Oil and Gas Demand Helps Sulzer Orders

Swiss engineering group Sulzer posted a 27.5 percent rise in nine-month orders on Tuesday and was upbeat about its outlook as the group benefits from demand in the oil and gas sector and growth in Asia.

Order intake at the group, which makes pumps for the oil and gas industry aswell as surface coatings for jet engines, rose to 3.18 billion Swiss francs ($2.70 billion), in line with the 3.16 billion francs forecast on average in a Reuters survey of six analysts.

The group, which competes with Dallas-based pump maker Flowserve

, said it expected 2007 order intake growth rates to remain at a double-digit
level, despite a high comparative year-ago figure.

But 2007 sales were expected to trail orders after Sulzer secured a number of larger orders that need longer to process, the firm said.

The group said it would continue to face problems finding qualified project-management and engineering staff and said "supply chain related challenges" were likely to remain as some of its suppliers were facing capacity problems.

Sulzer has benefited from increased investment in ageing oil fields as well as investment in the power generation industry.

"The figures are slightly above expectations, but the expectations and also the comparative figures were very high. The oil and gas and power generation end markets are the main drivers," said Sal Oppenheim analyst Beat Fueglistaller.

"The pumps division surprised the most and compensates for a more disappointing performance at the turbo unit. Investors are used to being positively surprised by Sulzer so the share reaction is likely to be neutral," he said.

Sulzer shares have gained around 20 percent so far this year and closed at 1,666 francs on Monday. Sulzer trades at nearly 18 times expected 2008 earnings, according to Reuters Estimates, a premium to the Dow Jones Industrial Goods and Services Index which is trading at around 15 times.