Sandvik AB : Sandvik Makes Strong Start To Year Amid Turnaround
04/27/2012| 04:47am US/Eastern
-Sandvik profit beats expectations on strong demand and increased profitability for all units as strategy overhaul starts to bite
-Mining business shines, with order intake up 40%
-Shares rise 9.6%
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By Katarina Gustafsson
Engineering group Sandvik AB (SAND.SK), which is in the midst of a strategy overhaul, Friday said it had a strong start to the year, with demand high for most of its products.
Sandvik--one of Sweden's biggest and oldest manufacturers--had a tough time during the financial crisis and, during the past year, has replaced a number of its top executives.
New Chief Executive Olof Faxander, who launched a new strategy in September to boost growth and profits at the 150-year-old company, said the turnaround is on track. Its order intake for the three months to end-March rose 13% on the year to SEK28.9 billion ($4.29 billion), at fixed exchange rates.
At 0752 GMT, Sandvik shares traded 9.6% higher at SEK101.30.
Sandvik's mining business--its largest unit, generating around a third of its total sales--profited on continued strong activity in the global mining industry and its order intake was up 40% on year at fixed exchange rates to its highest level ever at SEK11.8 billion.
Analyst Christian Cole at Bernstein, who rates Sandvik overweight with a price target of SEK119, said the report was "overall very positive and a very good start to the year".
He added, "I think a lot of people were cautious on mining growth. We were bullish... and it's good to see mining orders very, very strong and operating margins and sales growth strong as well."
Sandvik's second biggest unit, which makes tools and tooling systems, also showed good demand with order intake up 7% on the year, but the company's specialty steels business didn't fare so well. Its order intake fell by 13% on the year. Bernstein's Cole said the decline at the troubled unit was widely expected, and noted that its margins developed positively as the ongoing turnaround started to bear fruit.
Net profit in the first quarter rose 23% to SEK2.50 billion from SEK2.03 billion a year earlier and ahead of the average forecast in a Dow Jones Newswires/Factset survey of 12 analysts, for SEK1.97 billion.
-By Katarina Gustafsson, Dow Jones Newswires +46-8-5451-3097; firstname.lastname@example.org