First publishedon www.AggBusiness.com
has posted better than expected earnings for the third quarter of 2019.
The Swedish mining, quarrying and metal cutting equipment group said that adjusted operating profit remained largely stable year-on-year and amounted to SEK4.617bn (€430mn) in Q3 this year, compared with SEK4.587bn (€427mn) in Q3 2018.
Reuters reported that the figures beat the SEK4.48bn (€417mn) mean forecast from a Refinitiv poll of analysts.
Sandvik said that demand in the long-cycle business in the mining and oil & gas industries remained strong, while customer activity in the short-cycle business softened significantly, primarily related to the automotive and general engineering segments.
Organic order intake in the Sandvik Mining & Rock Technology unit increased by 5% on Q3 as the underlying market activity remained stable at a high level. Revenues improved organically by 3% year-on-year. In total, orders for equipment remained at a high level and noted a mid-single-digit growth rate, positively impacted primarily by the underground load and haul, crushing and screening, and automation divisions.
Orders in the aftermarket business for the Mining & Rock Technology unit increased at a mid-single-digit rate, supported by positive development for both parts & service and for consumables. The newly launched product line for surface drilling noted favorable development. The aftermarket business accounted for 63% of revenues, while the equipment business accounted for 37%.
The company added that a significant organic decline of -9% in orders in Sandvik Machining Solutions had a negative impact on the Q3 figures. This more than off-set the positive development in Sandvik Mining and Rock Technology and Sandvik Materials Technology of 5% and 4%, respectively. Sandvik Materials Technology received large orders totalling SEK690mn (€64mn) for products related to the oil and gas industry, surpassing the SEK478mn (€45mn) received in the corresponding period last year. Total orders for the Sandvik Group, excluding the impact from major orders, were down by 2%.
Sandvik CEO Bjorn Rosengren commented: “We continued to pursue the process to internally separate Sandvik Materials Technology from the remainder of the Sandvik Group, generating costs of -50mn SEK reported as items affecting comparability. The board’s decision to explore the possibility of a separate listing of Sandvik Materials Technology remains unchanged.”
Rosengren added that group operating profit was impacted by an SEK1.6bn cost related to activities to support earnings in an environment of slower demand, as well as by additional long-term efficiency measures. He said that this would mean a the group would be making a total reduction in personnel of about 2,500, 25% higher than the previously announced 2,000 reduction.
Overall, order intake for the whole Sandvik Group remained largely stable year-on-year, declining -1% in Q3 2019. Sandvik says this is the result of a sharp downturn in Sandvik Machining Solutions, while both Sandvik Mining and Rock Technology and Sandvik Materials Technology reported mid-single digit growth. Orders decreased in both Europe and Asia, while an increase was reported in North America, supported by the receipt of large orders in Sandvik Materials Technology.