October 30, 2019 / 12:43 PM / a month ago

CORRECTED-UPDATE 1-Hexagon Q3 profit edges up, software-heavy PPM unit cheers

(Corrects name in paragraph 2 to Process, Power and Marine (not Mines))

STOCKHOLM, Oct 30 (Reuters) - Industrial technology group Hexagon on Wednesday reported a slight rise in quarterly operating earnings, in line with analysts’ forecasts even as organic sales dropped for the second consecutive quarter due to slack demand in China.

As a quarter of weak demand had been largely factored in, investors turned their focus to Hexagon’s robust earnings and improving growth in units such as its software-heavy Process, Power and Marine (PPM) division, sending its shares 5.5% up.

Hexagon said third-quarter organic sales declined 3% year-on-year. That compared with a 1% drop in the second quarter, which was its first quarterly decline in 10 years.

“Hexagon recorded strong profitability and cash flow in the quarter, despite continued headwinds in China affecting sales growth,” CEO Ola Rollen said in a statement.

“This demonstrates the resilience of our business model and the effect of the restructuring actions we took in the second quarter.”

The company, which competes to an extent with companies such as Trimble, Autodesk and Dassault Systemes said in July it would cut 700 jobs after a quarter of weak demand in China, particularly within electronics.

Hexagon, which had already flagged it expected China to be weak also in the third quarter, said organic sales in the country dropped 23% in the quarter, a slim improvement from the 25% drop recorded in the second quarter.

The company’s operating earnings rose to 236 million euros ($262 million) from 232 million in the year-earlier quarter, and in line with the mean forecast in a Refintiv analyst poll.

One of the big positives in the quarter was the 8% organic sales growth recorded in its software-heavy PPM division on strong demand for design and construction software portfolios, Hexagon said.

Hexagon’s sensors and software are used for measurement and quality inspection in manufacturing processes and in engineering plant design and also in areas such as infrastructure planning, construction, mining, agriculture and energy.

Among other big markets, North American sales grew 1%, while in Western Europe they fell 4%, with Hexagon citing slower demand in the industrial segment in Germany as well as for infrastructure and construction in the United Kingdom.

$1 = 0.8998 euros Reporting by Johannes Hellstrom, editing by Helena Soderpalm and Emelia Sithole=Matarise

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