uploads///Q FLS Bookings

How Will Brexit Affect Flowserve?

By

Jul. 15 2016, Updated 8:06 a.m. ET

How Brent crude oil reacted following the Brexit vote

Brent crude oil (USO) fell by nearly 5% to $48.4 per barrel on June 24, 2016. The fall happened after the results of the Brexit vote were announced. The possibility of economic slowdown in the United Kingdom and the European Union could suppress demand in the future.

Article continues below advertisement

Flowserve’s industry exposure

Flowserve’s (FLS) major end user markets include oil and gas (XOP), chemicals, power generation, water management, and general industries. The company’s major bookings come from the oil and gas and chemical industries. The oil and gas and chemical industries combined made up nearly 54% of FLS’s 1Q16 order bookings of $922 million.

Flowserve’s sales and regional presence

In 1Q16, North America, Europe, the Asia-Pacific region, the Middle East, and Latin America contributed 42%, 21%, 16%, 14%, and 7%, respectively, to Flowserve’s total revenue of $947 million.

Flowserve’s management’s expectations from end markets 

Even as oil and gas investments have fallen due to low oil prices, FLS’s management believes that mixed opportunities will exist in the general and chemical industries in 2H16. In the European region, there has been improvement in the domestic economy, with improving prospects in the renewable and nuclear energy industries. At this point in time, Brexit’s impact—if any—is difficult to quantify.

Europe is also a major marketplace for flow control equipment for players such as Cameron International (CAM), Emerson Electric Company (EMR), and Pentair (PNR). Cameron International, Emerson Electric, and Pentair derive 25.9%, 18.0%, and 18.0% of their revenues, respectively, from the European region.

Advertisement

More From Market Realist