Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FLSmidth & Co AS (FLIDY, Financial) signed one of its largest agreements, supplying 80% of the MOF flowsheet in Uzbekistan, indicating strong market presence and potential growth in the region.
- The company successfully implemented a new ERP system in its Tucson facility, enhancing operational efficiency and contributing to revenue growth.
- There has been a significant improvement in profitability, with reported EBITA increasing from 8.2% to 12.4%, indicating effective cost management and operational improvements.
- The company is ahead of its transformation plan, particularly in closing the non-core activity (NCA) segment, which is expected to be completed by the end of 2024.
- FLSmidth & Co AS (FLIDY) is progressing well in its sustainability targets and continues to focus on safety improvements across its operations.
Negative Points
- The capital market remains slow, with subdued activity expected until the end of 2025, impacting potential growth in capital order intake.
- The service business in the cement sector experienced a low quarter, with expectations for improvement in the fourth quarter, indicating volatility in this segment.
- There is uncertainty in the timing of CapEx investments, with significant activity not expected until late 2025 or early 2026, which could delay revenue growth.
- The company is facing challenges with provisioning levels, particularly in the mining segment, which could impact financial stability.
- FLSmidth & Co AS (FLIDY) is still working on reducing SG&A costs, which remain high relative to current volumes, indicating ongoing cost management challenges.
Q & A Highlights
Q: What are the main challenges affecting the CapEx environment for large projects, and how do they impact FLSmidth's outlook?
A: Mikko Keto, Group CEO, explained that permitting delays are a significant challenge, especially outside Central Asia where government support accelerates processes. Economic pressures on mining assets due to declining ore grades and increased CapEx and OpEx are also factors. These pressures necessitate investments in upgrades and retrofits to maintain asset value. Keto expects a significant uptick in activity by late 2025 or early 2026, driven by the need for brownfield expansions and upgrades.
Q: Can you quantify the impact of provision releases on the cement business margin?
A: Roland Andersen, Group CFO, stated that provision releases contributed approximately 1.5% to 2% to the cement business margin, reflecting the completion of legacy projects.
Q: What is the outlook for mining orders and revenue, considering the current market conditions?
A: Roland Andersen noted that mining product orders are expected to remain stable at around DKK1 billion per quarter through 2025 and into 2026. The focus will be on maintaining profitability through SG&A cost reductions and optimizing the business mix.
Q: How is FLSmidth progressing with its transformation and cost reduction efforts?
A: Mikko Keto highlighted that the company is ahead of schedule in some areas, such as closing the NCA segment. The focus remains on reducing SG&A costs and maintaining a lean organization to improve profitability, even during periods of low capital business volume.
Q: What is the status of the cement divestment process?
A: Roland Andersen confirmed that the cement divestment process is on track, with the potential to sign a deal by the end of the year or early next year. The process is proceeding according to plan, with no changes in the timeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
