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FLSmidth sales down 30% in JQ

FLSmidth CEO Thomas Schulz admits uncertainties around order levels and deliveries in the company’s major mining and cement markets are making business predictions difficult, but the Danish manufacturer is “cautiously optimistic about a gradual recovery later in the year”.
FLSmidth sales down 30% in JQ FLSmidth sales down 30% in JQ FLSmidth sales down 30% in JQ FLSmidth sales down 30% in JQ FLSmidth sales down 30% in JQ

Staff reporter

Equipment, parts and service revenue was down a hefty 30%, year-on-year, in the June quarter, to DKK3,846 million (US$608 million), while orders slumped 32% yoy to DKK3,348 million (US$529 million) and EBITA fell 73% yoy to DKK131 million (US$20.7 million).

While the company said it dedicated "a lot of attention [during the quarter] to assessing and managing the pandemic's impact on our business … visibility remains low and our guidance remains suspended".

"We previously expected a moderate recovery in Q3, but the impact of the pandemic seems to last longer.

"Across all regions, the mining industry and especially the cement industry have been negatively affected by the pandemic. Whilst the general situation around COVID-19 is improving in parts of the world, it continues to escalate in other parts," FLSmidth said.

Q2 saw a 22% decline in mining revenue and 41% fall in cement sales. FLSmidth said the sharper drop in cement was due to a more severe COVID-19 impact on the industry, "but also a result of a lower level of cement capital orders in the past four quarters".

"The clear majority of the [overall] revenue decline was attributable to COVID-19, but the change was also a result of a lower backlog entering the year."

Schulz said while customers continued to defer non-critical investments, more mine sites and cement plants had restarted operations, "underpinning a gradual recovery later in the year".

But lockdowns and mobility restrictions continued to impact customers and FLSmidth's workforce, "especially the utilisation level of our global service technicians".

"This creates significant uncertainty around our service order intake and thus revenue for the remaining period of the year. Timing of our order backlog conversion is also impacted by uncertainty from these circumstances, as it is challenging to predict when customers will be able to progress projects and take delivery."

FLSmidth shares (CPH: FLS) are down more than 30% this year, giving it a market value of US$1.52 billion.