FLSmidth updates full-year guidance

FLSmidth’s order intake and revenue showed solid growth in the second quarter of this year supported by currency developments. However, the company noted that the outlook for the global mining industry has deteriorated in recent weeks, which has had an adverse impact on management's assessment of business risks and earnings in 2015.

During the second quarter, the order intake increased 13 per cent YoY to DKK5259m. The order backlog decreased 17 per cent to DKK18,105m.

Revenue rose four per cent to DKK5381m compared to DKK5167m in the corresponding quarter of last year.

Earnings before amortisation and impairment of intangible assets (EBITA) fell 14 per cent YoY to DKK395m, corresponding to an EBITA margin of 7.3 per cent (2Q14: 8.8 per cent). EBIT declined 25 per cent to DKK276m. Net profit amounted to DKK214m compared to DKK237m in 2Q14.

Cement division
Cement order intake in 2Q15 increased 90 per cent YoY to DKK1288m due to the receipt of a large Vietnamese order during the period under review. Adjusted for currency effects, the order intake increased 76 per cent. However, the company cautioned that “one quarter is not significant in a project based business.”

Revenue increased 15 per cent to DKK1014m, of which currency effects accounted for six per cent. EBITA amounted to DKK 63m which is significantly higher than last year (2Q14: DKK17m), corresponding to an EBITA margin of 6.2 per cent (2Q14: 1.9 per cent). The positive margin development is explained by a higher contribution margin.

2015 guidance updated
Based on a deteriorating outlook for the mining industry and a preemptive management assessment of associated business risks, the guidance for 2015 has been updated.

The company maintains expectations to the consolidated revenue of DKK 19-21bn but it is now believed that the revenue will be at the upper end of the guided range due to currency developments.

The expected EBITA margin is lowered to 7-8 per cent (previously 9-10 per cent) based on the changed management assessment of business risks.

Group CEO Thomas Schulz comments: "Despite a deteriorating market situation in the minerals business and oil exporting countries, we see a solid development in three out of our four divisions; especially in regards to the total service revenue which increased 24 per cent. And with the revised guidance for 2015 and the efficiency improvements already implemented, we will manage this prolonged cyclical downturn and continue to prepare for the upturn."

Cement project 'hotlist' potential
In terms of the outlook for the cement division, FLSmidth said: "Customer financing and projects dragging out is still part of the daily reality but nevertheless, there are projects on the hotlist that could materialise  this year, and while a real recovery of the cement industry remains ahead of us, it is still expected  that 2015 will see a higher order intake for Cement than last year. However, competition is tough and both prices and conditions remain under pressure."