January 21, 2020 / 7:20 AM / a month ago

Sandvik profit tops forecast, autos slump dents order intake

STOCKHOLM (Reuters) - Metal-cutting tools and mining gear maker Sandvik (SAND.ST) reported fourth-quarter core earnings above market forecasts on Tuesday but said a slump in the automotive and general engineering industries had dented order intake.

The company, one of the first European industrials to report year-end results, said adjusted quarterly operating profit rose to 5.07 billion crowns ($532 million) from 4.67 billion a year earlier, beating the 4.86 billion mean forecast from a Refinitiv poll of analysts.

“In the fourth quarter, demand remained at a high level in the long-cycle mining and energy businesses, although a significant decrease was reported for our short-cycle businesses,” CEO Bjorn Rosengren said in statement.

The group is considered a good gauge of industrial demand due to high shipping volumes of its cutting tools, which have short lead times from order booking to delivery and a wide customer base.

Sandvik said order intake was 25.2 billion crowns, down 6% organically, but just above the 25.1 billion seen by analysts.

The company in October said it would increase planned job cuts to 2,500 in response to a demand slump in early-cycle markets such as the car industry and related suppliers.

It said on Tuesday that profits had been boosted by cost-reduction efforts, while it had also focused on lowering inventories over the quarter.

“Overall solid numbers by Sandvik given the weaker short-cycle volumes and the bigger-than-expected destock,” analysts at Citi said in a research note, while highlighting tepid demand in Europe “with weakness now spreading across all key end-markets and geographies”.

Sandvik shares were down 2.6% by 0855 GMT, taking their gains over the past 6 months to 22%, versus a 12% rise for the European industrial sector .SXNP.

The group said order intake in its cutting-tools unit Machining Solutions dropped 10% on an organic basis in the quarter, citing weaker customer activity versus the year-ago period in all three major regions - Europe, North America and Asia.

Rosengren, who is leaving Sandvik at the end of the month to take the helm at robotics firm ABB (ABBN.S), said automotive in Germany was a particular weak spot in Europe, while China demand had leveled off and even improved toward the end of the quarter.

Reporting by Johannes Hellstrom; editing by Niklas Pollard and Kirsten Donovan

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