program of more than 1 billion crowns to cope with the outbreak of the coronavirus.
Alfa Laval said the measures would include work time reduction initiatives, aggressive cuts to travel costs as well as curbs on discretionary spending and external consultants.
Erixon said the program was “on track” to show results by the end of Q2.
Reporting by Colm Fulton; editing by Niklas Pollard, Kirsten Donovan