Sandvik Cuts Capacity, Backlog to Reflect Conditions in Nuclear Power Indus

    By Dominic Chopping 
 

STOCKHOLM--Swedish engineer Sandvik AB (SAND.SK) said Wednesday it will adjust capacity and order backlog in its Material Technology unit to reflect conditions in the nuclear power industry, but said the overall net effect of these actions on operating profit will be slightly positive.

 
   MAIN FACTS: 

-Sandvik Materials Technology will adjust capacity and order backlog for steam generator tubing.

-Order backlog will be written down by SEK1.1 billion, negatively affecting the order intake in 2Q.

-Overall net effect on operating profit due to closure of related currency hedges, as well as impairment and restructuring charges as a result of the capacity adjustment, is estimated to be slightly positive.

-To phase out older installed steam generator tubing mill in Sandviken, Sweden, to concentrate all production to the new steam generator tubing mill in Sandviken, which commenced commercial production in 2012.

-Older steam generator tubing mill will be mothballed.

-The capacity adjustment will take place during 2Q 2014.

-Adjustment of steam generator tubing capacity will see redundancies of 110 full time Sandviken employees.

-Redundancies handled through reducing third party workforce, natural turnover and voluntary agreements.

-Sandvik will still be able to fulfill its present contractual obligations to customers.

-While there remains continued uncertainty in the global nuclear power industry, the current assessment is that the need for further adjustments to order backlog is limited.

-Sandvik will close currency and nickel contracts relating to existing hedges of the orders that will be written down. This will generate a positive effect on operating profit of SEK300 million.

-Shares closed Tuesday at SEK88.80, valuing the company at SEK111.39 billion.

-Write to Dominic Chopping at [e-mail]; Twitter: @WSJNordics

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