Sandvik AB, the world’s biggest maker of metal-cutting tools, said demand from the global mining industry is stabilizing at low levels after it posted third-quarter operating profit that missed analysts’ estimates.
Operating profit fell to 2.5 billion kronor ($394 million) from 3.3 billion kronor a year earlier, as a strong krona and weak metal prices weighed on earnings, the Stockholm-based company said in a statement today. Analysts predicted 2.86 billion kronor, the average of 14 estimates. Demand stabilized after falling in the first half of the year, Sandvik said.
“Earnings were adversely affected by the decline in invoicing and reduced production rates,” the company said in the statement. The strong krona reduced operating profit by 250 million kronor, while metal prices trimmed earnings by 90 million kronor.
Sandvik has been cutting jobs and closing factories to cope with reduced orders for its products as mining companies hold back on spending. Demand from that industry showed signs of stabilization at low levels during the quarter and actions to further reduce costs and adjust capacity to weak demand are being implemented, the company said today.
“The mining performance in terms of significant pressure from end markets was better than feared and European machining solutions orders were up 5 percent, which is encouraging,” said Alexander Virgo, an analyst at Berenberg in London.
Sandvik gained 1.4 percent to 90.20 kronor as of 12:42 p.m. in Stockholm. The stock has fallen 13 percent this year, for the fifth-worst performance among companies on the Stoxx 600 Industrial Goods and Services Index.
Joy Global Inc., the world’s second-biggest mining-equipment maker, in August projected a decline in sales due to a slowdown in demand growth for metals and coal.
Sandvik’s revenue declined 13 percent to 20.4 billion kronor in the quarter. Net income fell 22 percent to 1.63 billion kronor, compared with the average analyst estimate of 1.53 billion kronor.