UPDATE 2-Atlas Copco to shed more jobs as mining slump deepens

Thu Jul 18, 2013 10:48am EDT

* Mining gear orders fall in Q2 vs Q1

* Weakness in mining partly offset by services

* Sees mining gear demand down slightly near term

* Overall group demand seen stable in Q3 vs Q2

* Q2 EBIT 4.5 bln SEK vs forecast 4.4 bln

By Niklas Pollard and Helena Soderpalm

STOCKHOLM, July 18 (Reuters) - Engineering group Atlas Copco announced more job losses on Thursday as spending cuts across the mining industry hit demand for its trademark drill rigs and loaders and raised worries the sector's downturn may have further to run.

Robust activity in services and industrial equipment stemmed a fall in group profit and orders but the company forecast that demand for mining gear would slip further in the near term.

Mining is suffering a hangover from years of booming expansion and has slashed capital spending as softer prices for commodities such as coal, copper and gold have raise doubts about future investment returns.

The likes of BHP Billiton and Rio Tinto have cut billions of dollars from outlays.

For Atlas Copco and its cross-town rival Sandvik, which together supply more than half the global market for underground mining gear, this has brought a sharp drop-off in equipment orders though a thriving services business has cushioned the blows.

Unlike Sandvik, which is due to report on Friday, Atlas's single biggest mining exposure - around one third - is to gold whose price has slid more than 20 percent since year-end.

"It's a pity but we will reduce the work force all over in the organisation for mining," Atlas Copco's CEO Ronnie Leten told Reuters, declining to specify the size of cuts beyond saying sales and R&D staff would be shielded.

"We adjust as we go. I don't like revolutionary, one-off adjustments," he added in a news conference.

Atlas Copco said order intake for its mining and excavation business fell 21 percent year-on-year and were also down compared with the initial months of 2013.

Some 200 million crowns ($30 million) of mining orders were cancelled in the quarter.

SHARES DROP

Atlas's shares were down 3.7 percent by 1456 GMT while shares in Sandvik, whose earnings have historically been less resilient to cyclical downturns, fell 1.8 percent.

Among other stocks in the Nordic cluster of mining suppliers, Denmark's FLSmidth fell 1.7 percent and Finland's Metso 2.6 percent.

"People are really worried about mining," Handelsbanken analyst Peder Frolen said, noting Atlas had not delivered a beat on order intake in line with that reported earlier in the day by engineering sector peer Alfa Laval.

"So the concerns about mining quite simply get a boost from this report."

Atlas's compressor and industrial business, which like mining and rock excavation accounts for roughly a third of sales, fared better and tempered the fall in group order bookings to 9 percent for the group, roughly in line with analysts' expectations.

Leten said in a conference call that mining equipment alone only accounted for 7-8 percent of its business.

The company also said overall demand for the group's products and services, which include construction gear, industrial tools as well as compressors and mining equipment, was expected to be unchanged in the near term.

Operating profit at Atlas fell to 4.53 billion Swedish crowns ($687.94 million) from a year-ago 5.03 billion to top a mean forecast 4.43 billion in a Reuters poll of analysts.

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