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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Sandvik AB    SAND   SE0000667891

SANDVIK AB

(SAND)
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Real-time Estimate Quote. Real-time Estimate Cboe Europe - 01/19 08:22:54 am
214.9 SEK   -0.92%
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FLSmidth sheds 1,100 jobs as miners cut capital spending

08/23/2013 | 09:00am EST

COPENHAGEN (Reuters) - Danish engineering group FLSmidth (>> FLSmidth & Co. A/S) said it will shed 1,100 jobs and lowered its financial forecasts as miners spend less on equipment.

COPENHAGEN (Reuters) - Danish engineering group FLSmidth (>> FLSmidth & Co. A/S) said it will shed 1,100 jobs and lowered its financial forecasts as miners spend less on equipment.

FLSmidth reported a surprise 40 percent drop in second-quarter operating profit on Friday, as it booked 323 million Danish crowns (£37.15 million) in one-off costs at its division that sells gear for cutting, crushing and transporting metal ores.

The company, which operates mainly outside Denmark in locations including Africa, the United States and Australia, warned it will take 1.35 billion crowns of writedowns and one-off costs by the end of the year.

Miners led by BHP Billiton (>> BHP Billiton Limited) and Rio Tinto (>> Rio Tinto plc) are slashing billions of dollars of capital expenditure in response to lower metals prices and shareholder pressure to boost returns, after a decade of expansion.

This hurts engineers that build and sell the gigantic ore-handling equipment, like FLSmidth and its Nordic peers, Metso (>> Metso Oyj), Sandvik (>> Sandvik AB) and Atlas Copco (>> Atlas Copco AB).

"We expect mining capex will hit bottom in 2014," said FLSmidth Chief Executive Thomas Schulz, who took the reins on April 1, told a conference call with analysts.

FLSmidth said it will cut about 7 percent of its staff which, along with other efficiency measures, will result in 350 million crowns of costs to be booked by the end of the year. It will take another 150 million of efficiency costs after 2013.

The company said it will cut its 200 locations by about 10 percent.

The firm hopes the job cuts and other measures will boost earnings before interest, tax and amortisation (EBITA) by 750 million crowns annually from 2015. EBITA was 287 million crowns in financial second quarter, hit by 323 million crowns of one-off costs.

FLSmidth shares jumped nearly 7 percent on Friday, in the busiest trading since mid-May and the second-biggest volume in more than a year.

Before the job cuts announcement, the shares were down 11 percent in the year to date, making them the worst performers in the Danish OMXC20 index <.OMXC20>.

SPRING CLEAN

FLSmidth expects to write down inventories for 200 million crowns in the third quarter and book an impairment of about 800 million crowns on Australian minerals processing group Ludowici, which it acquired in 2012 for 388 million Australian dollars (2.46 billion crowns).

"Looking at the risks associated with these old projects, I took the decision to clean that out," Schulz said.

Analysts say it makes sense for new chief executives to book any charges or restructuring costs at the beginning of their mandate.

"It looks like a real spring cleaning to me," Sydbank analyst Jacob Pedersen said.

The company cut its full-year revenue outlook to 26-28 billion crowns from 27-30 billion crowns and halved its EBITA margin guidance to 4-5 percent.

"From the picture they paint of the state of the markets, particularly mining, it sounds like they have some difficult years coming," Sydbank's Pedersen said.

Earnings before interest and tax (EBIT) fell to 195 million Danish crowns in May-July against a forecast rise to 384 million crowns in a Reuters poll [ID:nL6N0GH1LH].

"We are positively surprised by the cost initiatives announced by the new CEO," Jyske Bank analyst Janne Kjaer said in a note to clients. "This should help bring margins back towards the 10-11 percent range."

Morgan Stanley said in a research note that capex spending for five major miners including BHP, Rio Tinto, Anglo American (>> Anglo American plc), Glencore (>> Glencore Xstrata PLC) and Vale (>> Vale SA) is set to fall 28 percent between the end of 2012 and 2014.

FLSmidth - which is also the world's leading builder of cement factories - scrapped plans to sell its building materials unit Cembrit as it was not possible to "reach a satisfactory sales price".

(Reporting by Teis Jensen; Editing by Geert De Clercq and Erica Billingham)

By Teis Jensen


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ANGLO AMERICAN PLC -0.29% 2666 Delayed Quote.10.33%
BHP GROUP -2.93% 45.45 End-of-day quote.7.12%
DOW JONES AFRICA TITANS 50 INDEX 0.61% 538.79 Delayed Quote.0.36%
FLSMIDTH & CO 2.25% 236 Delayed Quote.-0.82%
GLENCORE PLC 0.97% 279.9 Delayed Quote.18.82%
METSO OUTOTEC OYJ -0.97% 8.7 Delayed Quote.7.46%
MORGAN STANLEY -1.61% 75.24 Delayed Quote.9.79%
NELES OYJ 0.28% 10.76 Delayed Quote.-1.15%
RIO TINTO PLC -0.49% 5945 Delayed Quote.9.21%
RISE, INC. -4.17% 23 End-of-day quote.-4.17%
S&P AFRICA 40 INDEX 0.94% 175.44 Delayed Quote.-0.21%
SANDVIK AB -0.83% 215.1 Delayed Quote.7.75%
VALE S.A. 0.00%End-of-day quote.0.00%
VALE S.A. 0.81% 94.31 End-of-day quote.7.84%
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Financials
Sales 2020 86 694 M 10 393 M 10 393 M
Net income 2020 8 858 M 1 062 M 1 062 M
Net cash 2020 3 855 M 462 M 462 M
P/E ratio 2020 32,1x
Yield 2020 1,82%
Capitalization 272 B 32 438 M 32 616 M
EV / Sales 2020 3,09x
EV / Sales 2021 2,86x
Nbr of Employees 34 969
Free-Float 97,6%
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 216,82 SEK
Last Close Price 216,90 SEK
Spread / Highest target 26,8%
Spread / Average Target -0,04%
Spread / Lowest Target -33,1%
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Managers and Directors
NameTitle
Stefan Widing President, Chief Executive Officer & Director
Johan Molin Chairman
Tomas Eliasson Chief Financial Officer & Executive Vice President
Percy Nils Barnevik Honorary Chairman
Tomas Ivar Kärnström Director
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