UK engineering firm Smiths misses profit view on weak demand, shares dip
Full year operating profit 526 mln stg vs forecast 535 mln
Acquires two North American firms for 110 mln pounds
Shares drop as much as 8%
Adds CFO quote in paragraphs 3 and 5, details in paragraph 11
By Yamini Kalia
Sept 24 (Reuters) -British engineering company Smiths Group SMIN.L missed on Tuesday annual profit expectations, hurt by subdued demand for its heating, ventilation and air conditioning products, and sending its shares as much as 8% lower.
The company also said it was buying U.S.-based Modular Metal Fabricators and Canada's Wattco for a combined 110 million pounds ($147 million) to further expand in the Americas, its biggest market by revenue.
The company sees potential for growth in the U.S. market, CFO Clare Scherrer told Reuters, adding that it would focus on expanding its footprint in the United States.
The deal ties in with Smiths' plans to target savings of 30-35 million pounds in fiscal 2027.
The plan is to primarily focus on streamlining certain processes to meet future demand as consumer spending improves, with minimal headline impact in fiscal year 2025, Scherrer said.
The over century-old company has struggled with a slow U.S. construction and semiconductor market, impacting revenues at its Flex-Tek and Smiths Interconnect divisions.
The acquired companies will be integrated into Flex-Tek, which supplies components for heating and moving liquids and gases in construction, industrial, and aerospace markets, Smiths said.
Smiths said it was "cautiously optimistic" about the year ahead following the Federal Reserve's rate cut, which is expected to boost the U.S. housing market.
The U.S. market contributes 45% of the company's annual sales.
Smiths reported headline operating profit of 526 million pounds for the year ended July 31, below analysts' consensus forecast of 535 million pounds, according to a company poll.
Smiths, whose baggage-screening kit and explosive detectors are a common sight at airports, said it expects organic revenue growth of 4%-6% for fiscal 2025, versus estimates of 5.8%.
($1 = 0.7488 pounds)
Reporting by Shanima A and Yamini Kalia in Bengaluru; Editing by Rashmi Aich, Mark Potter and Emelia Sithole-Matarise
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