Companies: RNO   

Renold, the engineering concern renowned for its industrial chains and power transmission products, has clinched a new $17m (£9.2m) contract with Mitsubishi to supply couplings and gearboxes for the New York City Metro North Transit Authority.

Earmarked for use in the propulsion systems for a new fleet of rail cars, deliveries of the couplings and gears begin in the middle of next year and will be fulfilled over a two-year period. Commenting on another significant contract win, chief executive Bob Davies said the deal ‘augments our order book, which at the end of June was already 32% ahead of 12 months ago’.

Diversity is a key investment attraction of Renold, which supplies an array of engineering products to OEMs and distributors that are used in industries ranging from energy and transportation to steel and mining. Despite rising freight, steel and energy costs, the company has a good recent track record of margin improvement, based on pricing actions and ongoing efficiency improvements, and has been beefing up its manufacturing presence in low-cost countries.

Following a recent Indian industrial chain acquisition, funded via a £5.3m placing priced at 76p, and the acquisition of a China-based chain manufacturer in June 2007, the group boasts 15 manufacturing plants around the globe and employs over 3,000 staff.

Annual results to March revealed much financial improvement, with pre-tax profits (before exceptional items) rising to £9.1m (2007: £7.3m) on turnover increased to almost £173m (2007: £159.3m). Trading on a price-to-earnings ratio of less than ten times – based on this year’s 9.2p earnings forecast – the shares are one of the more compelling plays on the unfashionable engineering sector.

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Renold	LSE	£25.05m	32.50p	-2.50p
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