Another day, another set of disappointing company results. This time, the stock in question is engineering business Spirax-Sarco.

The FTSE 100 constituent reported a 17pc slump in pre-tax profits in its latest financial year as tough operating conditions weighed on its performance.

The company’s sales declined by 1pc on an organic basis but were bolstered by the contribution of acquisitions. This meant revenue was up 4pc year on year. But with lower sales in higher margin segments, the business recorded a 2.9 percentage point fall in its operating profit margin so that it stood at 20.7pc.

Given that its operating profit margin had previously declined by 1.7 percentage points in the prior year, from 25.3pc in 2021, its profitability has clearly come under sustained pressure over an extended period.

While this is hugely disappointing, it is also very understandable. The company faces a highly challenging trading environment across most of its geographical segments.

Indeed, global industrial production growth amounted to a measly 0.3pc during 2023. This was far below upbeat forecasts made at the start of the year, with continued high interest rates having a negative impact on growth rates across major economies.

Although this trend is likely to persist in the short run, history shows that global economic growth is almost certain to return to its long-term average. Interest rate cuts are widely expected to be enacted over the coming years in response to the end of rampant inflation.

This should create stronger operating conditions for cyclical stocks and lead to a marked improvement in their financial performance.

Indeed, Spirax-Sarco expects to return to positive organic sales growth in the current year. It also anticipates that its operating profit margin will expand following two years of decline. It will aim to achieve these goals via a revamped management team, since a new chief executive and chief finance officer were recently appointed, while a new chairman is expected to be in place by the end of the year.

While wholesale management change represents a risk for investors, the company’s solid financial position, as demonstrated by a net gearing ratio of 66pc and net interest cover of seven, and sound competitive position, as evidenced by a return on equity of 16pc despite the aforementioned slump in profits, highlight its high-quality status.

When combined with an anticipated increase in the rate of industrial production growth during the current year, its future prospects are highly appealing.