FLSmidth has announced a strategic change to enhance long-term profitability and accelerate growth in its core Mining business. This change includes the decision to divest or wind down risky and unprofitable mining activities.
This is the result of a planned strategic review of the combined FLSmidth Mining and former TK Mining technology product portfolio against the Danish mining and cement industry technology and services giant's long-term strategic direction and ambitions. With this change, FLSmidth says it is creating a new platform for improved profitability, lower risk and strategic focus on the core value-creating parts of the Mining business.
The overall strategic rationale for the acquisition of TK Mining, effective 1 September 2022, has been reconfirmed, and the acquired business is overall in line with our expectations. Furthermore, the cost synergy potential from acquiring TK Mining has been revisited, and further cost synergies have been uncovered. Additionally, the pace to realise these synergies will be accelerated.
Based on the overall business performance, the raised cost synergy target and integration costs, as well as the implementation of the strategic change, financial guidance for 2022 is updated accordingly.
Following the recent acquisition of TK Mining, FLSmidth initiated a planned strategic review of the combined FLSmidth and TK Mining technology product portfolio. The review intended to assess all combined mining activities and products from a strategic, financial and sustainability perspective against FLSmidth's long-term strategic direction and ambitions.
As a result of the strategic review, it has been decided to split the Mining business into two separate segments for operational and reporting purposes:
- a continuing Mining segment focused on profitability, growth and sustainability
- a new Non-Core Activities segment, where activities will be fully exited either by way of divestment or wind-down of the order backlog
The new segment split will ensure sharpened strategic focus and stronger execution of the continuing Mining activities that are key to accelerate long-term profitability and growth for FLSmidth. At the same time, dedicated focus and resources will be allocated to the Non-Core Activities to ensure transparency and effective execution of the divestment or wind-down and to minimise losses from these activities. Financial reporting for this new structure will be effective from Q4 2022.
Group CEO Mikko Keto commented: "Today's announcement marks a significant milestone - not just for FLSmidth, but also for our customers, employees and shareholders. For years FLSmidth has been focused on engineering and large-scale projects with inherently high risks, challenging execution and volatile profitability. We are now taking decisive action to further strengthen the focus on our core business, ensure stronger execution and drive value creation. The world must undertake a significant green transition over the coming years, and the mining industry plays a crucial part in this. With today's strategic change, FLSmidth is better positioned than ever before to become the leading technology and service solutions supplier to the global mining industry."
