Sandvik lags Q3 profit forecast as non-mining units face weak demand

Sandvik, among the first of the Nordic industrials to report quarterly results, is considered a reliable indicator of demand given its broad customer base.

Quarterly order intake excluding acquisitions rose 2% organically to 28.8 billion Swedish crowns ($2.73 billion), driven by solid demand in the mining and software businesses despite challenges in other segments.

“The softer demand was broad-based, but most negative in Europe, and the low demand from the automotive industry notable in all regions,” CEO Stefan Widing said in a statement.

JPMorgan analysts said the results missed expectations across key metrics, hit by tough demand environment especially in Sandvik’s cutting tools and infrastructure units, while mining remained solid.

“The earlier hoped for improvement in markets condition has clearly not come through,” they wrote in a note to clients.

China’s stimulus package, which aims to refinance local government debt to boost construction but lacks specific spending details, has sparked concerns of lower demand for mining equipment makers like Sandvik.

Widing told reporters on a call that it was too early to assess the full impact of the stimulus package, but said he viewed it as a positive step that could help revive economic activity in China.

Sandvik’s adjusted operating profit fell 7% from a year earlier to 5.38 billion crowns in the third quarter, missing a mean forecast of 5.68 billion crowns from analysts polled by LSEG.

Items affecting comparability, mainly restructuring costs, had a negative impact of 455 million crowns on its unadjusted figures.

($1 = 10.5315 Swedish crowns)

(By Jesus Calero; Editing by Milla Nissi)