Sandvik calls Q4 2011 stable, order intake disappoints

Sandvik AB (OMX: SAND) reported fourth quarter and full-year 2011 on Wednesday morning one day after the company celebrated its 150th birthday. The mood will be festive for the entire year with various happenings being planned. The company spoke of a stable market demand and reported all time high sales. Markets had been hoping for an even more impressive numbers and the stock was down a notch to close just below 100 SEK.

Order intake was down heavily versus Q4 2010 and is mainly explained by a few large orders received within mining area projects in that quarter and in small part by less orders received by Materials Technology. While Sandvik did not think that is a sign of a change in trend, markets were a little bit more concerned. One-off items of 1.6 billion SEK from restructuring cloud quarter on quarter comparisons; adjusted result of 3.24 billion is quite strong. One-off items were also high in Q3. Going forward there are far less such items in sight.

Carbide cutting tools manufacturer Seco Tools is becoming a wholly owned subsidiary as nearly all of the minority shareholders have now accepted Sandvik’s offer. Seco has applied for de-listing. Sandvik plans to maintain Seco brand but cooperate more closely in machining solutions. Recently acquired Chinese crushing and screening equipment manufacturer Shanbao has now been consolidated. The company feels it has been a bit weak in Asia and is now making a push to be a stronger player there.

Tooling and mining businesses are doing very well where as construction business segment is lagging behind. Materials Technology has both bright spots and challenges. In general Sandvik has seen much better development in North America and weaker performance from Europe and Asia. Europe now represents a little over a third of Sandvik’s sales at the moment.

New group level targets are 8% growth rate, 25% ROCE, 50% of EPS distributed as dividend and net debt/equity below 0.8. Dividend proposal for 2011 fiscal year is an increase of 8.3% to 3.25 SEK a share. Sandvik is a large company with over 50 000 employees and is among the most traded shares in the Stockholm stock exchange.