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FLSmidth reports on first nine months

World Cement,

FLSmidth & Co. A/S has published its results for the first nine months of this year. Figures show that the global economic downturn has had a significant impact on the Group’s earnings, but some signs of improvement are beginning to be felt.

Year-to-date earnings
Revenue for the first nine months of the year reached DKK16 599 million, just 6% down on last year’s DKK17 711 million. Gross profit for the period amounted to DKK3686 million (down from DKK3816 million y/y). EBITDA reached DKK1808 million, while EBIT came in at DKK1497 million and EBT amounted to DKK1483 million. All were down y/y, although there was variation in performance between the business sections.

In July, FLSmidth acquired EEL India, India’s leading producer of cement handling and packing equipment. The annual revenue of this company amounts to approximately DKK200 million.

New orders
In the cement sector, the third quarter saw significantly more activity than the previous two quarters. Major contracts were signed with customers in Uruguay and Indonesia; a four-year O&M contract has been signed with a Libyan company, and there are potential new projects in South America, North Africa, India and Indonesia. Order intake reached DKK4915 million in the nine months to 30 September.

The Minerals division is also doing well, and the Group has positive expectations for the fourth quarter as mining companies consider their investment plans for 2010.

In the nine months to 30 September 2009, the total order intake across the FLSmidth Group amounted to DKK9231 million, a decline of 64% from last year’s extreme high of DKK25 782 million. Q3 saw the order intake up to DKK3620 million, a 45% increase compared to Q2.

Backlog continues
At the end of the period in question, the total order backlog amounted to DKK23 307 million, 23% down across the board since the beginning of this year, 26% down for the cement sector. A DKK550 million contract cancelled after the end of the period in question has not been counted in the reported order backlog as at the end of Q3 2009.

Projections for 2009 and beyond
Having previously projected new contracted cement kiln capacity worldwide (excluding China) to reach 25 – 50 million tpa, FLSmidth has upgraded their expectations to 40 – 50 million tpa. This is down from the 123 million tpa of new cement kiln capacity contracted in 2008.

The Group expects consolidated revenue in 2009 of DKK22 – 23 billion (up from the previously projected DKK20 – 23 billion) and EBIT ratio of 8.5 – 9%. The cement sector, specifically, is expected to show a slight decline in revenue compared to 2008 and satisfactory earnings.

In the long term, the outlook is positive. Increasing urbanisation and industrialisation means that there will always be a demand for cement and minerals. The Group expects that, in the future, its Minerals and Customer Services business divisions will bring in greater revenue than its Cement sector, which will reduce the impact of cyclical fluctuations in the cement industry on the Group’s total earnings.

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