Sweden’s Sandvik AB has reported that its order intake for third quarter 2014 amounted to 21.0 billion SEK and invoiced sales to 22.6 billion SEK. Operating profit totalled 2.5 billion SEK, or 10.9% of invoiced sales. Changed metal prices and currency rates contributed positively to third quarter earnings, stated the company.
“The global market situation remained relatively unchanged in the third quarter, albeit with variations between markets and segments. Business conditions remained favourable in North America, most notably for Sandvik Machining Solutions. Demand in Europe fluctuated as the weaker market conditions in Russia indirectly impacted other parts of the continent. Global demand from the mining industry remained stable and was on a par with levels observed earlier in the year, However, order intake for large mining systems projects declined due to timing of orders placed by customers,” stated Sandvik’s President and CEO Olof Faxander.
Business conditions in the third quarter remained largely unchanged for Sandvik Mining. Demand from mining customers for equipment, rock tools, services and spare parts was stable compared with the preceding quarter, while order intake declined for mining systems, due to normal fluctuations in the order pattern. Consequently, order intake at fixed exchange rates declined by 23% compared with the year-earlier period and by 14% compared with the preceding quarter, amounting to 5.6 billion SEK. Invoiced sales amounted to 6.8 billion SEK. Operating profit was 614 million SEK, or 9.0% of invoiced sales. During the quarter, the rock-tools production unit in Krugersdorp, South Africa was closed as part of the supply chain optimisation initiative.
Sandvik Machining Solutions
Demand for Sandvik Machining Solutions’ products improved year-on-year, while remaining largely unchanged compared with the preceding quarter. Order intake amounted to 7.7 billion SEK, up 5% compared with the year-earlier period at fixed exchange rates for comparable units. Demand remained favourable in North America while business conditions in Europe weakened somewhat. Operating profit amounted to 1,496 million SEK, or 19.5% of invoiced sales.
Sandvik Materials Technology
Business conditions for Sandvik Materials Technology were largely on par with the preceding quarter. Demand from the energy segment was stable at a high level, while demand in the general engineering industry remained subdued, particularly in Europe. Order intake amounted to 3.3 billion SEK, an increase of 2% at fixed exchange rates. Invoiced sales amounted to 3.7 billion SEK. Changed metal prices made a significant contribution to earnings of +171 million SEK. Adjusted for metal price effects, operating profit amounted to 311 million SEK, or 8.3% of invoiced sales in the seasonally weakest quarter of the year. The reported operating margin was 12.9%.
The demand situation varied across Sandvik Construction’s product groups, but generally remained challenging. Business conditions showed a slight improvement in parts of Europe, while conditions in Asia deteriorated. Nevertheless, order intake and invoiced sales increased year-on-year and amounted to 2.2 billion SEK and 2.2 billion SEK, respectively. While low production volumes contributed to a strong cash flow, they also had an adverse effect on earnings in the third quarter. Operating profit thus amounted to 1 million SEK, or 0.0% of invoiced sales. Measures to align costs with the weak demand and improve the long-term performance of the business area are being implemented.
The market situation improved slightly for most of Sandvik Venture’s products and services in the third quarter. Order intake increased year-on-year for all product areas and amounted to 2.2 billion SEK. The reported financial outcome was significantly affected by the acquisition of Varel International Energy Services Inc. in May. Invoiced sales amounted to 2.2 billion SEK. Operating profit amounted to 133 million SEK or 6.2% of invoiced sales, including costs related to the acquisition of Varel.