STOCKHOLM, Oct 24 (Reuters) – Swedish machinery and tool maker Sandvik said on Thursday a sharp fall in demand from a shrinking mining industry was showing signs of levelling out.
But the slump still hit its earnings, and led to a fall in orders at Finnish rival Metso, which also stepped up a programme of cost cuts.
The global mining industry is under pressure to reduce overheads as demand for raw materials levels off after a decade of strong growth, and sector heavyweights led by BHP Billiton and Rio Tinto have slashed capital spending by billions of dollars.
The cuts have translated into job losses and plunging order intakes for a cluster of Nordic suppliers.
Sandvik, which together with Swedish peer Atlas Copco supplies more than half the world’s underground mining gear, said the order intake in its mining business fell 17 percent year-on-year in the third quarter. The rate of decline eased from the second quarter, however.
“The mining market has stabilised at a low level and now we are at least booking orders at the same rate as we are invoicing,” Sandvik Chief Executive Olof Faxander told a conference call with reporters.
But while demand from the mining industry showed signs bottoming out, project delays and order deferrals continued to affect large parts of Sandvik’s mining business, which accounts for roughly a third of group sales, the company said.
Sandvik, which unveiled a new round of cost cuts last month, said order cancellations were negligible but that lead times in its equipment order pipeline were running as short as three months compared to roughly 9-12 months ahead of the slowdown, a sure sign of a dwindling backlog.
A top supplier of drill rigs and loaders, Sandvik said operating earnings fell to 2.53 billion crowns ($397 million) from a year-ago 3.33 billion, short of a mean forecast of 2.68 billion in a Reuters poll of analysts.
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