In the 2Q20 FLSmidth's revenue amounted to DKK3.846bn (US$608.8m) compared to DKK5.472bn in the 2Q19, down 30 per cent YoY with a 22 per cent decline in mining and a 41 per cent decrease in cement. The relatively sharper decline in cement was not only due to a more severe impact of COVID-19 on the cement industry but also a result of a lower level of cement capital orders in the past four quarters, reported FLSmidth.
FLSmidth’s organic order intake declined by 29 per cent and organic revenue decreased by 26 per cent compared to the 2Q19. Order intake was DKK3.348bn compared to DKK4.954bn in the 2Q19, down 32 per cent. The order backlog decreased by two per cent to DKK15.227bn in the 2Q20, falling from DKK15.591bn at the end of the 1Q20.
FLSmidth Group CEO, Thomas Schulz, commented: "As anticipated, the second quarter results were marked by the COVID-19 pandemic. Whilst customers continue to defer non-critical investments, more mine sites and cement plants have now restarted operations, underpinning a gradual recovery later in the year."
EBITA fell 73 per cent to DKK131m (2Q19: DKK487m), primarily as a result of the lower revenue. The clear majority of the revenue decline was attributable to COVID-19, but the change was also a result of a lower backlog entering the year. The EBITA margin was 3.4 per cent (2Q19: 8.9 per cent) and the drop was driven primarily by cement. Adjusted for extraordinary costs/savings in the quarter, the EBITA margin was 6.1 per cent in the 2Q20.
Net working capital decreased to DKK2.351bn at the end of 2Q20 (end of 1Q20: DKK2.792bn), owing to a combined reduction in trade receivables and net work in progress. The net working capital ratio came down to 12.3 cent from 13.5 per cent.
Guidance 2020 remains suspended
On 23 March FLSmidth's financial guidance for 2020 was suspended due to the global uncertainty caused by the COVID-19 pandemic. The company announced on 28 April that full-year results were expected to be below the initial guidance. Preliminary key figures for the 1H20 were announced on 24 July and FLSmidth confirmed the suspension of guidance.
Across all regions, the mining industry and especially the cement industry have been negatively affected by the pandemic. Whilst the general situation around COVID-19 is improving in parts of the world, it continues to escalate in other parts. As a global supplier with customers around the world, FLSmidth is subject to these varying market conditions. Lockdowns and mobility restrictions have continued to impact FLSmidth customers and its workforce, especially the utilisation level of its global service technicians. Visibility remains low and the company's guidance remains suspended. FLSmidth previously expected a moderate recovery in the 3Q, but the impact of the pandemic seems to last longer. FLSmidth is cautiously optimistic about a gradual recovery later in the year.
