FLSmidth cuts 1,100 jobs as mining outlook deteriorates
COPENHAGEN (Reuters) - Danish engineering group FLSmidth & Co (FLS.CO) said it will cut 1,100 jobs and reduce its global footprint by 20 locations as the outlook for mining capital expenditures deteriorated further in the second quarter.
The mining industry, facing softer metals prices and shareholder pressure to boost returns, is pulling back from a decade of expansion with the likes of BHP Billiton (BHP.AX) and Rio Tinto (RIO.L) slashing billions of dollars in spending, hurting suppliers like FLSmidth.
The firm reported a 40 percent drop in second-quarter operating profit, against expectations of a rise, and booked 323 million crowns in one-off costs in its material handling division, which makes machinery to crush ore and gigantic conveyor belts.
The company said it also expected a 200 million crown write-down in the third quarter, and it also said it will book an impairment of about 800 million crowns on the Ludowici Group acquisition in Australia.
New Chief Executive Thomas Schultz, who took the reins on April 1, said these steps were necessary and prudent.
"Looking at the risks associated with these old projects, I took the decision to clean that out," Schultz told Reuters.
Earnings before interest and tax (EBIT) fell to 195 million Danish crowns ($34.89 million) in May-July compared with 323 million crowns a year earlier and against a forecast for 384 million crowns in a Reuters poll.
The group also said it lowered its full-year outlook due to weaker business conditions for mining investments in general and for the Australian coal industry in particular.
"It looks like a real spring cleaning to me," analyst Jacob Pedersen from Sydbank told Reuters.
"From the picture they paint of the state of the markets, particularly mining, it sounds like they have some difficult years coming," he added.
(Reporting by Teis Jensen; Editing by Geert De Clercq)
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