The rush to find energy sources outside of Russia has helped demand for products from oil and gas industry supplier Smiths Group hit record highs as its customers in other countries expanded production.
The FTSE 100 company said Friday that the value of new orders received by its subsidiary John Crane, which sells mechanical seals to oil pipelines and gas pumps, jumped nearly 11 percent in the year to July, with the order book hitting its highest value to date. today.
“[The business] is being flooded with orders right now,” CEO Paul Keel told the Financial Times. “All non-Russian energy sources are scaling up quickly. . . They are trying to replace the large lost capacity from Russia.”
Keel said the need to increase energy production was exacerbated by increased demand as countries moved out of Covid-19 lockdowns. He expected demand to remain high despite a recent rise in energy prices.
In the wake of Moscow’s invasion of Ukraine, governments have pledged to phase out imports of oil and gas from Russia, which has long been a major global supplier. But with energy consumption on the rise, countries are under pressure to quickly find alternative sources, forcing companies outside of Russia to increase production.
Smiths, an industrial conglomerate that also produces products including airport baggage scanners and satellite parts, said it had halted sales to Russia this year and was in the process of ceasing operations in the country. It said the move had cost a whopping £19 million and contributed to an overall 57 percent drop in annual pre-tax profits to £103 million.
After adjusting for exceptional charges, Smiths said profits rose 13 percent to £372 million. It announced a dividend of £142 million for the full year, equivalent to 39.6 pence per share, up 5 per cent on the previous year.
The group’s shares rose 2 percent after the announcement of the results.
Despite rising demand for its products, Keel admitted that disruptions in the global supply chain had limited the company’s ability to capitalize immediately.
While orders across the group were up more than 11 percent over the year, sales grew just 4 percent as the supply chain crisis impacted the number of products Smiths could ship.
“It’s hard to get some components and so your supply chain can’t be as efficient,” says Keel. There are “hundreds of products that we want to have tomorrow and that we have to wait a week, a quarter, a month for”.