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FLSmidth see earnings down on margin pressure

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World Cement,

FLSmidth’s cement business earning’s fell 72% year on year in 2016m despite the Danish company reporting a 10% increase in revenue.

The company reported earnings of DKK28 million in 2016, down from DKK99 million the year before, a result of “lower margin orders in the backlog” – itself a result of price pressure over the past couple of years.

Revenue was up strongly at DKK4.3 billion in 2016 from DKK3.9 billion in 2015, while order intake was up 63% at DKK4.6 billion on the back of large orders from Algeria early in the year and Bolivia in 4Q16.

In February 2015, Algerian cement producer, SARL Amouda Ingineering, awarded FLSmidth the EPC contract for the supply of a 6000 tpd greenfield cement plant in El Beida. The order is worth about DKK1.5 billion (€200 million) and includes engineering, equipment supplies, construction, commissioning and training.

Meanwhile in Bolivia, the company received an order worth around DKK525 million (US$75 million) from Fabrica Nacional de Cemento for the support of a complete 2100 tpd cement production line.

Looking forward, the company said it would continue to focus on cost-cutting measures in response to the extended cement industry downturn – a result of continued overcapacity in the sector that has seen increased competition and margin pressure on equipment suppliers.

“Despite a series of cost management initiatives to help combat the ongoing market headwind, the cement division was outside of its targeted margin range in 2016 and the margin pressure is expected to increase into 2017,” the company said.

“Cost-reducing initiatives will remain a top priority, but FLSmidth will also work to adapt and differentiate its offering and business mix to improve margins and get back within the long-term target.”

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