UPDATE: Sandvik Bullish On Metal-Cutting Tools Outlook As Other Orders Disappoint
February 01 2012 - 9:52AM
Dow Jones News
Engineering company Sandvik AB (SAND.SK) has seen continued
strong demand for its metal-cutting tools during January in
contrast with other parts of its business, Chief Executive Olof
Faxander told Dow Jones Newswires Wednesday.
"Tooling order intake during the first weeks of January has
continued the trend we saw in the fourth quarter. The first few
weeks of this year, the market situation has been positive," he
said.
The unit's orders rose 21% year-on-year in the fourth quarter to
end-December. However, group total order intake was down 7% and
earnings were hit by SEK1.6 billion ($237 million) in charges
related to the company's restructuring program, with the heaviest
costs incurred at Sandvik's mining-construction and
materials-technology units.
Net profit in the quarter fell sharply to SEK731 million from
SEK2.1 billion a year earlier. Operating profit dropped to SEK1.6
billion from SEK3.1 billion a year earlier, although when adjusted
for the charges, operating profit totaled SEK3.2 billion.
"The underlying result was very strong," Faxander said, adding
that only minor restructuring charges will be booked in the coming
quarters.
Faxander, who joined Sandvik from Swedish steel maker SSAB
(SSAB-A.SK) last year, said he expects costs savings to bolster
margins during 2012.
Sandvik said the order intake and invoicing for 2011 was the
highest in the company's history while the full year profit,
excluding one-off items, was its second best ever with only the
2007 profit higher.
However, outside of Sandvik's metal-cutting tools, order intake
for other units disappointed, particularly at the company's mining
and construction unit.
"We saw Atlas Copco (ATCO-A.SK) report a very strong order trend
for a similar business, and today we see Sandvik reporting a much
weaker order trend", said Colin Gibson, an analyst at HSBC.
Atlas Copco Tuesday posted 17% on year increase for its
mining-equipment unit in the fourth quarter while orders for
Sandvik's mining and construction unit were down 19%.
The firm's materials technology unit, for which the firm has
launched a new strategy and replaced management, continued to
struggle, with a 19% drop in order intake year-on year and a SEK841
million operating loss. Faxander said his main focus in the short-
and middle-term is to turn the business around but longer-term
Sandvik could sell it.
"But in the middle- to long-run we can consider structural
alternatives--which could mean a number of things, such as changing
our ownership," he said.
At 1511 GMT Sandvik shares traded 4.3% lower at SEK96.15, losing
some of their gains in the run-up to the results. The stock rose
19% in January. "The shares have had a very, very strong run up
until today's results, so some profit-taking was almost
inevitable," said HSBC's Gibson. He has an overweight rating for
Sandvik with a price target of SEK100.
-By Katarina Gustafsson, Dow Jones Newswires +46-8-5451-3097;
katarina.gustafsson@dowjones.com
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