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FLSmidth releases 1Q14 Interim Report

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World Cement,

1Q14 financial highlights

Growth efficiency

Both order intake and revenue were significantly impacted by currency developments in 1Q14 compared to the beginning of FY13 when the Australian dollar and most emerging market currencies were significantly stronger against the euro. The currency impact in 1Q14 was -5% on revenue and -8% on order intake.


The order intake is currently impacted by the cyclical downturn of mining investments and a continued lack of large orders. Announced orders amounted to DKK515 million and included a DKK 205 million cement order in Oman and a DKK310 million cement order in Indonesia. Unannounced orders were stable at around DKK4.3 billion (1Q13: DKK4.4 billion). The order intake decreased 4% to DKK4.841 billion (1Q13: DKK5.027 billion), of which currency effects accounted for -8%. Total service activities accounted for 55% of the order intake in 1Q14 (1Q13: 51%), reflecting an increasing demand for productivity enhancing services and a lack of large orders.

The order backlog decreased by 1% in 1Q14 to DKK22.152 billion (end of FY13: DKK22.312 billion) and 22% compared to the same period last year (1Q13: DKK28.583 billion).


Revenue decreased by 11% y/y to DKK5.297 million in 1Q14 (1Q13: DKK5.921 billion), of which the currency effect accounted for -5% in 1Q14. Currency adjusted growth in revenue was positive in the Customer Services and Material Handling divisions, however more than offset by a significant drop in Mineral Processing.

Profit efficiency

The profit efficiency programme aims to create sustainable efficiency improvements, irrespective of the underlying market developments. The efficiency programme is expected to result in annual EBITA improvements of around DKK750 million with full-year effect in FY15. The implementation of the efficiency programme is on track.

It is estimated that the efficiency programme had a DKK100 million positive impact on EBITA in 1Q14. However, the 1Q14 result also included one-off costs related to the efficiency programme of DKK-45 million in total, of which DKK-40 million was booked as administrative costs in the Material Handling division related to site closures.

Gross profit was unchanged at DKK1.275 billion in 1Q14, compared to DKK1.277 billion in 1Q13, representing an increase in the gross margin to 24.1% (1Q13: 21.6%). The increase is primarily attributable to better performance in the Material Handling and Cembrit divisions. Additionally, the benefits of the efficiency programme are gradually starting to kick in.

Sales, distribution and administrative costs and other operating items amounted to DKK868 million in 1Q14 (1Q13: DKK989 million), which represents a cost percentage (SG&A ratio) of 16.4% of revenue (1Q13: 16.7%). As mentioned above, administrative costs included one-off costs of DKK-40 million related to the efficiency programme in connection with site closures in Material Handling.

Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) increased 41% to DKK407 million (1Q13: DKK288 million), corresponding to an EBITDA margin of 7.7% (1Q13: 4.9%). Earnings before amortisation and impairment of intangible assets (EBITA) increased 64% to DKK327 million (1Q13: DKK200 million), corresponding to an EBITA margin of 6.2% (1Q13: 3.4%). As mentioned above, the increase in margin is primarily a consequence of better performance in general in Material Handling and Cembrit as well as a positive contribution from the efficiency programme. Earnings before interest and tax (EBIT) increased 115% to DKK239 million (1Q13: DKK111 million), corresponding to an EBIT margin of 4.5% (1Q13: 1.9%).

Profit for the period increased 229% to DKK115 million (1Q13: DKK35 million). Earnings per share (diluted) amounted to DKK2.1 (1Q13: DKK0.7).

Cement market trends

Capacity utilisation in the global cement industry remains relatively subdued at around 70 – 75%, although with good local or regional opportunities. The struggling Indian economy is still hindering global growth, while the continuation of the US recovery should result in renewed opportunities in North America. In the medium to long term, continued expansion of cement consumption and a renewed need for additional capacity is expected.

The activity level in FY14 is expected to be slightly higher or similar to FY13. A recovery is not expected until FY15, depending on overall global economic growth and business sentiment.

FY14 outlook

  • In FY14, FLSmidth expects consolidated revenue of DKK21 – 24 billion (2013: DKK26.9 billion) and an EBITA margin of 7 – 9% (2013: 3.6%).
  • Cost associated with the efficiency programme is expected to amount to approximately DKK-70 million in FY14, which is included in the guidance.
  • The return on capital employed is expected to be 11 – 13% in FY14 (FY13: 6%).
  • The effective tax rate is expected to be 33 – 35% in FY14 (FY13: 35% estimated underlying).
  • Cash flow from investments is expected to be around DKK-0.4 billion (2013: DKK-0.6 billion).

Read the full version of FLSmidth’s Interim Report (1 January – 31 March 2014) here.

Adapted from press release by Rosalie Starling

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