Sandvik maintains high profit level, some added uncertainty observed

One of the major bellwethers in the Nordic exchanges is the engineering giant Sandvik (OMX: SAND). In previous report Sandvik spoke of some weakness in Asia but stable development in Europe. Now this was pretty much reversed, with weakening in Europe and strength albeit with strong regional variations in Asia. The Americas region performed well. Overall received orders ticked down from very strong previous quarter but the booked level of 26.2 billion can still be considered strong. Year-on-year it is flat in comparable units. The precarious situation in Europe means there is some caution going forward. The company disclosed a 900 million copper mine materials handling and crushing system order from South America this morning.

Mining industry demand remained strong. The same can be said for Machining Solutions but there some added uncertainty could be observed closer to the end of the quarter. Materials Technology market situation is fragmented, with oil and gas sector demand staying strong and various other segments performing less than stellar. Sandvik Construction experienced a weaker market environment particularly in Europe. Improvement was observed in Japan and India but China remained weak. Better cost control with the Chinese crusher manufacturer Shanbao helped maintain earnings. Sandvik Venture also noted declining market conditions.

Quarterly invoiced sales were nearly 26 billion, up 8% in comparable units. Based on achieved cost savings, profit numbers showed strong growth. Gross margin ticked up to 36.5% and operating margin to 16.2%. Reported profit for the period of almost 2.8 billion (EPS 2.21) was almost a quarter stronger than last year. The share climbed way above 100 SEK for a short while after the Q1 2012 report in a double-digit pop but has since returned even below the level going into the said report, even adjusting for dividend. This result is likely to be initially interpreted positively but it would not be surprising to see investors refocus on the uncertainties shortly after.