Sandvik Misses Estimates as Orders Decline Across BusinessJanina Pfalzer
Sandvik AB, the world’s biggest maker of metal-cutting tools, posted an unexpected fall in fourth-quarter net income as sales and orders declined and the company absorbed costs for efficiency programs.
Order intake amounted to 21.1 billion kronor ($3.3 billion), a decline of 12 percent from a year earlier, as the global industrial business climate remained weak during the quarter, the company said today in a statement. Orders slipped for all business areas at fixed exchange rates for comparable units. Sales fell 3 percent to 24.3 billion kronor.
“This marked the second consecutive quarter with a negative book-to-bill ratio,” Sandvik Chief Executive Officer Olof Faxander, who joined the company in February 2011, said in the statement. “The implementation of the structural improvements announced during the quarter is under way.”
The 151-year-old company said on Nov. 28 it would reduce spending to adjust to weaker demand, including jettisoning almost 1,000 jobs globally. The programs are progressing according to plan and the company currently sees no need for any “big”, additional measures, Chief Financial Officer Emil Nilsson said today in a phone interview.
“We’ve seen about the same activity level so far in the first quarter as in the fourth quarter,” Nilsson said.
Sandvik shares declined 1.2 percent to 104.80 kronor in Stockholm as of 10:29 a.m. A modest negative share reaction was expected after three good quarters as the market “expected a relatively in-line result,” Alexander Whight, an analyst at JPMorgan Chase & Co., said in a note to investors today.
Net income fell to 728 million kronor in the three months ended Dec. 31 from 731 million kronor a year earlier, when Sandvik took about 1.6 billion kronor in one-time charges, the company said. Analysts on average expected profit of 1.35 billion kronor, according to a Bloomberg survey of 14 estimates.
Cost savings from the program announced in November will amount to more than 1 billion kronor by the end of this year and the company booked a cost of about 920 million kronor in the fourth quarter for the program, it said.
Sandvik, which moved its headquarters to Stockholm from Sandviken, Sweden, last year, announced a new strategy in September 2011 that included splitting the company into five business areas instead from three and focusing on strategically important, fast-growing markets.
Latrobe, Pennsylvania-based Kennametal Inc., which competes with Sandvik’s Machining Solutions business, said on Jan. 24 it expects sales to decline this fiscal year.