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Good news and bad news for Invensys

21 January 2009

Process systems giant Invensys has had a week of mixed fortunes. On the one hand the company sealed a £170m safety contact in the Chinese nuclear industry but, on the other, its shares tumbled nearly 8% following the downward guidance the company gave regarding its second half profits.

Good news and bad news for Invensys
Good news and bad news for Invensys

The company only regained FTSE 100 status last autumn following an absence of six years but weakening demand at its controls business – which supplies white goods manufacturers prompted its pessimism on second-half performance, which will be ‘broadly in line with that achieved in the first half’, according to the financial press. Invensys’ controls business, which contributes about a third of group turnover, has also been hit as manufacturers and builders cut inventory levels. Profits were expected to advance but now estimates of full term profits have been cut by 6-7%.

And all this despite the technology and engineering systems company, which confirmed the $250m control rooms order for four reactors at two Chinese nuclear power stations. Overall, the order book has held up well in the third quarter both in Invensys’ rail group and process systems divisions.

The Invensys Process Systems (IPS) contract covers the automation of four reactors in both Fuqing and Fangjiashan nuclear power plants and aid in China's plan to increase nuclear power capacity.
IPS will implement four large-scale, fully digitised nuclear control rooms, equipped with the latest simulation technologies, critical control and safety systems for two nuclear power plant sites in China.

In a drive to reduce carbon dioxide emissions and its reliance on coal-generated power, China has raised the target for nuclear capacity in its power mix to 5% by 2020. The Fuqing and Fangjiashan nuclear power projects, which are a part of this push to increase capacity, are located in Fuijan and Zhejiang provinces, respectively.

IPS will provide an integrated technology platform for both safety and control systems, using its Triconex and Foxboro I/A Series equipment. The envisaged system also includes an advanced reactor protection system utilising functional software and hardware diversity. With these IPS innovations, the new nuclear plants will boast the most advanced, fully digitised nuclear control and safety environment available.

Presumeably IPS’s hard work in China won’t hit the profit line or come to the rescue of the share price until a future reporting quarter.

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