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UPDATE 2-Atlas Copco shares at record after CEO spies positive signs
July 16, 2014 / 3:55 PM / 3 years ago

UPDATE 2-Atlas Copco shares at record after CEO spies positive signs

* CEO says optimism growing in mining segment

* Q2 order intake stable in mining, down 3 pct y/y

* Book-to-bill positive in mining for second straight qtr

* CEO says still no signs of life in mining exploration

* Shares up 4.4 percent (Adds CEO comment, Boart Longyear, updates shares)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, July 16 (Reuters) - Mining equipment and compressor maker Atlas Copco AB said it had detected more a more optimistic tone in the mining sector, raising the prospect of a recovery in the industry from a two-year slump and sending its shares to a record high.

The Swedish company’s mining customers have been retrenching after a decade of heady expansion, as softer metals prices and an investor backlash at the scale of investment forced major players such as Rio Tinto and BHP Billiton to slash billions of dollars in spending.

But Ronnie Leten, chief of the company which makes mining gear such as drill rigs and loaders, told reporters there were tentative signs of a turnaround in operating mines, even though mining exploration remained depressed.

“The general feeling is that it’s more positive. There is much more optimism on the mining side than what we saw three, four months ago,” Leten told a news conference held in an old mine beneath its Stockholm headquarters, used to test new equipment.

“When it comes to exploration I haven’t seen any movement there. I have not heard anyone talking of ... any signs of life,” Leten said. “So that is really bad.”

Atlas Copco shares extended gains to trade up 4.4 percent by 1434 GMT in the wake of Leten’s comments. The stock rose as high as 207.3 crowns, surpassing a previous peak of 199.2 crowns set earlier this month.

Cutbacks in the mining industry had weighed on equipment sales at suppliers such as Atlas, which together with cross-town rival Sandvik accounts for well over half the global market for underground mining gear.

Atlas’s second-quarter operating earnings fell to 4.34 billion crowns ($635.5 million) from a year-ago 4.53 billion, versus a mean forecast of 4.31 billion in a Reuters poll of analysts.

ORDER INTAKE

Atlas said order intake in its mining and rock excavation business had stabilised in the past quarter, if at a low level, and forecast demand for the group as a whole would rise somewhat in coming months.

Group order intake, buttressed by brisker business in its compressor and industrial tools segments, rose 11 percent compared with a 10 percent year-on-year rise seen by analysts.

Order bookings in its mining unit fell 3 percent on the year to 6.46 billion crowns, a softer fall than the 11 percent fall in the first quarter, though still a far cry from the peak of nearly 10 billion before the mining chill set in.

“If you ask me about mining and rock excavation, what I saw before was a bit of a flat development, maybe with a bit of a negative trend. But I would now say it’s flat with a bit positive trend,” Leten said.

While weakness persisted in the sector across Asia, Leten pointed to signs of improvement in Australia and a better development in North America.

Atlas and Sandvik form part of a cluster of Nordic mining gear suppliers which also includes Denmark’s FLSmidth and Finnish companies Metso and Outotec, which have together cut thousands of jobs since the downturn began two years ago.

Elsewhere in the sector, Boart Longyear - focused mainly on drilling services and selling gear to the pummelled exploration segment - saw its shares plunge as it weighed options stay out of administration.

Atlas Copco is first of the Nordic group to report on the second quarter, with Sandvik - whose shares were up 2 percent - due on Thursday.

$1 = 6.8297 Swedish Crowns Additional reporting by Helena Soderpalm; Editing by Alistair Scrutton

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