Sandvik has reported that order intake for the first nine months of 2012 (January – September) developed positively and amounted to SEK 76,878 million (SEK 75,088 million in 2011), up 2% in total and 1% at fixed exchange rates for comparable units. Invoiced sales were SEK 74,201 million (68,980), up 8% in total and 7% at fixed exchange rates.
The company reported that operating profit for the period amounted to SEK 11,356 million (8,498), an improvement of 34%, or 10% if adjusted for the goodwill impairment charge of SEK 1,160 million that adversely impacted earnings in the preceding year.
Sandvik witnessed the global business climate improve significantly in the earlier parts of 2012, but stated that it started to weaken towards the end of the period. This trend applied to all business areas, but was most pronounced for Sandvik Mining, the company added.
Decline in European market in third quarter
Sandvik stated that its main markets became more cautious during the third quarter 2012 compared with the preceding quarter. Compared with 2011, demand increased in Africa, where the mining industry remained strong due to high gold prices. Business activity in Europe remained low, largely driven by declining demand in the German automotive and general engineering industries. Europe accounted for less than one third of Sandvik’s total order intake and invoicing for the first time in the company’s history.
“Although operating profit was impacted by currency effects, declining metal prices and extended maintenance work, it still totalled SEK 3.3 billion, or 14.2%, in the seasonally weakest quarter of the year. At the same time, working capital was reduced, thereby contributing to the strongest cash flow recorded to date for a single quarter. We remain on the right track”, stated Sandvik’s President and CEO Olof Faxander.
Global demand per customer segment displayed mixed development in this quarter, with the largest downward shift in mining, while the aerospace industry remained strong. Demand improved from a high level in Africa, but weakened in other major markets. Order intake amounted to SEK 21.8 billion, a decline of 10% compared with the preceding year at fixed exchange rates. Invoicing for the quarter increased by 2% at fixed exchange rates for comparable units, and amounted to SEK 23.4 billion. Changed exchange rates impacted both order intake and invoiced sales negatively by 3%.
“Production levels are being adjusted, in response to the market slowdown observed. Furthermore, various scenarios are being evaluated to enable us to adjust costs in accordance with new market conditions. The common objective is to proactively and efficiently manage a potentially weaker business climate, without negatively affecting our long-term growth ambitions,” added Faxander.
Posted by: Paul Whittaker, Editor ipmd.net, [email protected]mmunications.com