Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Image courtesy of Metso.
Finland-based mining technology supplier and engineering firm Metso is putting its mining division in the back burner and will, instead, boost its services offer as orders from the resource and energy sector continue to be poor.
Chief Executive Officer Matti Kahkonen, resigned to just breaking even in the market for manufacturing mining equipment, said his company is switching emphasis to sales of services and flow-control equipment, which together account for roughly 85% of its revenue.
In an interview with Bloomberg, Kahkonen noted he expected services demand to grow between 5% to 10% a year, as a result of the new approach. “Costs at factories making gear such as grinders and cable-belt conveyors will be reduced as Metso ensures operations don’t lose money, yet remain ready for any pick-up in orders,” the CEO told Bloomberg.
Last month the company posted weaker-than-expected earnings and complained of a further slide in mining demand.
Metso is not the only one suffering the impacts of spending cuts among miners in the last three years. Its peers in a Nordic cluster of mining gear suppliers, including Sweden’s Atlas Corp., Sandvik, and Denmark’s FLSmidth have also been squeezed by it.
