Atlas Copco Net Misses Estimates on Mining Industry Cuts
Stock Chart for Atlas Copco AB (ATCOA)
Atlas Copco AB (ATCOA), the world’s largest maker of air compressors, posted fourth-quarter net income that missed analysts’ estimates and gave a more subdued outlook on the first quarter than Swedish peers, citing Europe and China.
Net income rose to 3.4 billion kronor ($534.6 million) from 3.37 billion kronor a year earlier, the Stockholm-based company said in a statement today. Analysts predicted profit of 3.43 billion kronor on average, according to data compiled by Bloomberg. Atlas Copco stock dropped the most in 7 1/2 months.
The European climate will be tough while sentiment in China is uncertain and mining companies are unlikely to start placing orders soon, Chief Executive Officer Ronnie Leten said today in an interview. Competitor Sandvik AB (SAND) forecast two days ago that business in the first quarter would match the previous three months. SKF AB (SKFB) said yesterday that quarter-on-quarter demand will probably remain stable.
“We still believe demand for our products and services will decrease somewhat,” Leten said, reiterating the outlook given in the third-quarter report. “Maybe we live in another cycle. I hope they’re right.”
Euro-region economies entered a recession in the third quarter with manufacturers such as carmakers and truck producers posting lower sales. Labor disputes in South Africa in the final months of 2012 have reduced production in that country’s mines. Companies must also factor in the Chinese New Year holiday. The new year starts Feb. 10.
Atlas Copco fell 4 percent to 181.3 kronor in Stockholm, the biggest drop since June 25, giving the company a market value of 215.5 billion kronor.
Both Sandvik and SKF have announced programs in the past three months to reduce costs and adjust to demand. Sandvik, the world’s largest maker of metal-cutting tools, said on Nov. 28 that it will cut almost 1,000 jobs worldwide. SKF, the world’s largest maker of bearings, will eliminate about 2,500 jobs and move production from western Europe to faster-growing countries, it announced Jan. 14.
Atlas Copco may need to further adjust capacity to demand though it won’t be through big programs, Leten said citing the company’s agility and resilience.
Atlas Copco, which targets annual growth of about 8 percent over a business cycle, said fourth-quarter sales rose 2 percent to 22.7 billion kronor. New orders fell 4 percent to 21.1 billion kronor. A drop in mining-industry sales contracts weighed on the total compared with last year while remaining about the same as in the third quarter, it said.
No “large” orders were received in the quarter from Africa or the Middle East, Atlas Copco said. Demand “remained healthy” in North America versus a year earlier, with increasing orders for industrial compressors, industrial tools and construction equipment. Orders for mining equipment decreased in the region, it said.
European orders fell from a year earlier while rising from the previous three-month period, supported by the U.K. and German markets, the manufacturer said.
Atlas Copco said it plans to increase the dividend to 5.50 kronor a share from last year’s 5 kronor.
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