FLSmidth's revenue decreased 19 per cent to DKK4135m (US$620.7m) in 2Q16 (2Q15: DKK5093m or US$764.5m). The revenue improved sequentially from 1Q16 but was nevertheless lower than expected in 2Q16.
The gross profit in 2Q16 decreased to DKK1078m from DKK1327m in 2Q15, corresponding to a gross margin of 26.1 per cent (2Q15: 26.1 per cent). The gross margin is still holding up despite pricing pressure and under-absorption due to the lower than anticipated revenue, says FLSmidth.
Foreign exchange translation effects had a -5 per cent impact on revenue in 2Q. Organic growth was -14 per cent, related to lower activity in all divisions.
Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased to DKK340m (2Q15: DKK512m), corresponding to an EBITDA margin of 8.2 per cent (2Q15: 10.1 per cent).
Margins were negatively impacted by the revenue decline as well as negative results in the Minerals Division. The free cash flow was positive and improved on last year. Order intake related to total service activities showed organic growth. Based on the half-year results and the outlook for the remainder of 2016, the guidance for 2016 is narrowed to the lower end of the guided range.
In cement, priorities vary across geographies. In North America the company seeks to maximise production, whereas cost savings is the primary focus in South America. In most of the Middle East, sub-Saharan Africa and the southern part of India, excess capacity is driving focus on cost efficiency. The emphasis in other parts of the world, including Pakistan, Algeria, Kenya, northern India and northern Europe, is shifting towards minimising downtime and/or increasing production.
The order intake decreased 17 per cent to DKK4345m (2Q15: DKK5208m). Foreign exchange translation effects had a negative impact of seven per cent. Organic growth was -10 per cent, which is mainly explained by a decline in the cement and product divisions. The order intake in 2Q16 included a large announced order worth DKK255m for the supply of main equipment to a greenfield cement plant in Vietnam.
