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