FLSmidth sees strong momentum in service activities continue in 1Q
FLSmidth achieved its highest quarterly order intake from total service activities since 2012 reporting strong moment continued into the first quarter of this year.
"The growing momentum in the global economy is filtering through to FLSmidth's service business, while demand for equipment and projects remains largely unaffected. Based on our extensive knowledge from projects, products, and services, we continue to improve our competitive edge and assist our customers in their pursuit of enhanced productivity," commented Group CEO, Thomas Schulz.
"It was important that we delivered a substantial progress based on our corrective actions program. The solid momentum underpinning our service activities has continued into 2017 in both mining and cement and it is proof of a strong performance delivered by the organisation," said Mr Schulz.
Order intake increased five per cent and revenue was up 16 per cent. Customer Services and Product Companies were supported by the strong momentum in the aftermarket, and order intake from total service activities grew 23 per cent. While order intake in Minerals increased significantly, Cement fell short of the record-high order intake in 1Q16, despite three large orders received in the quarter.
The EBITA margin increased to 8.5 per cent due to the corrective actions program combined with higher revenue and operational leverage.
Cement division
FLSmidth said it saw good cement activity in 1Q, but overall, the market for new cement capacity remains unchanged with no clear signs of sustained recovery. In terms of new inquiries, south and southeast Asia led the activity, followed by north Africa and the USA. Expectations for the mid-term remain cautiously optimistic.
Despite three large orders in Colombia, Pakistan and Egypt, the order intake in Q1 2017 decreased 17 per cent to DKK1719m against a strong comparison quarter (1Q16: DKK2082m). The first quarter of last last year included a very large EPC contract of more than EUR200m.
Revenue increased 71 per cent to DKK961m, however against a weak first quarter last year (1Q16: DKK562m).
Gross profit, before allocation of shared costs amounted to DKK103m (1Q16:: DKK 104m), and the corresponding gross margin declined to 10.7 per cent (1Q16: 18.3 per cent). The development reflects increased execution of lower margin orders in the backlog, as communicated in past interim
reports but also a somewhat unfavourable project mix in the quarter. EBITA amounted to DKK-18m (1Q16: DKK-21m), negatively impacted by pricing pressure, as mentioned above. The EBITA margin increased to -1.9 per cent (1Q16: -3.7 per cent). There were no significant one-offs in 1Q17 neither in Q1 2017 nor in the comparison quarter.
Overall guidance for 2017
The guidance for 2017 is unchanged. It is still expected that revenue will be DKK17-19bn and that the EBITA margin will be 7-9 per cent. The return on capital employed is expected to be 8-10 per cent. The EBITA guidance includes expected one-off costs of DKK -200m related to corrective actions launched in 2016.
