Melrose (MRO) has warned that sales have slowed across key parts of the business and at its new acquisition, Elster, too. Crucially, there is no real sign of recovery either, which suggests 2013 will be a hard slog for the engineering turnaround specialist.
Revenue growth of 10 per cent in the first half fell to just 6 per cent in the four months since June, and the weekly order intake is down 8 per cent on the first six months. Melrose's electricity generators have sold well, but a book-to-bill ratio of 82 per cent and dip in demand for turbines implies sales at Melrose's energy division will fall next year. Growth at Crosby, which supplies lifting gear to the oil and gas industry, is moderating, and weak industrial demand for Bridon's steel wire rope is offsetting any benefit from improvements in oil and gas, and mining.
Elster, the German maker of utility meters bought by Melrose in the summer, is feeling the pinch, too. Orders are being deferred into 2013 and it could be a couple of years before there's any significant benefit from smart meters in Europe. Oliver Wynne-James, engineering analyst at broker Panmure Gordon, has cut EPS estimates for next year by 12 per cent to 17.1p and by 13 per cent to 19.5p for 2014.
