The US-headquartered company says that strong continued global demand drove orders and backlog growth across its portfolio.
Second quarter adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin was 16.6%, better than the company’s previous guidance and reflecting a year-over-year decrease of 70 basis points.
Inflation and the impact of continuing chip shortages drove the margin decline, exceeding the benefits of price realisation and productivity savings. Xylem generated net income of US$112m, or US$0.62 per share, and adjusted net income of US$120m, or US$0.66 per share, which excludes the impact of restructuring, realignment and special charges.
Xylem's water infrastructure segment - which includes its dewatering offering for quarry operators - made Q2 revenue of US$589m, a 9.0% increase organically compared with second quarter 2021. The company says this robust growth was driven by strong price realisation, industrial dewatering demand, and healthy activity in its wastewater utility business in the US and Western Europe.
“The team delivered very strong second quarter performance on all key metrics, and well ahead of our guidance for the quarter,” said Patrick Decker, Xylem president and CEO. “The result reflects our commercial momentum on continuing underlying demand, disciplined operational execution, and a moderate easing in chip supply constraints."
Decker added that, on the strength of robust backlog and orders growth, and the Xylem team’s success mitigating the effects of inflation, the company is raising its full-year guidance on revenue and earnings.
Xylem now expects full-year 2022 organic revenue growth to be in the range of 8 to 10%, and 3 to 5% on a reported basis. This represents an increase from the company’s previous full-year organic revenue guidance of 4 to 6%, and 1 to 3% on a reported basis. Full-year 2022 adjusted EBITDA margin is now expected to be in the range of 16.5 to 17.0%, raising the low end of the previous range of 16.0 to 17.0%. This results in adjusted earnings per share of US$2.50 to US$2.70, raising the low end from the previous range of US$2.40 to US$2.70.
Xylem says the increased guidance reflects strong demand, gradual easing of supply chain constraints and price realisation partially offset by inflation and foreign exchange headwinds.