Minerals and cement industries equipment and services provider FLSmidth (OMX: FLS) maintains full year expectations in connection with the release of its Q1 2012 interim report despite a slower than expected start. Revenue of 5.1 billion DKK was 17% higher than a year ago. Profit numbers were also up but slightly less due to somewhat weaker margins. EBITDA, EBITA and EBIT were up 10,11 and 10 per cent respectively to 469, 402 and 334 million, while reported profit for the period grew to 241 million.
Compared to strong Q4 2011, the numbers are considerably lower. The group claims this is explained by normal seasonality and it feels it is best to compare quarter on quarter. Order intake was up 29% vs. Q1 2011 to 6.4 billion and order backlog is now at 28.7 billion. The company is investing heavily in both upgrading its facilities and acquisitions. This led to some weakening in capital position, but it is still above internally defined goals.
The group is operating in a new structure for the first time. The segment performance is uneven. Bulk Materials, where bulk materials such as coal, iron ore and fertilized are transported from the mine to their final destination is not performing very well yet. There have been clear operational execution problems. The segment is a new one for the company and is yet to be brought to full potential. The company has previously been considerably more positive about the short term in the segment, just as recently as a month ago, and is now cutting the division profit outlook considerably. This makes investors worry about the quality of order backlog in the segment as well. It seems the company is not thinking to reduce the workforce in the division but needs to get the people work more effectively.
Non-Ferrous, which delivers minerals processing technologies, performed well. Some big miners might postpone large investment decisions due to uncertainty regarding Chinese demand, but the company has not seen any big impact thus far. It still expects stable order intake and higher revenue for the year. As has been known, EBITA margin is expected to decline. Customer Services division serves all the different segments in the group. The company is targeting to become a full-service provider and this segment is expected to grow revenue and order intake in 2012. It now represents around a quarter of the total group sales.
Cement division had a lower order backlog going into the quarter as the final orders before the financial crisis are coming out of the pipeline and therefore the sales were down although margins were maintained. The company is generally not too worried about the global problems since the business is very local in nature but individual markets are affected, particularly Indian market remains weak on the heels of a fiscal tightening last year. The high-profile corruption cases in other industries in India have also meant that public decision making in general has come to a halt.
The company aims to give increased attention to working capital and plans to come up with new targets of the carried stock in June. New ROCE targets will also be communicated later. The Ludowici acquisition is going according to plan thus far. Closing is expected for June. The 2012 expecttations of revenue in between 24 and 26 billion (22 in 2011) exclusive of acquisitions, EBITA margin of minimum 10% (10.9% in 2011) and EBIT margin of 9-10% (9.9% in 2011) are maintained. The stock has sold off several percentages in the first half of trading.
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