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Half-year report for FLSmidth & Co. for 1 January - 30 June 2018

08.08.2018

Company Announcement No. 7-2018, 8 August 2018

Organic order intake up 13% driven by mining projects and services

2018 guidance maintained as the mining industry continues to grow and the cement industry remains stable

Q2 highlights
·         Strong order intake
·         More than 100% growth in order intake in Minerals
·         Cement market unchanged, as expected
·         Improved profitability but negative cash flow
·         Increase in ROCE
·         2018 guidance maintained

"We saw the highest order intake in the Minerals division for several years, which shows that miners are starting to put action behind their investment plans. Most activity is related to single equipment and brownfield expansion. We benefit from our business model of full life-cycle offerings which enables us to support customers in their pursuit of productivity enhancements", said Group CEO Thomas Schulz.

Currency headwinds impacted order intake and revenue negatively by 7% and 6%, respectively, in Q2 2018. The organic order intake grew 13%, driven by mining projects and services. Revenue was up 7% organically, driven by projects and services.

EBITA rose 11% in Q2 thanks to higher revenue and no reported one-off costs. Consequently, the EBITA margin increased to 8.1% from 7.5% in the same quarter of last year. Operating cash flow was negative due to a temporary increase in net working capital and a cash payment related to provisions made in 2017. 

ROCE increased to 10.4% as a result of the higher EBITA over the past 12 months and the lower capital employed. Net interest-bearing debt increased to DKK 2.1bn in the second quarter due to the payment of dividend, an increase in net working capital and a cash payment related to provisions made in 2017. The financial gearing (NIBD/EBITDA) increased to 1.2, which is still well within the long-term target (NIBD/EBITDA<2).

Guidance for 2018 unchanged
Based on the results delivered in the first half of 2018 and the developments expected for the remainder of the year, FLSmidth is guiding for FY 2018 revenue of DKK 18-20bn and an EBITA margin of 8-10%. The return on capital employed is expected to be 10-12%. Thus, the company expects higher revenue in the second half of 2018, especially in Mining, accompanied by operating leverage and higher margins.

Effective 1 July 2018, we have changed our operating model and organisational structure. The FLSmidth organisation now consists of two industries - Cement and Mining - supported by a regional setup to strengthen customer focus and life-cycle solutions combined with the establishment of the new digital organisation.

"We are extending our customer coverage and are now able to offer our entire life-cycle portfolio anywhere around the globe. In addition, digitalisation is becoming an extremely important part of our customers' capex plans, and being able to offer digital solutions means that we can enhance productivity throughout the entire product life-cycle, thereby positioning us for further growth", said Group CEO Thomas Schulz.

The Half-year Report 2018 provides restated quarterly numbers from Q1 2016 to Q2 2018 as well as restated annual numbers from 2004 to 2017.

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 Q2 2018

DKKm Q2
2018
Q2
2017
Change Q1-Q2
2018
Q1-Q2
2017
Change Year
2016
Order intake 5,056 4,580 10% 10,074 10,141 -1% 18,303
- of which service orders 2,773 2,653 5% 5,658 5,521 2% 10,029
Service order intake share 55% 58%   56% 54%   55%
Order backlog 14,454 14,115 2% 14,454 14,115 2% 13,887
Revenue 4,730 4,585 3% 8,965 8,956 0% 18,192
- of which service revenue 2,599 2,613 -1% 5,106 5,287 -3% 10,262
Service revenue share 55% 57%   57% 59%   56%
Gross profit 1,181 1,164 1% 2,255 2,298 -2% 4,581
Gross margin 25.0% 25.4%   25.2% 25.7%   25.2%
EBITDA 440 405 9% 836 841 -1% 1,588
EBITA 381 342 11% 724 714 1% 1,289
EBITA margin 8.1% 7.5%   8.1% 8.0%   7.1%
EBIT 299 237 26% 547 509 7% 881
EBIT margin 6.3% 5.2%   6.1% 5.7%   4.8%
Profit 168 75 124% 304 236 29% 522
CFFO (412) (44)   (69) 105   1,447
Free cash flow (495) (109)   (194) 5   1,253
Net working capital       2,003 2,477   2,099
Net interest-bearing debt       (2,135) (2,590)   (2,525)


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

FLSmidth delivers sustainable productivity to the global mining and cement industries. As the market-leading supplier of engineering, equipment and service solutions, FLSmidth improves performance, drives down costs, and reduces the environmental impact of operations. Present in more than 50 countries and headquartered in Copenhagen, Denmark, the Group and its 11,700 employees generated revenue of DKK 18 billion in 2017.