Sandvik Declines as Profit Misses Estimates on Job-Cut Costs
(Updates with CFO comments from ninth paragraph.)
Feb. 1 (Bloomberg) -- Sandvik AB, the world’s biggest maker of metal-cutting tools, declined the most in three months in Stockholm trading after reporting profit that missed analysts’ estimates because of the cost to cut jobs.
Net income fell to 731 million kronor ($108 million) in the fourth quarter from 2.09 billion kronor a year earlier, the Sandviken, Sweden-based company said today in a statement. The average estimate from 10 analysts surveyed by Bloomberg was for profit of 1.19 billion kronor.
“It’s a weak report,” said Lars Brorson, an analyst at DNB Bank ASA in London who recommends that investors buy Sandvik’s shares. “The fourth quarter was impacted by a lot of restructuring stress.”
Chief Executive Officer Olof Faxander, who joined Sandvik from Swedish steelmaker SSAB AB a year ago, is scaling back the workforce to focus resources on more profitable operations. In September, Sandvik began reorganizing into five units from three, and said it may eventually sell the materials-technology business. Faxander said Nov. 1 that he was focusing on making that business more profitable and was leaning toward keeping it.
The stock declined as much as 6.3 percent, the sharpest intraday drop since Nov. 1, and was down 3 percent at 97.50 kronor at 11:31 a.m. That pared the gain this year to 13 percent.
Sandvik took charges of 1.6 billion kronor in the quarter, partly for its move to eliminate about 500 jobs, including 400 at its mining and construction unit.
Revenue rose 7.9 percent to 25.1 billion kronor as demand from the automotive, mining, and oil and gas industries “was high in the majority of markets,” Sandvik said.
“Major organizational changes always run a certain risk of the company becoming too internally focused,” Faxander said in the statement. The CEO said he is “delighted to see that the process has been fast and efficient and that the new organization is now in place.”
Demand has remained stable so far this year compared with the fourth quarter, Ola Salmen, Sandvik’s chief financial officer, said today in a phone interview. The company is likely to add a couple hundred million kronor in restructuring costs this year in its tooling unit, he said. The new charges would be related to making production more efficient, he said.
Sandvik, which also cut 9,000 jobs in the recession that started 2008, currently has no further plans to eliminate positions, Salmen said.
--Editors: David Risser, Tom Lavell
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