Revenue decreased 30% in Q2 2020, comprising a 22% decline in Mining and a 41% decrease in Cement. The organic decrease in group revenue was 26%. The company says the relatively sharper decline in Cement was due to a more severe COVID-19 impact on the cement industry, but also a result of a lower level of Cement capital orders in the past four quarters.
In Q2 2020, the company's revenue amounted to DKK3,846m (€516.54m) compared to DKK5,472m (€734.92m) in Q2 2019 (down 30%).
Organic order intake declined by 29% compared to Q2 2019, totalling DKK3,348m (€449.65m) compared to DKK4,954m (€665.35m) in Q2 2019 (down by 32%). The negative development in both order intake and revenue was larger in Cement than in Mining.
FLSmidth Group CEO Thomas Schulz commented on the Q2 results: "Mining was less impacted than Cement, and the service business was more resilient than the capital business. During the quarter, a lot of attention has been dedicated to assessing and managing the pandemic’s impact on our business, including a strong focus on customer relationships and identification of business opportunities."
He added that, while customers continue to defer non-critical investments, more mine sites and cement plants have now restarted operations, underpinning a gradual recovery later in the year.
The company's order backlog decreased by 2% to DKK15,227m (€2,045.07m) in Q2 2020 compared with Q1 2020.
“Cash generation has been an important objective for all our activities," Schulz added. "We are pleased that we have managed to significantly improve cash flow and net working capital, despite the challenging market conditions during the quarter. The strong collection of receivables was thanks to a changed way of working and a continuation of the positive trend from Q1.”
FLSmidth suspended its financial guidance for 2020 in March due to the global uncertainty caused by the COVID-19 pandemic and it reconfirmed the suspension of guidance on July 24.
It says that, across all regions, the mining industry and especially the cement industry have been negatively affected by the pandemic. Whilst the general situation around COVID-19 is improving in parts of the world, it continues to escalate in other parts.
"As a global supplier with customers around the world, FLSmidth is subject to these varying market conditions," the company states. "Lockdowns and mobility restrictions have continued to impact our customers and our workforce, especially the utilisation level of our global service technicians. This creates significant uncertainty around our service order intake and thus revenue for the remaining period of the year."
"We previously expected a moderate recovery in Q3, but the impact of the pandemic seems to last longer. We are cautiously optimistic about a gradual recovery later in the year."
