Quarterly Report • Apr 28, 2020
Quarterly Report
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| Quarterly highlights | 3 |
|---|---|
| Financial key figures | 5 |
| Quarterly performance | 6 |
| Segment performance | 12 |
| Sustainability | 16 |
| Quarterly key figures | 18 |
| Income statement | 21 |
|---|---|
| Statement of comprehensive income | 21 |
| Cash flow statement | 22 |
| Balance sheet | 23 |
| Equity statement | 24 |
| Statement by Management | 33 |
| 1. Key accounting estimates and judgements | 25 |
|---|---|
| 2. Income statement by function | 25 |
| 3. Segment information | 26 |
| 4. Revenue | 28 |
| 5. Provisions | 28 |
| 6. Contractual obligations and contingent | |
| assets and liabilities | 29 |
| 7. Business acquisitions | 29 |
| 8. Discontinued activities | 29 |
| 9. Net working capital | 30 |
| 10. Work in progress | 30 |
| 11. Earnings per share (EPS) | 31 |
| 12. Fair value measurement | 32 |
| 13. Events after the balance sheet date | 32 |
| 14. Accounting policies | 32 |
The COVID-19 pandemic impacted our first quarter results, especially in the month of March. It has also significantly affected FLSmidth's share price, in line with industry peers.
Order intake grew 16% owing to record high service orders and three large announced orders in Mining. Two years back, we changed our operating model to a more localised business set-up which is showing its true value in the current situation. We have seen significantly increased demand for our local resources, our remote support and our digital solutions.
Apart from the announced mining orders, customer hesitation on large investments has intensified, particularly in cement, and customers are increasingly deferring large investments. Demand for spare and wear parts is relatively stable, whereas technical services are challenged by restricted access to sites.
Revenue increased 4% organically, driven by Mining, whereas Cement revenue declined modestly.
EBITA was impacted by extraordinary costs related to business improvement initiatives and costs associated with more complex logistics and lower capacity utilisation because of the pandemic, as well as the previously communicated lower profitability in the mining capital business. Consequently, the EBITA margin declined to 5.0%.
Q1 saw an adjusted free cash flow of DKK -103m. The net working capital ratio increased from 13.3% to 13.5%, despite strong collection of receivables.
Entering the year 2020, our focus has been anchored around order intake and cash generation, combined with strong efforts on implementing our business improvement program and delivering on our MissionZero sustainability ambitions.
Throughout the quarter, we have increasingly had to navigate the unpredictability of the COVID-19 outbreak. In this regard, our clear top priority has been the safety of our employees and customers.
Around 70% our employees are currently working from home and a safe working environment has been established for the remaining employees. At the same time, we have been adapting our operations to the changing circumstances to support our customers the best way possible.
We have taken further actions to reduce costs and preserve cash. Amongst others, we have implemented a hiring freeze, an expansion of the ongoing business improvement program, postponement of salary adjustments, employees on furlough, reduced capex spend, and the withdrawal of the proposed dividend.
We have a strong financial position with a net debt to EBITDA of 1.4 and undrawn committed credit facilities of DKK 3.4bn by the end of March. In April, we bolstered our liquidity further by ensuring additional DKK 500m of available credit facilities.
On 23 March, FLSmidth suspended its financial guidance for 2020 as a consequence of the global uncertainty caused by the current pandemic and pending further clarification of market developments and the actual financial impact on the business.
Visibility remains low and our guidance remains suspended. However, we now expect that the full year results will be below the initial guidance for the year.
We are increasingly seeing disruptions to cement plants and mine sites which could impact near-term demand for equipment and services. Lockdowns and mobility restrictions are affecting suppliers and parts of our own operations, resulting in more complex logistics and lower capacity utilisation. We expect the biggest direct impact in Q2 and a more moderate impact in Q3, but we are unable to assess the duration of disruptions and the extent of the impact.
