Sandvik profit tops forecast as mining bucks industrial slump
Metal-cutting tools and mining gear maker Sandvik reported third-quarter core earnings above market forecasts on Friday as strong demand in the mining and oil industries helped offset slumping automotive and engineering markets.
Worries over the extent of a downturn in industrial demand have risen in recent weeks as weaker purchasing manager indices in the United States and Europe, Sandvik’s two biggest markets, came on top of a slowdown in China.
“Demand in the long-cycle business in the mining and oil & gas industries remained strong, while customer activity in the short-cycle business softened significantly,” Sandvik CEO Bjorn Rosengren said in a statement.
The Swedish group said adjusted quarterly operating earnings rose to 4.62 billion Swedish crowns ($477 million) from 4.59 billion a year earlier, beating the 4.48 billion mean forecast given by a Refinitiv poll of analysts.
Sandvik said weakness in demand had been most pronounced in the automotive and general engineering segments, and that it would increase staff-cut plans announced three months ago to 2,500 jobs from 2,000.
The firm said order intake was 25.0 billion crowns, down 1% organically, and just above the 24.8 billion forecast. While bookings in its machining solutions arm, which caters to mainly industrial clients, fell 9%, its mining unit posted a 5% rise.
Amid the industrial slowdown, Sandvik said it expected to make deeper cost cuts, which were now seen at 1.7 billion crowns compared to its previous guidance of 1.4 billion, with most kicking in fully around the middle of next year.
Sandvik shares, which were flat ahead of the results, rose 1.9% at 1017 GMT.
The company, which has struggled historically to safeguard profitability during cyclical downturns, has been restructured under Rosengren’s tenure with the sale of a string of businesses seen as outside its core and decentralisation across the group.
($1 = 9.6780 Swedish crowns)
(By Johannes Hellstrom and Niklas Pollard; Editing by Simon Cameron-Moore)