Sandvik reports decline in orders and revenues in Q1 2020 amid market uncertainty
April 27, 2020
Sandvik AB, headquartered in Stockholm, Sweden, has reported its results for the first quarter of 2020, showing an 11% decline in order intake year-on-year, and a decline in revenues of 7%. Customer activity is said to have developed in line with expectations during January and February, with the exception of an extended shutdown period of about one week in China after the Chinese New Year and the spread of the coronavirus (COVID-19).
Adjusted operating profit dropped by 18% and amounted to SEK 3,728 million and the adjusted operating margin declined to 15.8%. While cost measures are said to have been executed according to plan, they were not sufficient to offset the adverse impact of the negative year-on-year organic growth of -7%.
“In this challenging environment, I am pleased to see that our ongoing efficiency initiatives are progressing according to plan with 1.4 billion SEK achieved, out of the expected total of 1.7 billion SEK. I am also satisfied with the speed with which we have been able to identify and start implementing new savings initiatives to protect profitability going forward,” stated Stefan Widing, CEO and President of Sandvik, who assumed the senior role in February 2020. …
“Each of the three business areas faced high comparables in the form of all-time-high order levels in the year-earlier period. Hence all three business areas noted declines in organic order intake and our overall order intake declined organically by 11% year-on-year. I am pleased to note that Sandvik Materials Technology’s strong product offering to the energy segment resulted in large orders amounting to 0.7 billion SEK in the period, supporting deliveries from this high value-added segment into next year.”
Sandvik Materials Technology
Organic orders declined by 14%, on record-high comparables in the year-on-year period. Excluding the impact of large orders, order intake declined by 9%. Alloy prices had a positive impact of 1% on order intake and of 2% on revenues.
Adjusted operating profit excluding metal price effects totalled SEK 340 million, yielding an underlying margin of 9%. Including negative metal price effects, adjusted operating profit decreased to SEK 139 million and the adjusted operating margin decreased to 3.7%.
Coronavirus (COVID-19) update: The majority of the manufacturing footprint is concentrated in Sweden, and production in the first quarter was largely unaffected by COVID-19. Market uncertainty is increasing and, should the current situation persist, both the business areas’ and customers’ operations and value chains may be impacted due to safety precautions and local restrictions.
Sandvik Machining Solutions
Order intake and revenues deteriorated year-on-year, with an escalating negative development in demand noted in the last week of March as the spread of COVID-19 intensified. A decline was noted in all major regions and all customer segments during the quarter.
Adjusted operating profit amounted to SEK 2,054 million, decreasing 23% year-on-year. The adjusted operating margin declined to 21.0%.
Coronavirus (COVID-19) update: In January and February, production was unaffected by COVID-19, apart from the extended stoppage of about one week in China. While there was an escalation of the pandemic in March, this only resulted in smaller disruptions to the business area’s production, which is largely European-based. Supply and distribution chains remained largely intact throughout the quarter. However, a sharper drop in demand was recorded in the last week of March, with large customer segments impacted by production stoppages. Sandvik anticipates a low business activity near term, should the current situation caused by COVID-19 persist.
Sandvik Mining and Rock Technology
Total order intake declined organically by 8% from the all time-high level reported in the preceding year. Increased hesitancy in customer decision-making processes was noted toward the end of the quarter as COVID-19 escalated.
Operating profit decreased by 9% year-on-year, primarily due to the negative impact from changed exchange rates, but also due to lower organic revenues. The operating margin declined to 17.0%.
Coronavirus (COVID-19) update: During the quarter, production was impacted only to a minor extent, and both supply and distribution proceeded as planned. The majority of the business area’s production footprint is Europe-based. That said, as the spread of COVID-19 escalates globally, market uncertainty is increasing and both the business area’s and customers’ operations and value chains may be impacted due to safety precautions and local restrictions.
