Sandvik, which shows a direction for machine shops, fell short of analysts’ forecasts

Swedish engineering giant Sandvik reported on Monday lower profit and net sales for the third quarter.

The company’s adjusted ebita operating result in July–September decreased by seven percent compared to the third quarter of last year and was 5,866 million kroner. This was 4.3 percent less than the sum of 6,132 million kroner predicted by analysts’ information service Factset.

Sandvik’s adjusted operating result also decreased by seven percent from the comparison period and was 5,382 million kroner. Of the 5,770 million crowns predicted by analysts, 6.7 percent remained.

Sandvik reported new orders for July–September for 28,796 million kroner, which was almost the same as the corresponding period a year earlier. However, 4.3 percent of the 29,982 million crowns expected by analysts remained.

Sandvik’s turnover in the third quarter was 30,306 million kroner, which was 2.6 percent less than analysts’ forecast and four percent less than the comparison period. However, the company says that if the effect of exchange rates is removed, the turnover would have increased by one percent.

Sandvik is one of the largest engineering companies in Sweden and the Nordic countries, serving the mining and stone crushing industries as well as the manufacturing machine industry. Sandvik is also the first major earnings reporter in the engineering industry this earnings period and can give direction on the development of Finnish engineering companies as well.

CEO of Sandvik Stefan Widing describes in the interim report that Sandvik’s demand picture was divided in the third quarter.

“Although order momentum was solid in our mining and software businesses, macroeconomic trends were weaker than expected and negatively impacted our cutting tool business,” states Widing.

However, according to him, the company did well in the difficult economic situation and showed sustainability, as evidenced by the 19.4 percent profit margin measured by the adjusted ebita result. Widing calls this a good achievement, considering the reduced delivery volumes.

Among the business operations, Mining and Rock Solutions, a division serving the mining industry, did clearly the best, with new orders growing by 2 percent and without the adverse effect of exchange rates by 7 percent. The order intake of the Rock Processing Solutions division, which serves the stone crushing industry, decreased by 3 percent and without the exchange rate effect by 1 percent.

In the Manufacturing and Machining Solutions division, which serves the machine shop industry, Sandvik reports widespread subdued demand in, for example, the automotive industry, but sees good prospects especially in the aircraft industry. The value of the division’s new orders decreased by three percent from the comparison period.

Sandvik’s share has been falling on the Stockholm stock exchange on Monday. Around 14:45 Finnish time, the stock was traded down 3.9 percent.

The undercurrent may have slightly caught the nearest control from the Finnish machine shops Metsoonwhose share was down 1.1 percent at the same time. Metso reports on its third quarter on Thursday.