FLSmidth annual report released

Danish minerals and cement industries equipment and services provider FLSmidth (OMX: FLS) could boast with a record high quarterly EBIT result (870 million DKK on 11.9% margin) in its Q4 2011 interim report. Revenue was up 32% to almost 7.3 billion. Quarterly order intake was under 5.9 billion, which was somewhat disappointing since despite this being a 32% increase vs. 2010, it was down 18% sequentially.

Overall 2011 for Minerals segment where FLSmidth supplies process plants and machinery among other things made a new record in revenue, earnings and new orders. Annual order intake was 15.9 billion (+45%), revenue 12.4 billion and EBIT 1.3 billion. The Board of Directors proposes a dividend of 9 DKK a share for 2011. At one point the stock was up over 4% but was pulled down along with the wider market to finish just above 455 DKK, down by half a percent.

One long-term trend is that companies need to try to find minerals in more and more remote regions results in increased capital expenditure required as conditions are often more challenging. FLSmidth said that some projects were never realized as governments are becoming more nationalistic when it comes to their resources, making it harder for foreign companies to obtain permits.

Cement segment had to struggle in much more arduous business conditions and the company felt that the result is sold. Annual order intake was down 18% to 8.2 billion with revenue at 8.4 billion, EBITDA of 985 million and EBIT of 837 million. The segment did not receive any operation or maintenance contracts during the year. Poor performance in North Africa as the region was in turmoil for much of the year and in India due to overcapacity and high interest rates couple with low government spending had a big impact on the lessened activity.

FLSmidth expects the market to grow slightly in 2011. The US cement market should stay level with 2011 since when the economy recovers, closed-down plants will come online before any new investments decisions will be taken. Overall global demand for new cement kiln capacity (excluding China) is expected at 50-60 million tonnes (for 2011 the number turned out to be 46 million).

Going forward FLSmidth will be structured in four divisions with Customer Services, Cement and Minerals divided into Bulk Materials and Non-Ferrous. Financial targets are above average annual growth, 10-13 EBITA ratio, equity ration above 30%, gearing <2 and payout-ratio of 30-50%. For 2012 the company expects revenue of 24-26 billion and EBIT ratio of 9-10%.