Sandvik Plays Down Manufacturing-Slump Concerns as Orders Gain

(Bloomberg) -- Sandvik AB, the world’s largest maker of cutting tools, poured cold water on concerns about a European manufacturing slump, saying Germany is a weak spot but that other markets are doing fine.

  • Chief Executive Officer Bjorn Rosengren said Thursday that demand is “generally robust at a high level” with no signs of a downturn after announcing first-quarter orders of 27.8 billion kronor ($3 billion) that beat analyst estimates.

Key Insights

  • Sandvik is one of the first European industrials to report results, and does so against a backdrop of concern about weakness in the sector. An index of sentiment among German manufacturers fell to a seven-year low in March, but the Swedish company said Europe’s largest economy is an isolated case, held back by sluggish car sales.
  • Sandvik tools, including drills and milling cutters, are used to make metal components for autos, planes and industrial gear. Demand at its machining-solutions arm, has more than 100,000 customers worldwide, gained in North America, was stable in Europe and fell in Asia, which has also seen a softening of the autos segment.
  • Sales of mining equipment were a particular bright spot, with the order intake jumping 9 percent at constant exchange rates and excluding acquisitions and disposals.
  • The group’s first-quarter operating profit of 4.57 billion kronor and sales of 25 billion kronor were roughly in line with the average estimates of analysts surveyed by Bloomberg.

Market Reaction

  • The stock rose as much as 2.2 percent and traded 2 percent higher at 173 kronor as of 11:39 in Stockholm, where Sandvik is based. The shares have gained 37 percent this year.

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