FLSmidth shares drop 9 pct as orders for new cement plants disappoint

13 November 2017

Shares in FLSmidth fell as much as 9 percent on Thursday as the Danish engineering firm said it had received fewer orders for new cement factories than investors had hoped.

The order intake in Cement, one of its four business units, fell 12 percent to 585 million Danish crowns ($91.5 million), missing the 4 percent increase expected by analysts in a Reuters poll.

“We had no large orders in this quarter, we had currency headwinds and we saw, especially in Cement, a slowdown of the recovery compared to what we have seen before,” chief executive Thomas Schulz told Reuters.

FLSmidth said that the utilisation rates of existing cement plants remain low globally, curtailing appetite for investments in new capacity.

It said that there are still select opportunities in Asia, Africa and parts of Latin America, but that some of the recently most active markets are starting to become sufficiently supplied with new capacity. Investment appetite is slowly increasing in India, it said.

The majority of new cement factories are being built in emerging markets rather than in more mature markets where there are already plenty of such factories.

Schulz was however not overly worried about the trend, stating that growth in the cement business usually follows that of global GDP.

“At the moment we see a disconnect between the two, but normally it’s just a matter of time before that comes back to normal,” he said.

With few tenders for large cement projects, FLSmidth’s cement unit is increasingly focusing on equipment sales and upgrades of existing plants.

The slowdown in the order intake in the cement business disappointed investors and postponed their hopes for a recovery in that part of the business, analyst Mikkel Emil Jensen of Sydbank said.

He said that the results in FLSmidth’s customers service and product brands units had also disappointed investors, while the mining equipment unit actually had performed better and booked more orders than expected.

Source: TOI