Metso Oyj (MEO1V), the Finnish provider of rock crushers and engineering services, declined the most in two months after Morgan Stanley said the company will probably miss its service growth target as miners rein in spending.
Metso fell as much as 3.1 percent, the most since July 25. Shares in the Helsinki-based company traded down 2.2 percent at 31.11 euros as of 1:10 p.m. in the Finnish capital, the biggest decline in the OMX Helsinki 25 Index. (HEX25)
“The recent lackluster service sales growth means we believe it will be difficult for Metso to reach expectations,” Markus Almerud, an analyst at Morgan Stanley, said in a note to clients today. He downgraded his recommendation to equal-weight from overweight, lowering the 12-month price target to 31 euros from 35 euros. “We clearly overestimated the potential mining aftermarket growth earlier in the year.”
BHP Billiton Ltd., Rio Tinto Group and Glencore Xstrata Plc are among miners cutting costs, selling assets and reducing spending as lower prices erode profit. Aftermarket services include selling spare parts for grinders, maintenance and equipment upgrades.
Metso’s aftermarket sales will grow 2 percent annually through 2015, compared with 7 percent estimated earlier and less than the company’s long-term target of over 10 percent, Almerud said. As the mining companies’ cash flow remains weak, orders are set to recover only after next year, he said.
Metso published a prospectus today regarding spinning off its pulp, paper and power unit to a separate company called Valmet. The transaction is set to take effect by year-end.
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