Skip to main content

FLSmidth shares Q3 interim results

Published by , Deputy Editor
World Cement,

Highlights in Q3 2020

  • Organic order intake declined by 5% y/y
  • Organic revenue decreased by 12% y/y
  • EBITA margin declined to 4.6%
  • Strong cash flow
  • Sequential improvement in both order intake and EBITA
  • Group business improvement programme complete

In Q3 2020, order intake amounted to DKK 3955 m compared to DKK 4571 m in Q3 2019 (-13%). Organic order intake declined by 5%, comprising a 2% decline in mining and a 12% decline in cement.

The order backlog decreased by 3% to DKK 14839 m in Q3 2020 (end of Q2 2020: DKK 15 227 m).

FLSmidth Group CEO, Thomas Schulz, commented: “Similar to Q2, our Q3 results were negatively impacted by the pandemic, which affected order intake, revenue and EBITA. The market activity stabilised during the quarter, and we achieved a sequential improvement in both order intake and EBITA. However, our business is still impacted by restricted access to sites and hesitation around large capital investments, particularly in cement. With COVID-19 infection rates currently increasing across most of the world, unexpected shutdowns could change the outlook, but we continue to take advantage of our vast pool of local resources and our strong capabilities within remote support to help customers sustain production.”

Financial performance

Revenue amounted to DKK 3834 m compared to DKK 4736 m in Q3 2019 (-19%). Organic revenue decreased by 12%, comprising a 1% increase in mining and a 33% decline in cement. The sharp decline in cement was due to a more severe pandemic impact on the cement industry and a low backlog.

EBITA decreased 53% to DKK 177 m (Q3 2019: DKK 377m), primarily as a result of the lower revenue. The EBITA margin was 4.6% (Q3 2019: 8.0%), and the decline was driven by cement. Adjusted for extraordinary costs and savings in the quarter, the EBITA margin was 6.3% in Q3 2020.

Net working capital decreased to DKK 1981 m at the end of Q3 2020 (end of Q2 2020: DKK 2351 m), owing to a lower activity level and continued strong cash collection from accounts receivables. The net working capital ratio came down to 10.9% from 12.3% at the end of Q2 2020.

Despite challenging market conditions, CFFO increased to DKK 594 m in Q3 2020 compared to DKK 244 m in Q3 2019, mainly due to significant cash inflow from working capital. The adjusted free cash flow increased to DKK 489m in Q3 2020, compared to DKK 139 m in Q3 2019.

Due to the strong free cash flow, net interest-bearing debt decreased to DKK 1936 m, from DKK 2298 m at the end of Q2 2020. FLSmidth improved its strong financial position with a net debt to EBITDA of 1.4x and undrawn committed credit facilities of DKK 4.7 bn by the end of September.

Average capital employed increased to DKK 15.3 bn in Q3 2020 compared to DKK 15.0 bn in Q3 2019, related primarily to intangible assets. ROCE decreased to 6.7% in Q3 2020 compared to 11.2% in Q3 2019, due to the higher capital employed and a lower 12-months trailing EBITA.

Thomas Schulz, commented: “In recent years, cement industry dynamics have put pressure on the returns of cement producers due to the overcapacity in regional markets. There is a clear positive outlook in the areas of digitalisation and green cement, but the fall in cement capital investment has been accelerated by the pandemic and is not expected to recover in the short- to medium term. Throughout the year, our strong focus has been on executing our Group business improvement programme, including site consolidation, an improved logistical setup, and headcount reductions. The programme is now complete with an EBITA improvement run-rate of DKK 150 m. To address the challenging cement market, we have taken additional steps to increase outsourcing, simplify the cement business and adjust the cost structure. To further strengthen our two industries setup, we will keep a focus on leveraging synergies while ensuring a clear capital allocation to capture growth opportunities and maximise value creation within both businesses.”

Guidance 2020

The company’s full year guidance was reinstated on 28 August, based on the following assumptions:

  • No further escalation of COVID-19
  • No further extensive lockdowns or travel restrictions occurring before year-end
  • A gradual improvement in business sentiment for the remainder of 2020
  • Business improvement implementation costs of around DKK 210 m (now expected to be DKK 222 m) are included in the guidance

FLSmidth has seen a stabilisation of business activities, but with the increasing spread of COVID-19, the company has not seen the gradual improvement in business sentiment that it had assumed in its base case scenario. Consequently, the company narrows its 2020 revenue guidance to around DKK 16 bn (previously DKK 15.5 –17.0bn) and the EBITA margin guidance to 4.5-5.0% (previously 4.5 ¬– 6.0%).

The guidance remains subject to higher uncertainty than usual as lockdowns and mobility restrictions continue to impact suppliers, customers and FLSmidth’s own workforce.

Read the article online at:

You might also like


Embed article link: (copy the HTML code below):


This article has been tagged under the following:

European cement news Construction news FLSmidth news