FLSmidth has reviewed and approved the company’s interim report for the six months to 30 June 2014, maintaining its 2014 guidance and noting a significant improvement in margins. However, its order intake declined declined due to a lack of large orders, whereas announced orders were stable.

In 2Q14 FLSmidth's order intake fell by 17 per cent to DKK4643m and the order backlog fell by 20 per cent to DK21,713m. Revenue was down 19 per cent to DKK5577m. EBITA increased 52 per cent to DK472m, corresponding to an EBITA margin of 8.5 per cent. EBIT rose by 76 per cent to DKK381m, with an EBIT margin of 6.8 per cent.

Commenting on the results, FLSmidth stated: “Prospects for the global economy suggest that a more firm upturn is underway albeit with significant regional differences. Developing countries have by and large recovered from the financial crisis and most of the acceleration in global growth is expected to come from high-income countries.

“Short-term, the improvement in many high-income countries alone will be insufficient to generate a substantial increase in business activity. As an example, cement plant utilisation rates are increasing across Europe as growth is recovering. However, as utilisation rates are coming from relatively low levels, a short-term pick-up is insufficient to reach the typical threshold for large capital investments.”

Cement division
In the company’s cement division, second-quarter revenue and earnings declined and no larger orders were announced. As a result, the order intake decreased 34 per cent in 2Q14 to DKK878m since two large orders were booked in the 2Q13. Adjusted for currency effects, the order intake decreased 33 per cent. Revenue dropped 17 per cent to DKK1087m in 2Q14  but was down by 15 per cent when currency affects are taken into account. EBITA fell 36 per cent to DKK58m equivalent to an EBITA margin of 5.3 per cent.

Commenting on cement market developments over the second quarter, FLSmidth noted that conditions remained largely remain unchanged with the main themes prevailing: an improving US market and more muted development in developing countries. It also highlighted that while tensions in the Ukraine have temporarily “stripped potential brownfield activity in Russia off the agenda”, recent Indian elections should allow for a faster recovery in that market as the new government is expected to boost economic growth by restarting stalled investment projects and undertaking long-term policy reforms.

FLSmidth said its 2014 guidance for its cement division remains unchanged. The company expects full-year revenue to be in the range of DKK3.5-4.5bn (2013: 5.2bn) and EBITA margins will be in the range of 5-7 per cent compared to 2.4 per cent in 2013.

FLSmidth added that the activity level for cement in 2014 is expected to be slightly higher or similar to 2013, and “a real recovery is not expected to commence until 2015, depending on overall global economic growth and business sentiment.”