Atlas Copco calms demand jitters

STOCKHOLM, July 16 (Reuters): Swedish industrial group Atlas Copco on Monday forecast only a slight drop in demand in the third quarter after a rise in second-quarter orders allayed some investor fears of a sharp slowdown.

Investors and analysts have grown jittery about the near-term industrial outlook as warnings from a string of automotive suppliers, industrial technology company Hexagon and chemicals producer BASF have hit confidence.

Hexagon this month said it had experienced a much weaker than expected June in China, hurt by weakness in electronics.

Atlas Copco has heavy exposure to the chipmaking sector through its vacuum pumps business.

Monday's results lifted the company's shares by 1.6 per cent in morning trade as investors took heart from organic order growth of two per cent in the second quarter, outpacing the one per cent posted for the previous quarter.

"We continue to grow and deliver high profitability despite the uncertainties in the global economy," Atlas Copco Chief Executive Officer (CEO) Mats Rahmstrom said in a statement.

JPMorgan described the share price gain as "a fair reflection" on a second quarter that it feels was mostly in line with first-quarter trends."

"Demand has certainly not fallen off a cliff," it said in a research note.

Shares in Atlas Copco, which competes with the like of Gardner Denver and Pfeiffer Vacuum, have climbed by 35 per cent this year but stalled somewhat on downbeat sector sentiment this month.

The maker of compressors, vacuum pumps and industrial tools reported second-quarter operating profit of 5.38 billion Swedish crowns (US $575 million), down from 5.43 billion crowns a year ago and lagging the 5.69 billion crowns forecast in a poll of analysts.

Adjusted for items affecting comparability, Atlas said operating profit was 5.62 billion crowns.

Organic orders at the company's biggest business, Compressor Technique, grew three per cent in the quarter. Orders fell seven per cent at its Vacuum Technique operation but that was a much smaller drop than in previous quarters.