Precision engineering firm Renishaw (RSW) is down 10.4% to £37.64 as it warns on profit for the 12-month period to 30 June 2019.
The company says a slowdown in demand in Asia for its encoder products and from large end-user manufacturers of consumer electronic products is expected to continue for the rest of the financial year.
Renishaw announced full year revenue will be in the range of £595m to £620m and adjusted pre-tax profit to be in the range of £117m to £135m. Statutory pre-tax profit is expected to be in the range of £123m to £141m.
This is lower than a forecast revenue range for the year of £635m to £665m and an expected adjusted pre-tax profit of between £140m and £160m given alongside half year results in January. Statutory profit before tax was expected to be in the range of £146m to £166m.
This is disappointing for Shares given Renishaw is one of our top picks for 2019. A trading statement for the nine months to 31 March 2019 will be released on 14 May 2019.
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WHEN QUALITY ISN’T ENOUGH
AJ Bell investment director Russ Mould says: 'Sometimes being a top-quality business just isn't enough. Precision engineer Renishaw's profit warning on softening Asian demand is proof of that fact.
'Renishaw does a lot of things you would want a company to do, most notably investing heavily in research and development to maintain its position at the forefront of high-end precision measurement equipment.
'The business is also diversified across several sectors, but this does not mean it is immune to fluctuations in the wider economy.'
Mould adds: 'The market reaction this morning suggests that a degree of patience remains, with the sell-off fairly measured when you consider the typical response to a growth company which reveals disappointing performance.
'Today's warning will raise fears over the prospects of the wider engineering sector given Renishaw is probably better positioned than most of its peer group, with a level of expertise which sets up barriers to any potential competitive threats.'
UBS analyst Guillermo Peigneux Lojo says: 'Post first half results, we noted that the share price had not de-rated enough given pressures in the Far East which represents circa 43% of group sales.'
