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Interim Report for FLSmidth & Co. A/S for 1 January - 30 June 2016

11.08.2016

Company Announcement to the Danish Financial Supervisory Authority No. 15-2016, 11 August 2016

Main conclusions

  • Revenue improved sequentially from Q1 but was nevertheless lower than expected
  • Margins were negatively impacted by the revenue decline, as well as by negative results in the Minerals Division
  • Corrective actions are being implemented across the Group
  • The free cash flow was positive and improved on last year
  • Order intake related to total service activities showed organic growth
  • Based on the half-year results and the outlook for the remainder of 2016, the guidance for 2016 is narrowed to the lower end of the range

Group CEO Thomas Schulz says, "Mining companies and most cement producers are postponing large investments and spending. They are focussing on equipment and critical spare parts directly linked to operations, as well as on services that can help to solve immediate problems and improve productivity. Our service activities are well positioned to benefit from these market conditions, and we will continue enhancing our customer service offerings to maintain our competitive edge. In the light of a weak market outlook, we will continue with internal cost-reduction activities, such as supply chain and procurement optimisation, as well as management delayering. To further strengthen our revenue, we will invest in increasing our sales capacity."

Guidance for 2016
As a result of the lower-than-expected revenue delivered in the first half of 2016, combined with a continued soft outlook for the remainder of 2016, the guidance for 2016 is narrowed to the lower end of the range.

It is now expected that revenue will be DKK 17-18bn (previously DKK 17-20bn) and that the EBITA margin will be 7-8% (previously 7-9%). The return on capital employed is expected to be 8-9% (previously 8-10%). The effective tax rate is expected to be 29-31% (in 2015: 32%) and cash flow from investments is expected to be around DKK -0.3bn excluding acquisitions and divestments (previously DKK -0.4bn).

The guidance is based on the assumption that the order backlog will not be negatively impacted by further market-driven delays.

Contacts

Investors
Pernille Friis Andersen, tel. +45 36 18 18 87, pefa@flsmidth.com
Nicolai Mauritzen, tel. +45 36 18 18 51, nicm@flsmidth.com

Media
Sofie Karen Lindberg, tel. +45 30 93 18 77, skl@flsmidth.com


Key Figures for the second quarter of 2016

MDKK Q2 2016 Q2 2015 Change Q1-2 2016 Q1-2 2015 Change
Order intake 4,345 5,208 -17% 9,626 9,648 0%
Service share 2,432 2,551 -5% 4,772 5,109 -7%
Service share 56% 49%   50% 53%  
Order backlog 15,914 16,932 -6%      
Revenue 4,135 5,093 -19% 7,893 9,776 -19%
Service share 2,445 2,855 -14% 4,772 5,417 -12%
Service share 59% 56%        
Gross profit 1,078 1,327 -19% 2,116 2,517 -16%
Gross margin 26.1% 26.1%   26.8% 25.7%  
EBITDA 340 512 -34% 652 984 -34%
EBITA 273 440 -38% 519 840 -38%
EBITA margin 6.6% 8.6%   6.6% 8.6%  
EBIT 177 321 -45% 330 617 -47%
EBIT margin 4.3% 6.3%   4.2% 6.3%  
Profit for the period 97 214 -55% 170 486 -65%
CFFO 155 (61)   95 (106)  
Free cash flow 60 (105)   (12) 610  
Net working capital 2,610 2,900 -10%      
Net interest-bearing debt (3,844) (4,251) -10%      

For more information, please see Investor Room at www.flsmidth.com.