FLSmidth reports 33% decline in 3Q cement revenues

In the 3Q20 FLSmidth’s revenue amounted to DKK3834m (US$4181m) compared to DKK4736m in the 3Q19, down 19 per cent. Organic revenue decreased by 12 per cent, comprising a one per cent increase in mining and a 33 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. 

In the 3Q20 FLSmidth’s order intake amounted to DKK3955m, compared to DKK4571m in the 3Q19, down 13 per cent. Organic order intake fell by five per cent, comprising a two per cent decline in mining and a 12 per cent decline in cement. The order backlog decreased by three per cent to DKK14,839m in the 3Q20, compared to DKK15,227m in 2Q20. 

EBITA decreased 53 per cent to DKK177m (3Q19: DKK 377m), primarily as a result of the lower revenue. The EBITA margin was 4.6 per cent (3Q19: eight per cent) and the decline was driven by cement. 

Cement business
The cement order intake in the 3Q20 continues to be impacted by the pandemic and decreased by 16 per cent YoY to DKK 1189m (3Q19: DKK1423m), but increased by six per cent compared to the previous quarter (2Q20: DKK1125m). 

The service order intake decreased by 24 per cent to DKK688m compared to the same quarter last year (3Q19: DK 904m) but increased by 11 per cent compared to the previous quarter (2Q20: DKK618m). The service order intake is still impacted by restricted site access and reduced demand for spare parts as a result of previous plant shutdowns and cement plants operating at reduced capacity. The capital order intake fell by three per cent to DKK501m (3Q19: DKK519m), positively supported by a medium-sized project. 

The cement order intake in 9M20 decreased by 39 per cent to DKK3626m (9M19: DKK5934m), due to a continuation in the subdued market conditions for new cement capacity and customers postponing investments due to the pandemic. The first nine months of 2019 included two large cement plant orders together worth around DKK900m. No large cement orders have been announced in 2020. 

FLSmidth Group CEO, Thomas Schulz, commented: "Similar to 2Q, our 3Q results were negatively impacted by the pandemic, which affected order intake, revenue and EBITA. The market activity stabilised during the quarter, and we achieved a sequential improvement in both order intake and EBITA. However, our business is still impacted by restricted access to sites and hesitation around large capital investments, particularly in cement." 

Thomas Schulz, added: "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 short- to medium term."

Guidance 2020
FLSmidth has seen a stabilisation of business activities, but with the increasing spread of COVID-19, it has not seen the gradual improvement in business sentiment that the company had assumed in its base case scenario. Consequently, FLAmsiuth has narrowed its 2020 revenue guidance to around DKK16bn (previously DKK 15.5-17bn) and the EBITA margin guidance to 4.5-5 per cent (previously 4.5-6 per cent).