Europe dip for Sandvik
By Sandy Guthrie27 October 2014
A fall in demand in Europe has been reported by Sandvik in its third quarter results, but North America has looked more favourable and Africa is said to have improved.
It said that overall business conditions remained relatively unchanged compared with the second quarter. While activity levels in the aerospace industry, and the oil and gas sector remained high, the mining and construction industries were stable at a low level, it said.
In construction, Sandvik said that demand varied across its product groups, but generally remained “challenging”. Business conditions were said to have shown a slight improvement in parts of Europe, while conditions in Asia deteriorated.
Nevertheless, it reported that order intake had increased year-on-year and amounted to SEK2.18 billion (€236.02 million) compared to SEK1.89 (€204.63 million) for the same period last year, and invoiced sales were up to SEK2.23 billion (€241.54 million) from SEK2.06 billion (€223.14 million).
Sandvik said that while low production volumes contributed to strong cash flow, they also had an adverse effect on earnings in the third quarter, with operating profit amounting to just SEK1 million (€108,300), compared to SEK88 million (€9.53 million) for the same period last year – 0.0% of invoiced sales compared to 4.3% last year.
It said measures to align costs with the weak demand and improve the long-term performance of the business area were being implemented.
Business conditions fluctuated in Europe, it added, with more favourable demand for tunnelling equipment, in particular, in the northern regions. It found that smaller customers in southern Europe continued to face financing difficulties and so investment decisions were being postponed.
Business conditions were said to have improved somewhat in North America, though. Market activity for crushing equipment in China was stable at a low level, partly as a result of continued tight government cash control, said Sandvik.
The weak macroeconomic conditions in South America affected demand for the business area’s products, it said, and order intake decreased from high levels, particularly in Brazil.
Favourable demand for tunnelling and surface drilling equipment was offset by weak demand for crushing and screening equipment as customers postponed investment decisions. Demand for rock tools, consumables and services was largely unchanged, it said Sandvik.
Sandvik president and CEO Olof Faxander said, “Our continued momentum during the quarter confirmed that we are on the right track. The global supply chain optimisation programme progressed according to plan, with the closure of nine production units underway and two units closed to date.”