COPENHAGEN (Reuters) - Danish engineering group FLSmidth (FLS.CO) reported better-than-expected new orders in the first quarter as it secured its first big contract from the minerals sector since 2015.
The news sent its shares up more than 7 percent on Wednesday on optimism about the outlook for demand from the mining sector. New orders still fell 10 percent from a year earlier, but that was a much smaller drop than analysts had expected.
FLSmidth, part of a Nordic cluster of mining gear makers including Swedish Sandvik (SAND.ST) and Atlas Copco (ATCOa.ST) and Finland’s Metso (METSO.HE), said its order intake in the first quarter totalled 5.02 billion Danish crowns (593 million pounds), above the 4.77 billion expected by analysts, but down from 5.56 billion crowns a year earlier.
“The price level we have now throughout almost all commodities is very satisfying,” Chief Executive Thomas Schulz told Reuters in a phone interview.
The company stuck to its 2018 guidance with revenue seen at 18 billion-20 billion crowns, compared with 18 billion crowns last year, and an operating margin (EBITA) of between 8 and 10 percent.
The company’s biggest order in January-March was a 600 million crown copper order from Kazakhstan’s Kaz Minerals (KAZ.L).
“The outlook for mining is positive. While spending budgets in mining are increasing, it takes a while before we see significant improvement in order intake and revenue, but it will come. It’s not a matter of ‘if’ it comes but ‘when’,” Schulz said.
Service orders, including for repairs and installations, were the highest since the fourth quarter of 2012 and accounted for just over half of total orders.
Shares in FLSmidth traded 6.9 percent higher at 410.20 crowns by 1128 GMT, their highest level since mid-March.
“Given some concerns in the market ahead of the first-quarter results, the report may provide some comfort to the market,” analysts at Jyske Bank said in a note.
Operating profit fell 9 percent to 248 million crowns from a year ago but in line with the 251 million seen in a Reuters poll.
Currency effects driven by a weaker U.S. dollar negatively affected order intake, revenue and operating profit, the company said.
While demand from the mining sector has begun picking up from a deep slump, Schulz said its cement division was still affected by “intense price competition.”
Reporting by Jacob Gronholt-Pedersen; Editing by Susan Fenton