FLSMidth CEO: Loss-Making Projects In Minerals Segment A One-Off

Danish industrial plant maker and services supplier FLSmidth & Co. A/S (FLS.KO) took a hit in the first half of 2011 from two loss-making projects in its minerals segment, but the problems have been contained and the remaining project portfolio is healthy, the company's chief executive said Thursday.

"This is a one-off, and the projects have been ring-fenced. There will be no further impairments from these projects going forward," Chief Executive Joergen Huno Rasmussen said, speaking on a conference call following FLSmidth's second-quarter results.

FLSmidth reported a 14% increase in second-quarter net profit, but the result fell short of analysts' estimates, partly because of losses booked for two specific, but unidentified projects, which narrowed the earnings margin in its minerals segment.

"The last time we announced loss-making projects was in 2005. That proves our track record. I can firmly say this is a one-off. There are no other projects in our portfolio with similar problems," Ramussen said, declining to disclose details about the projects or the nature of the problems.

The losses booked on the two projects weren't specified in the second-quarter report, but according to Jyske Bank analyst Janne Vincent Kjaer, they amounted to DKK85 million.

"The minerals segment margin was very disappointing, mainly because it was dragged down by the two loss-making projects," Kjaer said.

As a consequence, the mineral division's first-half earnings before interest and taxes margin fell to 7.2%, from a full-year 2010 margin of 8.6%, and a first-half consensus of 8.7%.

Rasmussen said the current global financial and economic woes haven't had an impact on FLSmidth. Demand remains strong, and the investment appetite of the company's customers so far appears unaffected, he said.

-By Flemming Emil Hansen, Dow Jones Newswires; Contact: [phone]; [e-mail]