FLSmidth's 1Q-3Q16 revenue down 12%

FLSmidth reported that its interim accounting period for July -September saw revenues of DKK4774m (US$699.7m) down four per cent, while revenues over the longer 1Q-3Q16 period reached DKK12.6bn (US$1.8bn), down 12 per cent on 1Q-3Q15.

Order intakes amounted to DKK4133m in the 3Q16m while EBITDA amounted to DKK421m in 3Q16 down two per cent on 3Q15.

It was announced in August 2016 that corrective actions would be implemented to compensate for declining revenue and earnings. The corrective actions include further business right-sizing, more site closures, management delayering as well as supply chain optimisation and procurement savings. At the same time it was announced that investments would be made in value engineering, new sales offices in 'white spots' and more sales people.

In total, it is anticipated that the corrective actions will result in an EBITA improvement of DKK 500m in 2017 and lead to one-off costs of DKK 350m. The EBITA improvement is expected to be largely offset by lower level of activity and lower margin orders in the backlog. As part of the corrective actions, 600 employees were given notice in September and October 2016.

FLSmidth's Group CEO Thomas Schulz was not surprised by the low market activity. "Our results for the third quarter are as expected, with strong activity in the service business as well as continued pressure on capital orders, especially in minerals. As announced in the second quarter, we have implemented corrective actions worldwide to adjust our cost base and to invest in the future," he said.
 
"The market for mining capex is at a volatile low, and we expect to see the start of a slow recovery from the end of 2017. Our strength here is our stronghold in gold and copper processing, where we see good prospects for brownfield activities and a solid mid-term outlook. The market for new cement capacity continues to be characterised by pricing pressure. That said, the pipeline of potential projects is encouraging, and current tendering activity gives reason to be cautiously optimistic about the mid-term outlook," continues Thomas Schulz.
 
It is still expected that revenue will be DKK 17-18bn and that the EBITA margin will be 7-8 per cent, however the EBITA margin is expected to end up at the lower end. The return on capital employed is expected to be 8-9 per cent.