FLSmidth & Co. Group Interim Report for Q1 2024: Strong gross
margin leading to continued improvement in profitability
COMPANY ANNOUNCEMENT NO. 8-2024 15 May 2024, Copenhagen,
Denmark
Highlights in Q1 2024
- Mining order intake showed organic growth of 3% reflecting
stable Service market and large Products order wins
- Mining revenue declined organically by 11% due to timing of
order execution
- Group gross margin of 29.2% driven primarily by strong margin
execution in Mining
- Adjusted Mining EBITA margin of 11.5% driven by continued
strong execution and realised synergies
- Good progression on all our science-based sustainability
targets
- Separation of Mining and Cement businesses progressing
according to plan
- Financial guidance for the full year 2024 maintained
Group CEO, Mikko Keto, commented: “We have had a good start to
the year, where we have not only progressed on all our core
transformation activities, but also seen further improvements in
profitability in both Mining and Cement as well as shown good
progression on all our Science Based Targets. The market dynamics
in the mining industry remain unchanged compared to prior quarter.
Consequently, we continue to see a stable and healthy service
market, whereas the products market – despite the recent increases
in key commodity prices such as copper and gold – remains softer
due to persisting hesitation by some customers on larger investment
decisions as well as continued permitting issues in many countries.
The largely stable cement market provides good opportunities for
our Service business in our core market clusters, further
de-risking of our Products business to preserve profitability is
ongoing. The good start to the year makes us confident that we can
achieve both our ambitions for 2024 as well as our long-term
targets.”
Commercial performance, Q1 2024 versus Q1
2023
Mining order intake was on par with the level
from Q1 2023 (increase of 3% if excluding currency effects).
Service order intake decreased by 4%, mainly driven by currency
effects and a very high order intake in the comparative quarter.
Products order intake increased by 9%, supported by two large
orders with a combined value of DKK 680m announced in the quarter.
Service and Products comprised 67% and 33% of the total Mining
order intake in the quarter, respectively (compared to 70% and 30%
in Q1 2023, respectively).
Cement order intake decreased by 22% (no
effects from currencies in the quarter). Service order intake
decreased by 11%, reflecting the divestments of the AFT and MAAG
businesses as well as the exit from select markets. However, during
the quarter, we have seen underlying growth in orders for spare
parts and professional services within our core market clusters,
partly offset by lower orders for upgrades & retrofits. Service
and Products comprised 69% and 31% of total Cement order intake in
the quarter, respectively (compared to 60% and 40% in Q1 2023,
respectively).
The order backlog for the Non-Core Activities
(NCA) segment amounted to DKK 479m at the end of Q1 2024
compared to DKK 531m at the end of Q4 2023 and DKK 2,085m at the
end of Q1 2023. It remains the expectation that the segment will be
fully exited by the end of 2024.
Group order intake decreased by 7% (decrease of
4% excluding currency effects). Service order intake decreased by
8%, driven by relatively lower order intake for both the Mining and
Cement businesses. Products order intake decreased by 5% driven by
lower Cement Products orders. Service and Products represented 67%
and 33% of total order intake, respectively, which was unchanged
compared to Q1 2023.
Financial performance, Q1 2024 versus Q1
2023
Mining revenue decreased by 14% (decrease of
11% if excluding currency effects). Service revenue decreased by
11%, primarily due to lower revenue within spare parts and
consumables driven by timing of order execution as well as the
ongoing exit from basic labour services. Products revenue decreased
by 21% due to continued de-risking of the order backlog and timing
of backlog execution. Gross profit increased by 11% and the
corresponding gross margin increased by 7.5 percentage points to
32.9%. Adjusted for transformation and separation costs of DKK 42m,
the EBITA margin was 11.5% in Q1 2024. Including these items, the
EBITA margin was 10.3% compared to 6.5% in Q1 2023.
Cement revenue decreased by 24% (decrease of
23% if excluding currency effects). Service revenue decreased by
19% due to the divestments of the AFT and MAAG businesses. Products
revenue decreased by 30% driven in part by the continued pruning of
our product portfolio, exit of larger projects as well as the
impact from the divested businesses. Gross profit decreased by 26%
as a result of the lower revenue, inventory write-downs and costs
related to the separation of the Mining and Cement businesses. The
corresponding gross margin decreased by 0.7 percentage points to
22.8%. Adjusting for transformation and separation costs of DKK
36m, the EBITA margin was 7.7%, partly driven by the net gain from
the divestment of the MAAG business. Excluding this gain, the
Adjusted EBITA margin was 5.2%. Including the aforementioned
transformation and separation costs as well as the net gain, the
EBITA margin was 4.7%.
NCA revenue amounted to DKK 50m. Gross profit
was negative and amounted to DKK -40m, reflecting the general
volatility and operationally loss-making nature of the segment.
EBITA amounted to DKK -62m, corresponding to an EBITA margin of
-124%.
Group revenue decreased by 20% (decrease of 17%
if excluding currency effects). Gross profit increased by 1%
reflecting good margin execution, mix effects and continued
de-risking, partly offset by lower revenue in the quarter as well
as costs related to our ongoing transformation activities and the
pure play separation of the Mining and Cement businesses. The
corresponding gross margin increased by 6.0 percentage points to
29.2%. Excluding transformation and separation costs of DKK 78m,
the Adjusted EBITA margin was 9.2%. If including these items, the
EBITA margin was 7.5%. Cash flow from operating activities (CFFO)
amounted to DKK -352m driven by changes in net working capital,
partly offset by changes in provisions.
