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UPDATE 2-Outotec to cut up to 500 jobs as miners slash spending
October 17, 2013 / 7:42 AM / in 4 years

UPDATE 2-Outotec to cut up to 500 jobs as miners slash spending

* Outotec lowers full-year sales, margin outlook

* Outotec shares fall over 13 pct

* Metso warns of big fall in full-year sales, EBITA

* Finnish industrial sector being squeezed (Adds analyst comment, details on outlook)

By Ritsuko Ando

HELSINKI, Oct 17 (Reuters) - Finnish mining technology company Outotec lowered its full-year sales and profit margin forecasts and said it planned to cut up to 500 jobs as a sluggish global economy forces miners to rein in spending.

In a further sign of tough times for Finland’s industrial firms, its warning on Thursday came just after engineering company Metso said it faced a fall in sales and profit due to weakness in its pulp, paper and power unit.

Shares in Outotec, whose job cuts represent 10 percent of the workforce, slid 15 percent by 0930 GMT while Metso lost 6 percent.

Outotec said it was seeing delays in customer payments. One project, worth 30 million euros ($40.5 million) in its order backlog, was cancelled in September.

Mining companies have over the past year been pulling back on spending in the face of weaker prices as many boom-year projects turned sour, and many have scrapped or delayed plans.

Outotec said its third-quarter sales fell to 440 million euros from 503 million a year earlier, with new orders slumping to 229 million from 452 million. Outotec’s customers include minerals and metals processing companies.

“Customers are postponing projects where there’s not such a hurry to ramp up,” said Pareto Securities analyst Jari Harjunpaa, adding that the fall in orders was particularly worrying.

“The key issue is not only what they’re now guiding for 2013 but more what will happen in 2014. Looking at what’s happening now in the order intake, that is quite low.”

Analysts on average had expected 2014 sales of around 1.9 billion euros which now looked too optimistic, Harjunpaa said, adding that he too may trim his relatively cautious forecast of 1.7 billion euros by around 100 million.

For 2013, Outotec forecast sales of around 1.9-2.1 billion euros ($2.6-2.8 billion) compared with a previous forecast of 2.1-2.3 billion. It also lowered its operating margin forecast to 8.5-9.5 percent from an earlier 9.5-10.5 percent.

Outotec 2012 sales were 2.1 billion euros and its operating profit margin was 9.3 percent.

Outotec said it was targeting up to 50 million euros in annual savings by the end of 2014 through the lay-offs, which are due to start later this year and be completed by mid-2014.

COOLING INVESTMENT

Metso warned that full-year sales and earnings before interest, taxes and amortisation (EBITA), excluding one-off items, would be significantly lower than in 2012. It had previously forecast underlying EBITA would be somewhat lower.

In addition to citing weakness in its pulp paper and power unit, which is due to be spun-off as an independently listed company next year, Metso also forecast 2013 sales at its mining and construction business to be somewhat lower from 2012.

The warnings underscored a dimmer outlook for engineering and other industrial companies in Finland.

Earlier this week, cargo handling equipment maker Cargotec cut its annual profit outlook after a fall in merchant ship deliveries, while crane maker Konecranes lowered its forecasts after a 10 percent drop in third-quarter orders.

“Except Wartsila and Kone, all the other Finnish engineering companies have warned. It’s a little bit different for each company, of course, but we are looking at investment activity in mining, and metals as well, cooling down,” said Harjunpaa.

Outotec is due to announce its full quarterly results on Oct. 30, while Metso’s are due on Oct. 24.

$1 = 0.7412 euros Editing by David Cowell, Mark Potter and Patrick Lannin

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