Sandvik AB shares fall as Q3 earnings miss expectations

Investing.com -- Sandvik AB's (ST:SAND ) shares took a hit following its third quarter results, which missed market expectations. 

At 7:25 am (1125 GMT), Sandvik AB was trading 3.6% lower at SEK 209.70.

The company's order intake for the third quarter reached SEK 28.8 billion, reflecting a modest 2% organic year-over-year growth. 

However, this figure fell 4% short of consensus estimates, indicating a weakening demand in some of its key segments. 

The segments of Sandvik Mining and Rock Solutions and Sandvik Manufacturing and Machining both reported order misses of 6% and 4%, respectively, while the Sandvik Rock Processing division managed to beat expectations slightly.

Revenue for the quarter totaled SEK 30.3 billion, marking a slight decline of 1% organically year-over-year, which again fell short of consensus estimates by 3%. 

The reported numbers reflect broader sluggishness in the mining and manufacturing sectors, with a particularly stark contrast seen in the aerospace market.

The company’s adjusted EBITA amounted to SEK 5,866 million, which was a 4% miss against forecasts. Sandvik's margin for this measure stood at 19.4%, which was also slightly below expectations. 

Further compounding these issues were higher one-off charges totaling SEK 455 million, much more than the SEK 51 million reported in the same quarter last year. 

These charges included a substantial SEK 390 million writedown that Sandvik had already announced in late September, which analysts had anticipated.

On the earnings front, Sandvik reported a net profit before tax that was 9% below consensus expectations, with earnings per share posting a 12% miss. 

“Today's Q3 results are softer than expected, showing that Sandvik cannot escape the soft tooling end markets, even if timely capacity adjustments ensure a resilient margin for SMM,” said analysts at RBC Capital Markets in a note. 

This disappointing performance stemmed from increased amortization and adjusting items, alongside higher net financial costs and an effective tax rate of 26.4%, compared to the expected 23.8%.

Breaking down the divisions further illustrates the challenges Sandvik faces. In the SMR division, order intake showed an 8% organic year-over-year increase, but was still a 6% miss against forecasts. 

This was partly due to foreign exchange headwinds. In the SMM division, orders declined by 4% year-over-year, with a particularly sharp 12% drop quarter-over-quarter, driven by weaker demand in general engineering and automotive sectors. 

The SRP division saw a modest 1% organic growth, yet demand for infrastructure equipment remains weak, especially in Europe and Asia.

“Here, while auto and general engineering was muted, we saw incremental weakness in aero and Asia. We think the latter is linked to pre-buy effects in China in Q2,” said analysts at Jefferies in a note. 

Source: Investing.com