WRAPUP 1-Mining investment squeeze hits Sandvik, Metso orders

Tue Apr 23, 2013 7:48am EDT

* Q1 mining orders down 30 pct for Sandvik, 18 pct for Metso

* Sandvik Q1 operating profit 2.56 bln SEK vs forecast 2.97 bln

* Metso's Q1 EBITA 132 mln euros vs 134 mln forecast in poll

* Metso plans cost cuts at paper unit (Combines Sandvik and Metso, updates shares)

By Niklas Pollard and Terhi Kinnunen

STOCKHOLM/HELSINKI, April 23 (Reuters) - A drop in orders for Nordic engineering firms Sandvik and Metso added to signs on Tuesday that mining companies are cutting back spending as commodity prices slide.

Shares in both Sandvik and Metso rose more than 2 percent, however, as investors had been bracing for worse after the world's biggest mining and construction equipment maker, Caterpillar Inc, cut its 2013 sales forecast due to weak demand from mining customers.

Miners have scaled back investment plans against a backdrop of slumping prices of coal, copper and other commodities. Sandvik and Metso make mining equipment such as drill rigs, crushers and grinding mills.

"Sandvik's business areas generally reported stable or slightly improved market conditions, apart from Sandvik Mining, which continued to be affected by weaker demand and uncertainty from the mining industry," the Swedish company said.

Sandvik, along with domestic rival Atlas Copco, supplies more than half the global market for underground mining gear. It said its mining orders had dropped 30 percent in the first quarter of 2013.

Operating profit fell 33 percent to 2.56 billion Swedish crowns ($392.12 million) missing an average analyst forecast of 2.97 billion from a Reuters poll.

Metso's first-quarter underlying earnings before interest, tax and amortisation (EBITA) fell 7 percent to 132 million euros ($172.00 million) and missed the average forecast of 134 million euros in a Reuters poll.

Earnings rose at its mining and construction business, which makes crushers and grinding mills, but the unit's orders dropped 18 percent.

The Finnish firm said, however, that it expected underlying demand for mining equipment to remain at a "good" level. It expected construction equipment demand would remain low.

GOLD LOSES SHINE

Sandvik said mining activity in Africa fell due to lower prices for gold and copper. Demand from coal and iron ore mines in Australia was especially weak.

"We have seen the sentiment weaken also in the gold sector due to the weaker gold price," Sandvik Chief Executive Olof Faxander told reporters in a conference call.

"We see a rather stable situation in the after-market, but in terms of both mining systems and equipment sales, demand is falling right now as a consequence of mining companies slowing their pace of investment."

The 22.3 billion crowns in Sandvik's overall quarterly orders was less than the 22.8 billion seen in a Reuters poll of analysts.

Shares in Metso were up 3.2 percent at 29.5 euros and Sandvik was up 2.2 percent at 93.85 crowns by 1138 GMT.

Metso's profit fall was mostly due to a weaker performance from its paper machine business, where it said it planned to cut costs.

The paper industry has been hit by a decline in magazines and newspapers due to the rise of digital news. Metso is considering a possible spin-off of the business. ($1 = 0.7674 euros) ($1 = 6.5285 Swedish crowns) (Additional reporting by Helena Soderpalm and Johannes Hellstrom, writing by Niklas Pollard and Patrick Lannin,; Editing by Alistair Scrutton and Tom Pfeiffer)