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Interim report for FLSmidth & Co. for 1 January - 30 September 2017

09.11.2017

 
Company Announcement No. 13-2017, 9 November 2017

Improved momentum in mining equipment and the cement market is challenging
 

Positive cash flow generation and higher EBITA margin despite lower revenue

Highlights

  • Higher EBITA margin despite lower revenue
  • Improved sentiment led to higher order intake in the minerals business
  • Reduced activity in the cement business caused a decline in service orders
  • Positive free cash flow
  • Guidance for 2017 maintained

"Equipment orders are beginning to materialise thanks to the improved sentiment in the mining industry. We expect to see some recovery in large minerals projects in 2018, although we do not expect high growth rates next year. In addition, the cement industry is showing less strength than in recent quarters, and we do not expect to see a recovery in 2018, but our relentless efforts to achieve our long-term financial targets will continue," commented Group CEO Thomas Schulz.

"We have positioned ourselves to pursue growth through productivity for our customers and for FLSmidth. Our unique combination of products, projects and service expertise sets us apart in the market. This powerful combination is a driver for how FLSmidth delivers sustainable productivity enhancement as a trusted adviser and partner our customers want to do business with," said Thomas Schulz.

The order intake grew 4% organically, driven by stronger demand in Minerals. Revenue was down 10% organically, primarily due to the low order intake by the two capital divisions in the second half of 2016. Service related order intake was also lower in the quarter, but it remains at a healthy level for the year to date.

Low revenue in the quarter resulted in a slightly lower EBITA at DKK 336m, whereas the EBITA margin increased to 8.2% due to a higher gross margin and a significantly lower cost base.

The return on capital employed increased to 10.0% from 8.2% in Q3 2016, driven by higher EBITA and lower capital employed.

A reduction of net working capital and the positive free cash flow made for a reduction in net debt to DKK 2.2bn. The financial gearing (NIBD/EBITDA) decreased to 1.2, well within the long-term target.

Guidance for 2017
The guidance for 2017 is unchanged. FLSmidth expects revenue of DKK 17-19bn and an EBITA margin of 7-9%. The return on capital employed (ROCE) is expected to be 8-10%.

The EBITA margin guidance includes expected one-off costs of DKK -100m related to corrective actions as well as other one-off costs of DKK -62m (recognised in Q2).

Contacts

Investors
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 Q3 2017

(DKKm) Q3 2017 Q3 2016 Change (%) Q1-Q3 2017 Q1-Q3 2016 Change (%) Year 2016
Order intake (gross) 4,193 4,133 1% 14,334 13,759 4% 18,303
- of which service order intake 2,501 2,647 -6% 8,023 7,419 8% 10,029
Service order intake share 60% 64%   56% 54%   55%
Order backlog 13,799 15,174 -9% 13,799 15,174 -9% 13,887
Revenue 4,101 4,774 -14% 13,057 12,667 3% 18,192
- of which service revenue 2,614 2,601 0% 7,902 7,373 7% 10,262
Service revenue share 64% 54%   61% 58%   56%
Gross profit 1,065 1,164 -9% 3,363 3,280 3% 4,581
Gross margin 26.0% 24.4%   25.8% 25.9%   25.2%
EBITDA 398 421 -5% 1,239 1,073 15% 1,588
EBITA 336 344 -2% 1,050 863 22% 1,289
EBITA margin 8.2% 7.2%   8.0% 6.8%   7.1%
EBITA margin adjusted for one-off costs 8.3% 8.0%   8.8% 7.2%   8.0%
EBIT 234 243 -4% 743 573 30% 881
EBIT margin 5.7% 5.1%   5.7% 4.5%   4.8%
Profit 23 170 -86% 259 340 -24% 522
CFFO 414 744 -44% 519 839 -38% 1,447
Free cash flow 345 701 -51% 350 689 -49% 1,253
Net working capital 2,232 2,251 -1% 2,232 2,251 -1% 2,099
Net interest-bearing debt 2,155 3,150 -32% 2,155 3,150 -32% 2,525

For additional information, go to the Investor Room at www.flsmidth.com

FLSmidth is the market-leading supplier of productivity to the global mining and cement industries. Headquartered in Copenhagen, Denmark, and with offices in more than 50 countries, FLSmidth delivers engineering, equipment and service solutions to customers worldwide. Productivity, sustainability, and quality are focus areas for FLSmidth and its 12,000 employees. The company generated revenue of DKK 18 billion in 2016. Read more on www.flsmidth.com