FLSmidth reports 11% rise in revenue

FLSmidth reported an 11 per cent rise in revenue and a 25 per cent increase in EBITA in the 2Q17, driven by continued momentum in in orders from service activities.

Consolidated order intake grew by five per cent in the three month period while revenue rose to DKK4585m from DKK4135m a year earlier. The growth was attributable to all divisions but Minerals, as mining capital investments remained soft despite a firmer sentiment and an improved order pipeline, the company said in a statement.

Operating profit (EBITA) amounted to DKK342m and included one-off costs of DKK-92m related to corrective actions announced last year and the demobilisation of an operation and maintenance contract. The EBITA margin was 9.5 per cent adjusted for one-off costs.
 
The quarter also saw an improvement in the Group's capital efficiency. The return on capital employed advanced to 9.8 per cent from eight per cent in 2Q of last year as a result of lower capital employed and higher EBITA.

"We are pleased to report solid progress towards our KPI targets. The Group's service activities continue to benefit from the firming global growth and improvement in confidence. With Q2 marking the fourth consecutive quarter of strong aftermarket momentum, especially in mining, the service business is stabilising at a higher level," commented Group CEO, Thomas Schulz.

Cement division
FLSmidth noted that April-June period was another quarter of good cement order activity which rose by 27 per cent to DKK1023m supported by a large order in Pakistan for a  complete cement production line. During the quarter the company also won an operation and maintenance (O&M) contract in Morocco to operate port equipment for handling phosphate, fertilisers and sulphur.  As FLSmidth’s O&M business is part of the company's cement division, all O&M orders are booked in this division, irrespective of end customer or industry.

Revenue in the cement division increased 12 per cent to DKK1030m  and increased by 18 per cent adjusted for currency, due to timing of projects. In addition to foreign exchange adjustments, the order backlog was adjusted by DKK250m in Q2 related to the demobilisation of an O&M contract in Angola.

EBITA declined to DKK-68m (2Q16: DKK15m), corresponding to an EBITA margin of -6.7 per cent. EBITA was impacted by one-off costs of DKK-76m of which DKK-30m impacted production costs.

Overall guidance for 2017
Following the results, FLSmidth confirmed its guidance for 2017. Revenue is expected to be DKK17-19bn and the EBITA margin between 7-9 per cent. The return on capital employed (ROCE) is expected to range between 8-10 per cent.  EBITA guidance includes one-off costs of DKK-150m related to corrective actions launched in 2016 (previous expectation DKK -200m) as well as other one-off costs of DKK-62m recognised in the 2Q.