STOCKHOLM (Reuters) - Industrial technology firm Hexagon’s (HEXAb.ST) first-quarter core earnings came in below expectations on Friday, with the company citing currency headwinds and a still challenging oil and gas market.
The results were also affected by slower growth at the Swedish company’s high-margin power, process and marine division (PPM), which only returned to growth in the fourth quarter after being hit by weak demand in the oil and gas sector.
Hexagon said it expected growth in the PPM division, which has high exposure to the oil industry, to accelerate in coming quarters after just 1 percent organic growth in January-March. This was lower than the 2 percent reported in the preceding quarter.
The company maintained its sales targets for the end of 2021.
Adjusted quarterly operating earnings at the Stockholm-listed firm rose 12 percent to 198.3 million euros (175 million pounds) in the first quarter from a year ago, missing a 200 million forecast in a poll of analysts.
Movements in the dollar as well as the Chinese yuan affected earnings negatively, Hexagon said.
Organic sales rose 7 percent in the quarter, decelerating from a record 10 percent growth seen in the fourth quarter, and lower than the mean forecast for an 8 percent rise.
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.
Sales of 423 million at its industrial enterprise solutions unit missed the Reuters poll estimate of 432 million, with Hexagon highlighting a decline in the UK and weak demand within the North American manufacturing sector.
Hexagon shares were down 5.7 percent at 477.4 crowns at 1150 GMT.
They had rallied 23 percent this year by Thursday’s close, outpacing a 3 percent rise in the STOXX Europe 600 Technology index .SX8P, after fourth-quarter earnings beat expectations and investors favoured the company’s exposure to high-margin software businesses.
Chief Executive Ola Rollén said that the oil and gas markets remained challenging but were showing signs of further stabilisation.
“Our strategy remains unchanged,” he said in a statement as the company stuck to its targets of annual sales of 4.6 billion-5.1 billion euros by the end of 2021 and an operating margin of 27-28 percent by then.
This compares with sales of 3.5 billion euros and an operating margin of 24.1 percent in 2017.
Reporting by Esha Vaish, Helena Soderpalm and Johannes Hellstrom; Editing by Susan Fenton