June 20 (Bloomberg) -- FLSmidth & Co. A/S led today’s benchmark gainers in Copenhagen amid speculation the company’s plan to improve its bulk materials business will help profits as Rio Tinto Group boosts investment in iron ore.
FLSmidth advanced as much as 2.2 percent, making it the biggest winner in the OMXC20 Index of 20 companies. The shares advanced 4 kroner, or 1.3 percent, to 319.50 kroner at 12:28 p.m. in the Danish capital.
“The turnaround process in bulk materials is running according to plan,” Patrik Setterberg, an analyst at Nordea Bank AB in Copenhagen, said in a note to clients today. He repeated a buy recommendation on FLSmidth shares.
Rio Tinto is committing $4.2 billion to expand iron ore mines as the world’s second-largest exporter of iron ore invests in its Simandou operation in Guinea as well as in mines in Australia’s Pilbara, it said today.
Changes to FLSmidth’s bulk material tendering process will increase profit margins through 2013, Nordea said in the note. The unit, which provides equipment for transporting iron ore out of mines, is currently Copenhagen-based FLSmidth’s least profitable of its four main divisions.
Nordea estimates the unit will increase its margin on earnings before interest, tax and appreciation to 4.7 percent of revenue this year and 6.8 percent in 2013. That compares with a 2011 margin of 4.5 percent.
“It will take some time before margins increase significantly,” Setterberg said. “The main reason being that it will take time for implemented changes in the tendering process -- 12 to 24 months -- to become visible in the profit-and-loss results.”
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