Weak automotive, construction markets hurt Hexagon's Q2 results
Q2 sales, operating profit miss expectations
Weak automotive, construction markets to also affect Q3
Shares fall as much as 5.9% to nearly 8-month low
Adds sales in paragraph 4, updates shares and adds milestone in paragraph 5
By Marta Frackowiak
July 26 (Reuters) -Swedish industrial technology group Hexagon HEXAb.ST reported second-quarter results below expectations on Friday and said the slowdown in construction and automotive markets would continue to weigh on the trading environment in the third quarter.
"We have seen from macro data points and peers that markets are a bit choppy, particularly in manufacturing activity in the supply chain that's related to automotive and construction," CEO Paolo Guglielmini told Reuters in an interview.
The maker of measurement and positioning systems said its adjusted operating earnings rose 1% year-on-year to 399.5 million euros ($433.5 million) in the quarter, but missed the 414 million euros expected by analysts.
Sales declined 1% to 1.35 billion euros, also below the consensus provided on Hexagon's website.
The shares fell 5.9% to 104.40 Swedish crowns per share at one point, their lowest price since early December, and were trading 3.6% lower by 1111 GMT, the second worst performer on the Stockholm blue chip index .OMXS30.
Hexagon's Geosystems unit, a high-margin business that develops digital solutions, was particularly affected by the worsening construction environment, it said.
The Manufacturing Intelligence division, which provides sensor and software solutions, was meanwhile hit by the weakness in automotive, offsetting a positive momentum in aerospace.
Joachim Gunell, an analyst at DNB Markets, said in a note that the negatives overshadowed the positives in the quarter, while the soft outlook commentary raised questions on recovery in the second half of the year.
However, Guglielmini said Hexagon was "quite hopeful" about the second half. "We have a lot of innovation that's coming our way. Some of it has already had an impact in Q2," he said.
Inderes analyst Pauli Lohi also highlighted the weak second quarter, but said there was good potential for earnings growth once the cyclical industries recover, considering Hexagon's high margins.
"Q2 growth ended up weaker than we expected, which was also reflected in earnings, even if the relative profitability was rather strong," Lohi wrote on the research firm's website.
Hexagon's gross margin grew by 1.7 percentage points to 67.3% in the second quarter, supporting a 0.6 percentage point rise in its operating margin to 29.5%.
($1 = 0.9217 euros)
($1 = 10.8018 Swedish crowns)
Reporting by Marta Frąckowiak in Gdańsk; editing by Milla Nissi
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