Bodycote hit by energy costs, plans India move

London, Aug 22: Shares in UK engineering firm Bodycote Plc fell 6 percent on Tuesday as worries over energy costs outweighed a 20 percent rise in first half underlying profit and plans to set up a plant in India.

The market punished the firm for not upgrading forecasts following a recent spate of bullish statements by rival engineering firms such as Morgan Crucible .

The company, whose heat-treating technology is used to strengthen parts for the aerospace, car and power industries, said profit before tax and goodwill for the six months to June 30 reached 35.1 million pounds ( million) on revenue up 22 percent to 279.3 million pounds.

Chief Executive John Hubbard said the results were as expected, driven by strong aerospace, power generation and oil and gas markets, while the firm was on track to hit full-year targets despite rising global energy costs.

''We would say results were pretty much bang on in line (with expectations),'' he told Reuters. ''Looking ahead, we remain confident that our full-year results will be in line with our expectations.'' Hubbard said the company's customers accepted that spiralling global energy costs could not be side-stepped.

''From the beginning we took a very firm stand with our customer base that that (energy) is a cost that we cannot control and therefore it's an uncontrollable cost which we have been very successful in passing on to our customers,'' he said.

Shares in the firm lost as much as 7 percent in early trading and were 5.7 percent lower at 233-1/2 pence by 0745 GMT.

''As much as anything the shares had had a decent run ahead of these results in the anticipation they might be better than expected and that we would get an upgrade,'' said Numis analyst Nick Webster.

''We haven't had that and I wouldn't put it down to being much more sinister than that.'' Arbuthnot analyst Michael Blogg added: ''There are issues about energy costs, that's as expected ... Maybe the fact they are looking to the second half to claw that (energy costs) back is concerning people. I don't think it should.'' INDIA PLANS Hubbard said Bodycote would continue to shift its operations into developing countries in Asia and Central and South America, as many of the world's engineering firms have been doing.

As well as two testing plants opening in Mexico, Hubbard added that the firm was putting the final touches on plans to make its first move into India's booming market.

''We have been doing a lot of market preparation so the time is right for us to move into India,'' said Hubbard.

''Ask me in 30 days. I need board approval to put a greenfield in India. I'm quite optimistic because the fundamentals of putting that into India are quite compelling.'' Bodycote, which has said it plans to spend up to 80 million pounds on acquisitions this year, added that it had spent 51 million pounds so far on 10 acquisitions in the first half.

The firm raised its interim dividend 6.4 percent to 2.5 pence per share.

Reuters