Weaker Scrubber Demand Takes Shine Off Alfa Laval’s Results

Photo courtesy Alfa Laval

STOCKHOLM, July 17 (Reuters) – Sweden’s Alfa Laval reported a fall in quarterly orders on Wednesday on weaker-than-expected demand for ship exhaust cleaners and pumping systems, sending its shares sharply lower.

Demand for so-called scrubbers which strip out sulphur from marine fuel has boosted the engineering group as well as Wartsila in the past few years as shipowners prepared for stricter sulphur emissions regulations from next year.

Chief Executive Tom Erixon forecast higher sequential demand for Alfa’s marine unit as well the overall group and said he remained confident about future prospects.

“Our underlying view on the scrubber market and view on the technology has not changed,” said Erixon. “All indications are that the market will maybe grow a little bigger over time… than we had expected.”

The company has forecast about 5,000 ships will be retrofitted with scrubbers by 2023. Its scrubbers order book is filled well into the first quarter of 2020, Erixon said.

He said uptake of scrubbers was being impacted by shipowners comparing installing scrubbers with switching to lower sulphur fuels.

The outlook for scrubbers has also been clouded by a move by several major ports to ban discharges from open-loop scrubbers. One producer, Yara Marine, is up for sale.

Alfa Laval’s second-quarter order intake fell 20% to 10.0 billion crowns ($1.07 billion), while adjusted core earnings rose to 1.87 billion Swedish crowns ($199 million) from 1.70 billion a year earlier, the company said.

Citi analyst Klas Bergelind said order intake was a 12% miss on expectations and adjusted earnings was a 7-8% miss due to a bigger impact from a divestment. He said he now expected full year earnings per share consensus to be cut by 3-5%.

The maker of machinery such as heat exchangers, separators and ballast water treatment equipment forecast “somewhat higher” demand in the current quarter.

Alfa shares extended their losses after results and were down 6.2% at 192 crowns at 1242 GMT.

($1 = 9.3750 Swedish crowns) (Reporting by Esha Vaish, editing by Anna Ringstrom and Jason Neely)

(c) Copyright Thomson Reuters 2019.

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