The Denmark-headquartered group is forecasting 2021 revenue of DKK 15.5-17bn (€2.083-2.285bn) and a group EBITA-margin of 5-6%. The guidance is based on expected different developments in the two individual businesses, Mining and Cement, and continued impact from the COVID-19 pandemic in the first half of 2021.
A company statement read: “The guidance for 2021 is subject to uncertainty due to the COVID-19 pandemic. Lockdowns and mobility restrictions continue to impact suppliers, customers and our workforce. Restricted access to customer sites, in particular, is creating uncertainty around the timing of our order backlog conversion and the activity level for our service business. A gradual improvement in business sentiment and access to customer sites is, however, expected in the second half of the year.”
FLSmidth believes the outlook for the mining industry remains positive. For 2021, the group forecasts its Mining business revenue and EBITA to grow in the second half of the year as COVID-19 restrictions are expected to ease. EBITA-margin for Mining is expected to be high-single-digit.
The statement continued: “The outlook for the cement industry remains impacted by overcapacity and slow recovery. The Cement business revenue is expected to decline further in 2021, and as a consequence, initiatives to reshape the Cement business will continue during the year. The Cement business is not expected to be EBITA positive in 2021 due to continued Cement reshaping costs and low capacity utilisation in the service business until the pandemic eases.”
FLSmidth notes that in recent years, cement industry dynamics have diverged from those of the mining industry. Whereas fundamentals for the mining industry remain positive, overcapacity in the cement industry has put pressure on the returns of the cement producers, a development which has been further accelerated by the ongoing pandemic.
“The structural changes in the cement industry and the pandemic have increased uncertainty around our mid-and long-term target levels and the timing for achieving these targets. Consequently, it has been decided to withdraw the mid-and long- term financial targets. Targets for capital structure, including financial gearing, equity ratio and dividend policy remain unchanged.
“We will resume communication on the longer-term prospects for our Mining and Cement businesses when we have sufficient visibility,” the group statement concluded.
FLSmidth’s order intake in 2020 was on par with 2019, comprising a 13% growth in Mining and a 22% decline in Cement. Including currency effects and acquisitions, order intake decreased by 5% to DKK 18,524mn.
FLSmidth Group CEO Thomas Schulz said: “2020 was impacted operationally and financially by the pandemic, which has presented both challenges and opportunities for FLSmidth. Our employees have done a tremendous job handling this crisis and adapting to the changed situation. Our financial results were negatively impacted by the rapidly deteriorating business environment which affected order intake, revenue and EBITA. Still, we secured four large orders and a book-to-bill of 113% for the year, representing an organic order intake on par with 2019.”
In 2020, the order backlog increased by 5% to DKK 14,874mn from DKK 14,192mn in 2019, comprising an 18% increase in Mining and an 11% contraction in Cement.
FLSmidth group organic revenue declined 16% in 2020, comprising a 7% decrease in Mining and a 30% decline in Cement. The sharp decline in Cement was due to a more severe pandemic impact on the cement industry and a low backlog entering the year. Including currency effects, Group revenue decreased by 20% to DKK 16,441m.
Schulz continued: “In recent years, cement industry dynamics have put pressure on the returns of cement producers due to the overcapacity in regional markets. There is a clear positive outlook in the areas of digitalisation and green cement, but the fall in cement capital investment has been accelerated by the pandemic and is not expected to recover in the mid-term. Throughout the year, our focus has been on executing our Group business improvement programme, including site consolidation, and improved logistical setup and lower fixed costs. The programme is now complete with an EBITA improvement run rate of DKK 150m. To address the challenging cement market, we have taken additional steps to increase outsourcing, simplify the cement business and adjust the cost structure.”
To further strengthen FLSmidth’s two industries setup, Schulz said the group will keep a focus on leveraging synergies while ensuring a clear capital allocation to capture growth opportunities and maximise value creation within both businesses.
In Q4 2020, FLSmidth’s order intake increased 7% to DKK 4,695mn compared to DKK 4,389mn in Q4 2019. Organic order intake increased by 15%, comprising a 2% growth in Mining and a 39% growth in Cement. Order intake in Cement included a large contract for engineering, procurement and supervision on a greenfield cement plant in Ethiopia valued at around DKK 750m.
Revenue declined 30% to DKK 4,236mn in Q4 2020 from DKK 6,022mn in Q4 2019, and declined 24% organically, comprising a 15% decrease in Mining and a 37% decline in Cement. EBITA decreased by 52% to DKK 235mn compared to the same quarter last year but increased by 33% compared to Q3 2020.