Other business
On 22 January 2024, FLSmidth Cement entered into an agreement to
sell the MAAG gears and drives business to Solix Group AB. The
transaction closed on 1 March 2024 and includes all related assets,
including intellectual property, technology, employees and customer
contracts.
On 4 March 2024, FLSmidth acquired the Canadian mill
engineering, supply and services provider, Farnell-Thompson Applied
Technologies Inc. The acquisition is aligned with FLSmidth’s Mining
CORE’26 strategy, which includes targeting service growth through
strategic investments and prioritisation.
Financial guidance for 2024
Financial guidance for 2024 is maintained. The guidance reflects
the ongoing business simplification and transformation efforts,
continued improvement in the core Mining business, realisation of
the full cost synergies from the Mining Technologies acquisition,
continued profitability progress in the underlying Cement business
and the ongoing exit from the Non-Core Activities segment.
Mining |
Cement |
Non-Core Activities |
Consolidated Group |
Revenue (DKKbn)16.0-17.0 (DKK 3.6bn) |
Revenue (DKKbn)4.0-4.5(DKK 1.2bn) |
Revenue (DKKm)250-350 (DKK 50m) |
Revenue (DKKbn)20.0-21.5(DKK 4.8bn) |
Adj. EBITA margin11.5-12.5%(11.5%) |
Adj. EBITA margin5.5-6.5%(7.7%) |
|
Adj. EBITA margin9.0-10.0%(9.2%) |
|
|
EBITA (DKKm)Loss of DKK 200-300(Loss of DKK 62m) |
EBITA margin7.5-8.5%(7.5%) |
Note: Numbers in brackets represent Q1 2024 results.
Earnings call
A presentation of the results will take place on 15
May 2024 at 11:00 CEST. Mr. Mikko Keto (Group CEO) and Mr.
Roland M. Andersen (Group CFO) will comment on the report and
developments in the Group. The presentation will be followed by a
Q&A-session. The presentation is available
at: www.flsmidth.com/reports-and-presentations.
Live audio-webcast
The presentation can be followed live or as
replay via the
internet here.
If you wish to ask questions during the Q&A-session, please
sign up here. After registration, you will receive phone
numbers, pin codes and a calendar invite. Please note that you will
receive two codes (a pass code and a PIN code), both of which are
needed when dialling into the webcast.
Presentation slides
The presentation slides will be made available shortly before
the scheduled start of the webcast at
www.flsmidth.com/reports-and-presentations.
Consolidated key figures Q1 2024
DKK million unless otherwise stated |
Q1 2024 |
Q1 2023 |
Change (%) |
FY 2023 |
Order intake |
5,248 |
5,632 |
-7% |
21,376 |
- of which service order intake |
3,505 |
3,795 |
-8% |
14,183 |
- of which products order intake |
1,743 |
1,837 |
-5% |
7,193 |
Order backlog |
17,482 |
22,027 |
-21% |
17,593 |
Revenue |
4,839 |
6,016 |
-20% |
24,106 |
- of which service revenue |
3,130 |
3,682 |
-15% |
14,236 |
- of which products revenue |
1,709 |
2,334 |
-27% |
9,870 |
Gross profit |
1,415 |
1,397 |
1% |
6,087 |
Gross margin |
29.2% |
23.2% |
|
25.3% |
Adjusted EBITA |
443 |
362 |
22% |
1,919 |
Adjusted EBITA margin |
9.2% |
6.0% |
|
8.0% |
EBITA |
365 |
235 |
55% |
1,438 |
EBITA margin |
7.5% |
3.9% |
|
6.0% |
Profit for the period |
194 |
84 |
131% |
491 |
CFFO |
(352) |
(404) |
13% |
623 |
Free cash flow |
(306) |
(428) |
29% |
366 |
Net working capital |
1,935 |
2,613 |
-26% |
1,382 |
Net interest-bearing debt |
(830) |
(1,187) |
-30% |
(639) |
Contacts: Investor
RelationsJannick Lindegaard Denholt, +45 21 69 66 57,
jli@flsmidth.comAndreas Escherich Holkjær, +45 24 85 03 84,
andh@flsmidth.comTherese Möllevinge, +45 41 37 16
38, tmo@flsmidth.com
Media RelationsRasmus Windfeld, +45 40 44 60
60, rwin@flsmidth.com
About FLSmidth
FLSmidth is a full flowsheet technology and service supplier to
the global mining and cement industries. We enable our customers to
improve performance, lower operating costs and reduce environmental
impact. MissionZero is our sustainability ambition towards zero
emissions in mining and cement by 2030. We work within fully
validated Science-Based Targets, have a clear commitment to
reducing the sustainability footprint of the global mining and
cement industries and aim to become carbon neutral in our own
operations by 2030. www.flsmidth.com.
- 213800G7EG4156NNPG91-2024-03-31-en
- Interim Report Q1 2024
- Company Announcement Q1 2024
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