FLSmidth: Market activity picked up in the second half of 2016
“After a weak first half, activity picked up, finishing the year on a strong note. Rising commodity prices positively impacted sentiment in the mining industry in 2016, although it has yet to translate into higher capital investments. The cement industry is showing early signs of recovery,” commented Group CEO Thomas Schulz.
Order intake increased 2 % organically in 2016, while revenue was 5 % down due to a lower order backlog at the beginning of the year and a slow start to the year.
In 2016, the EBITA margin was 8.0 % (adjusted for one-off costs), adversely impacted by lower revenue, particularly in the first half. Towards the end of the year, activity picked up, and the adjusted EBITA margin increased to 9.7 % in the fourth quarter.
Capital efficiency improved in 2016. The equity ratio increased to 35 % and the financial gearing (NIBD/EBITDA) declined to 1.6, both comfortably within the targeted capital structure. Improved working capital and positive operating cash flow reduced net interest-bearing debt by DKK 1.1 bn in 2016.
The guidance for 2017 reflects the lower order backlog at the beginning of the year combined with an assumption of stable market activity in 2017. The EBITA margin guidance includes expected one-off costs related to corrective actions.
Accordingly, revenue is expected to be DKK 17-19 bn and the EBITA margin to be 7-9 %. The return on capital employed (ROCE) is expected to be 8–10 %.