FLSmidth reports strong order intake and improved profitability

Including currency effects and acquisitions, order intake increased by 38% year-on-year to DKK4,615m (€620.48m).

FLSmidth group CEO Thomas Schulz commented: “Our second quarter showed positive progress across the board: A strong order intake, including the award of Europe’s first full-scale clay calcination installation which will cut plant CO2 emissions by up to 16%. Higher revenue from both service and capital businesses and 50% higher EBITA compared to Q2 2020. Further reduction in net working capital and a strong free cash flow. Overall, a good performance by our organisation.”

Revenue increased 6% to DKK4,073m (€547.61m) in Q2 2021 (Q2 2020: DKK3,846m or €517.09m) and 9% organically, comprising a 13% increase in mining and a flat development in cement.

Gross margin improved 1.3%-points compared to Q2 2020, positively impacted by implemented business improvement activities. The group EBITA margin increased to 4.8% from 3.4% in Q2 2020.

CFFO in Q2 2021 was strong at DKK 507m, and the adjusted free cash flow was DKK 451m. Net working capital has improved over the past five quarters and decreased to DKK 1,305m at the end of Q2 2021 (end of Q1 2021: DKK 1,678m). The net working capital ratio improved to 8.2% of 12-months trailing revenue, which was the best level in many years.

Due to the positive free cash flow, net interest-bearing debt (NIBD) decreased to DKK 1,159m (end of Q1 2021: DKK 1,577m), and the financial gearing decreased to 1.0x (end of Q1 2021: 1.4x).

On 29 July, FLSmidth announced the acquisition of thyssenkrupp’s mining business. Closing of the transaction is expected in H2 2022 and is subject to customary approvals from relevant authorities.

Schulz commented: “This is a transformational deal and at at the right time with the mining growth cycle already underway. We are creating one of the world’s largest and strongest suppliers to the mining industry, and at the same time it is a significant milestone in our MissionZero sustainability ambitions. The transaction offers an attractive opportunity to create long-term value for our shareholders, a stronger value proposition for our customers and improved career pathways for the combined pool of talented employees.”

FLSmidth has updated its 2021 guidance to group revenue of DKK 16.0-17.0bn (previously: DKK 15.5-17.0bn) and a group EBITA margin of 5-6%. The guidance includes cost related to the acquisition of thyssenkrupp’s mining business estimated at around DKK100m (€13.44m) for the full year.

The mining business revenue is expected to grow in 2021 with modest growth in the second half of the year. EBITA margin for mining is expected to be high-single digit for the full year. The cement business revenue is expected to remain soft in the second half of 2021 and decline for the full year.

FLSmidth says that initiatives to reshape the cement business are progressing well. 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, particularly related to the impact of the pandemic in H1.