Sweden’s Alfa Laval points to stability in Chinese market

Investors in China may feel more upbeat if they consider the evidence of growth there in the latest results from Swedish company Alfa Laval, which makes equipment for heat transfer, separation and fluid transfer in sectors such as food and water, energy, environmental protection and pharmaceuticals.

According to its latest interim report, Lars Renström, president and CEO, said: “In Asia, our activities in China reported broad-based growth since the wait-and-see mode that has characterized the last quarters’ investments seemed to have eased somewhat.”

At a more granular level, in its second quarter results, the company pointed to good order intake from China in both its industrial equipment and services business lines.

“Industrial equipment showed significant growth compared to the previous quarter, due to the seasonal effect in the heating and refrigeration applications. Both did well across the line, especially in the Nordic countries, Russia and China,” it said.

“Service delivered good growth compared to the previous quarter. Looking at the development by country, China and Japan both reported strong growth,” it added.

It concluded: “The growth in China was broad-based, covering most segments and concerned both base business and large orders. Customers, who for some quarters adopted a wait-and-see mode when it came to investments, now seem to be moving towards a more positive sentiment.”

Commenting on its interim results, the company also offered up what may be seen as a contrarian view of the recovery in the US, by stating: “All regions showed sequential growth except North America. There the order intake decreased slightly due to postponement of projects at customers in the oil and gas sector due to lack of resources.”

The products that the company makes mean it is a bellwether of investment cycles. This is in part because its customers include large scale industrial users. In part this is because the firm has been through so many cycles: shares were first listed in Stockholm in 1901, and remained listed until Tetra Pak bought the company in 1991. Shares returned to the stock exchange in 2002. Tetra Laval BV retains a 26.1% holding, according to shareholder information to 30 June.

Within the Swedish asset management community it is considered a core holding for exposure to Swedish equity. Key local brands with exposure according to the data from Alfa Laval include Alecta, Foundation Asset Management, Swedbank Robur, AMF (insurance and asset management), Handelsbanken Fonder, Folksam, and the first second and fourth AP funds.

 

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