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Sandvik First-Quarter Net Declines on Sluggish Mining Demand

Sandvik AB, the world’s biggest maker of metal-cutting tools, posted a decline in first-quarter profit on falling demand for new equipment in mining, the company’s biggest business area.

Net income declined to 1.48 billion kronor ($226 million) from 2.5 billion kronor, the Stockholm-based company said today in a statement. Analysts expected profit of 1.82 billion kronor on average, according to a poll of 11 estimates compiled by Bloomberg. Sales declined 11 percent to 22.1 billion kronor, falling short of the 22.7 billion kronor analysts expected.

Mining companies including BHP Billiton Ltd., the world’s largest, are cutting costs as demand and prices for metals decline and stockpiles increase due to reduced demand from China. Caterpillar Inc., the world’s biggest maker of mining equipment, yesterday cut its 2013 profit forecast to about $7 a share, compared with a January projection of $7 to $9. Sandvik saw signs of improving demand for parts of the business, excluding Sandvik Mining, in the first quarter, it said.

“We continue to carefully manage production rates, workforce and investment levels,” Sandvik’s Chief Executive Officer Olof Faxander said in the statement. “The lower production levels, combined with significant adverse currency effects and nonrecurring charges, negatively impacted first-quarter earnings.”

The 151-year-old company said Nov. 28 it would reduce spending to adjust to weaker demand, including jettisoning almost 1,000 jobs globally. The company, which moved its headquarters to Stockholm from Sandviken, Sweden last year, announced a new strategy in September 2011 that included splitting into five business areas from three and focusing on strategically important, fast-growing markets.

Profit was negatively impacted by 350 million kronor in currency effects, mainly resulting from the krona’s strengthening.

Sandvik said April 11 it signed a five-year outsourcing contract with Cap Gemini SA that covers parts of the company’s finance activities, such as accounts payable and receivables. The deal would probably lead to redundancies, the Swedish manufacturer said at the time.

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