In its just released Q2 2018 report, Sandvik reports that business is booming – its Mining and Rock Technology business saw order intake improve organically by 15% year-on-year on strong development in most product areas. Revenues increased organically by 16% supported by strong order intake in recent quarters and favorable demand in the aftermarket business.
Key items impacting order intake and revenues compared with the year-earlier period:
• Order intake was driven by high demand for replacement mining equipment as well as expansion of activities in
already existing mines and high customer activity in the aftermarket business.
• Strong growth for both underground and surface mining equipment.
• In the equipment business, drilling, crushing and screening accounted for the strongest growth in relative terms.
• Growth in the aftermarket business improved significantly, with strong development for both parts & service and
consumables.
• All geographies noted a strong underlying activity level. The greatest increase in order intake in relative terms was
noted in North America, while the timing of orders implied a negative development for Australia.
• The aftermarket business accounted for 60% of revenues while the equipment business accounted for 40%.
Operating profit improved by 24% and the operating margin increased to 17.1% (16.0), including an adverse impact from changed exchanged rates. Items impacting operating profit and operating margin:
• Positive organic growth in revenues of 16% improved the absorption of fixed costs in production.
In divestments, the Mining Systems conveyor components business, including the closely related specialist conveyor systems business in Hollola (Finland), was divested to NEPEAN. Mining Systems has been reported in discontinued operations and the divested businesses has as of 2 November 2017 been deconsolidated from Sandvik’s financial statements. The projects to be finalised during 2018–2019 by Sandvik, through an operational agreement with FLSmidth, will however remain reported in discontinued operations.
Sandvik is also evaluating the strategic options for Sandvik Drilling and Completions (Varel). The business being reviewed relates to the oil and gas industry, representing about 70% of the total revenues of approximately 2 billion SEK generated in 2017 by Sandvik Drilling and Completions. The remaining approximately 30% which manufactures and services application specific roller cone bits primarily to the mining industry, is not included in the review and continues to be core operations of Sandvik Mining and Rock Technology.
