The rush to find energy sources outside Russia has helped drive demand for products of oil and gas industry supplier Smiths Group to record highs, as its customers in other countries expanded production.
The FTSE 100 company said on Friday that the value of new orders received by its subsidiary John Crane, which sells mechanical seals to oil pipelines and gas pumps, rose almost 11 per cent in the year to July, with its order book reaching the highest value to date.
“[The business] is being flooded with orders right now,” chief executive Paul Keel told the Financial Times. “All non-Russian sources of energy are scaling up rapidly . . . They are trying to replace the large lost capacity from Russia.”
Keel said the need to increase energy production had been compounded by higher demand as countries exited Covid-19 lockdowns. He expected demand to remain elevated despite a recent surge in energy prices.
In the wake of Moscow’s invasion of Ukraine, governments have committed to phasing out imports of oil and gas from Russia, which has long been a key global supplier. But as energy consumption has risen, countries have been under pressure to rapidly find alternative sources, pushing businesses outside Russia to increase production.
Smiths, an industrial conglomerate that also manufactures products including airport baggage scanners and satellite parts, said it had stopped sales to Russia this year and was in the process of ending its business in the country. It said the move had cost as much as £19mn and contributed to an overall 57 per cent decline in annual profits before tax to £103mn.
Adjusting for exceptional costs, Smiths said profits rose 13 per cent to £372mn. It announced a full-year dividend of £142mn, equivalent to 39.6p per share, a 5 per cent increase over the previous year.
Shares in the group rose 2 per cent following the release of its results.
Despite the rising demand for its products, Keel conceded that disruptions in the global supply chain had limited the company’s ability to immediately capitalise.
Although orders across the group had risen more than 11 per cent during the year, revenues grew just 4 per cent as the supply chain crisis affected the number of products Smiths was able to ship.
“It’s hard to get some components and so it can cause your supply chain to be not as efficient,” Keel said. There are “hundreds of products that we would like to get tomorrow that we have to wait a week, a quarter, a month to get”.