Sandvik reported quarterly earnings above market expectations on Thursday, boosted by firming demand for mining equipment and a recovering automotive sector.
The metal-cutting tools and mining gear maker proposed an extra dividend on top of its ordinary payout as the pace of recovery held firm through the fourth quarter.
Sandvik, one of the first major Nordic industrial firms to report fourth-quarter earnings, said like-for-like order bookings, adjusted for major orders, grew 3% helped by a record 15% rise in its mining unit.
Sandvik shares, up 22% over the past three months, almost twice as much as the European industrials sector
The group is considered a good gauge of industrial demand due to high shipping volumes of its cutting tools, which have short lead times from order booking to delivery and a wide customer base.
“While the quarter was characterized by increased optimism and a higher degree of activity, we nonetheless find ourselves in the midst of the second wave of Covid-19,” Chief Executive Stefan Widing said in a statement, adding it remained difficult to forecast short-term consequences.
Widing said on a call with reporters that the underlying mining sentiment was positive, with mineral prices at record high levels.
“And we can also see that a lot of larger mining companies are expected to increase their investments this year,” he said.
The mining sector accounts for almost 40% of Sandvik’s sales, while engineering and automotive industries make up roughly a third.
Sandvik, which in April scrapped the dividend for 2019, proposed an ordinary dividend of 4.50 crowns per share for 2020, versus a mean forecast of 4.21 crowns. It also proposed an extra dividend of 2 crowns per share.
JPMorgan said it had also expected firepower to be retained for mergers and acquisitions.
“Evidently the Board feels there is sufficient capacity for both,” the investment bank said in a note.
Sandvik shares, up 22% over the past three months, almost twice as much as the European industrials sector, fell 0.6% in early trade.
The company, which competes with the likes of Epiroc and Kennametal, said adjusted operating profit fell to 4.51 billion crowns ($541.2 million) from 5.07 billion a year ago, still beating a mean forecast 4.31 billion according to Refinitiv data.
Under Widing, who joined Sandvik in February just before the pandemic hit with full force, the company has moved to quickly cut costs, helping it maintain profitability far better than during steep demand downturns in the past.
($1 = 8.3246 Swedish crowns)
(By Helena Soderpalm; Editing by Niklas Pollard and Emelia Sithole-Matarise)
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