Sandvik Profit Falls as Mining Clients Hold Back on Investment
Sandvik AB (SAND), the world’s biggest maker of metal-cutting tools, said second-quarter profit declined after mining clients booked fewer order than expected.
Net income declined to 1.86 billion kronor ($284 million) from 2.78 billion kronor a year earlier, the Stockholm-based company said today in a statement. Analysts on average expected profit of 1.78 billion kronor, a poll by Bloomberg showed. The order intake totaled 20.7 billion kronor, 3 percent below the consensus reported by SME Direkt. The shares declined as much as 4.6 percent in Stockholm trading.
Sandvik suffered as mining companies held back on spending. While BHP Billiton Ltd. (BHP) and other top miners have reported increased output, mineral prices haven’t yet recovered. Any signs of a recovery in equipment demand are probably at least a couple of months away, Atlas Copco’s Chief Executive Officer Ronnie Leten said yesterday in an interview. Joy Global Inc. (JOY), the world’s second-biggest mining-equipment maker, cut its full-year earnings forecast on May 30.
“Considering the world we live in I think we delivered a pretty strong report,” Sandvik’s Chief Executive Officer Olof Faxander said today on a conference call. “But we have to constantly look at the market development and at what steps we need to take.”
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 2011 that included splitting the company into five business areas instead of three and focusing on strategically important, fast-growing markets.
Sales declined 11 percent to 23 billion kronor, which was in line with analyst expectations. Order intake in the Mining business area, the company’s biggest unit, declined 30 percent with Australia being the hardest hit market. The strong krona currency cut operating profit by 300 million kronor, Sandvik said.
The shares traded 3.1 percent lower at 82 kronor as of 11:09 a.m. in Stockholm.
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