Sandvik Net Profit Hit By One-Offs But Beats Forecasts

   By Christina Zander 
 

STOCKHOLM--Swedish engineering company Sandvik AB (SAND.SK) Monday reported a 72% drop in net profit for the first quarter due to costs related to a group-wide cost saving program.

Sandvik, which makes tools for customers in the mining, construction and energy sectors, said net profit in the three months ended March 31 was 415 million Swedish kronor ($48.1 million), down from SEK1.49 billion in the same period last year. Analysts polled by Factset expected a net profit of SEK365 million.

Sandvik said non-recurring charges from the cost saving program and writedowns totaled SEK1.9 billion, as previously announced, and the company hopes the actions will yield annual savings of SEK1.1 billion by the end of 2016.

In the last few years, Sandvik's profitability has been hit by low demand in the mining sector, and the company said demand for mining equipment remained slow in the quarter, though the underlying market within the aftermarket is slowly recovering. Demand in its mining systems unit remained muted, in line with the postponement of projects, particularly within coal and iron ore, it said.

A low and volatile oil price has also hampered demand in the group, it said, due to the rapid and sharp drop in on-shore drilling activity in North America.

The company expects capital expenditure in 2015 at below SEK5 billion, while based on current foreign exchange rates, it expects second quarter operating profit to get a SEK900 million boost from currency.

Revenue in the quarter were SEK23.33 billion, up from SEK20.78 billion a year ago. Operating profit was SEK1.05 billion, down from SEK2.48 billion a year ago.

Shares closed at SEK97.75 Friday.

Write to Christina Zander at [e-mail]

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