FLSmidth reports 22% decline in cement order intake in 2020

FLSmidth’s order intake in 2020 was on par with last year, comprising 13 per cent growth in mining and a 22 per cent decline in cement. Including currency effects and acquisitions, total order intake decreased by five per cent to DKK18,524m (US$2490m).

FLSmidth Group CEO, Thomas Schulz, commented: "2020 was impacted operationally and financially by the pandemic, which has presented both challenges and opportunities for FLSmidth. Our employees have done a tremendous job handling this crisis and adapting to the changed situation. Our financial results were negatively impacted by the rapidly deteriorating business environment which affected order intake, revenue and EBITA. Still, we secured four large orders and a book-to-bill of 113 per cent for the year, representing an organic order intake on par with 2019."

In 2020 the order backlog increased by five per cent to DKK14,874m from DKK14,192m in 2019, comprising an 18 per cent YoY increase in mining and an 11 per cent contraction in cement.

Financial performance
Group organic revenue declined 16 per cent in 2020, comprising a seven per cent decrease in mining and a 30 per cent decline in cement. The sharp decline in cement was due to a more severe pandemic impact on the cement industry and a low backlog entering the year. Including currency effects, group revenue decreased by 20 per cent to DKK16,441m. 

EBITA decreased by 54 per cent to DKK771m in 2020 from DKK 1663m in 2019, as a result of the sharp decline in revenue. The EBITA margin declined to 4.7 per cent from 8.1 per cent in 2019. Adjusted for business improvement costs and cement reshaping costs in the year, the EBITA margin was 5.9 per cent in 2020. 

Thomas Schulz, commented: "In recent years, cement industry dynamics have put pressure on the returns of cement producers due to the overcapacity in regional markets. There is a clear positive outlook in the areas of digitalisation and green cement, but the fall in cement capital investment has been accelerated by the pandemic and is not expected to recover in the mid-term. Throughout the year, our focus has been on executing our group business improvement programme, including site consolidation, an improved logistical setup and lower fixed costs. The programme is now complete with an EBITA improvement run-rate of DKK150m. To address the challenging cement market, we have taken additional steps to increase outsourcing, simplify the cement business and adjust the cost structure. To further strengthen our two industries setup, we will keep a focus on leveraging synergies while ensuring a clear capital allocation to capture growth opportunities and maximise value creation within both businesses."

4Q20
In the 4Q20 order intake increased seven per cent to DKK4695m compared to DKK4389m in the 4Q19. Organic order intake increased by 15 per cent, comprising a two per cent growth in mining and a 39 per cent growth in cement. Order intake in cement included a large contract for engineering, procurement and supervision on a greenfield cement plant in Ethiopia valued at around DKK750m.

Revenue declined 30 per cent to DKK4236m in the 4Q20 from DKK6022m in the 4Q19, and declined 24 per cent organically, comprising a 15 per cent decrease in mining and a 37 per cent decline in cement. EBITA decreased by 52 per cent to DKK235m compared to the same quarter last year but increased by 33 per cent compared to the 3Q20.

Guidance 2021
FLSmidth guides for group revenue of DKK15.5bn-17bn and a group EBITA-margin of 5-6 per cent. The outlook for the cement industry remains impacted by overcapacity and slow recovery. The cement business revenue is expected to decline further in 2021.