| $\circ$ |
|---|
| --------- |
| DKK | Initial guidance 2020 |
Current Guidance 2020 |
|---|---|---|
| Revenue (DKKbn) | 18.5-20.5 | suspended |
| EBITA margin | 8-9% | suspended |
| ROCE | 9-12% | suspended |
| Year | |||
|---|---|---|---|
| DKKm | Q1 2020 | Q1 2019 | 2019 |
| INCOME STATEMENT | |||
| Revenue | 4,525 | 4,416 | 20,646 |
| Gross profit | 1,047 | 1,081 | 4,849 |
| EBITDA before special non-recurring items | 319 | 395 | 2,008 |
| EBITA | 228 | 312 | 1,663 |
| EBIT | 146 | 218 | 1,286 |
| Financial items, net | 3 | (3) | (118) |
| EBT | 150 | 215 | 1,171 |
| Profit for the period, continuing activities | 106 | 145 | 798 |
| Loss for the period, discontinued activities | (5) | (9) | (22) |
| Profit for the period | 101 | 136 | 776 |
| ORDERS | |||
| Order intake (gross), continuing activities | 6,526 | 5,640 | 19,554 |
| Order backlog, continuing activities | 15,591 | 17,824 | 14,192 |
| EARNING RATIOS | |||
| Gross margin | 23.1% | 24.5% | 23.5% |
| EBITDA margin before special non-recurring items |
7.0% | 8.9% | 9.7% |
| EBITA margin | 5.0% | 7.1% | 8.1% |
| EBIT margin | 3.2% | 4.9% | 6.2% |
| EBT margin | 3.3% | 4.9% | 5.7% |
| CASH FLOW | |||
| Cash flow from operating activities (CFFO) | (35) | 234 | 948 |
| Acquisitions of property, plant and equipment | (32) | (39) | (177) |
| Cash flow from investing activities (CFFI) | (109) | (85) | (661) |
| Free cash flow | (144) | 149 | 287 |
| Free cash flow adjusted for acquisitions and disposals of enterprises and activities |
(103) | 155 | 574 |
| DKKm | Q1 2020 | Q1 2019 | Year 2019 |
|---|---|---|---|
| BALANCE SHEET | |||
| Net working capital | 2,792 | 2,207 | 2,739 |
| Net interest-bearing debt (NIBD) | 2,663 | 2,059 | 2,492 |
| Total assets | 22,305 | 23,001 | 23,532 |
| Equity | 8,537 | 8,201 | 8,793 |
| Dividend to shareholders, paid | 0 | 0 | 450 |
| FINANCIAL RATIOS | |||
| CFFO / Revenue | -0.8% | 5.3% | 4.6% |
| Book-to-bill | 144.2% | 127.7% | 94.7% |
| Order backlog / Revenue | 75.1% | 94.2% | 68.7% |
| Return on equity | 4.7% | 6.6% | 9.1% |
| Equity ratio | 38.3% | 35.7% | 37.4% |
| ROCE, average | 10.2% | 10.8% | 10.9% |
| Net working capital ratio, end | 13.5% | 11.7% | 13.3% |
| NIBD / EBITDA | 1.4 | 1.1 | 1.2 |
| Capital employed, average | 15,424 | 14,348 | 15,251 |
| Number of employees | 12,001 | 12,273 | 12,346 |
| SHARE RATIOS | |||
| Cash flow per share (CFPS), (diluted) | (0.7) | 4.7 | 18.9 |
| Earnings per share (EPS), (diluted) | 2.0 | 2.8 | 15.5 |
| Share price | 153.6 | 287.5 | 265.4 |
| Number of shares (1,000), end | 51,250 | 51,250 | 51,250 |
| Market capitalisation, end | 7,869 | 14,734 | 13,602 |
The financial ratios have been computed in accordance with the guidelines of the Danish Finance Society and financial definitions according to note 7.8 in the Annual Report 2019.
Number of employees have been restated in comparison periods as the measure has changed in Q1 2020. The number of employees includes temporary employees compared to previous where only permanent headcount was disclosed.
Throughout the report we present financial measures which are not defined according to IFRS. We have included additional information in the Annual Report 2019 note 7.4 Alternative performance measures and note 7.8 Definition of terms.
Order intake increased 16% owing to a record high service order intake and three large announced orders in Mining. Revenue increased 2%, attributable to Mining.
Order intake increased 16% to DKK 6,526m (Q1 2019: DKK 5,640m). Currency had a 1% negative impact and acquisitions a 1% positive impact on order intake in Q1.
Mining order intake increased 73%, comprising a 16% increase in service orders and 160% growth in capital orders. The service business benefitted from our strong local presence and in some cases customers have increased pur-
(DKKm) Q1 2020 Q1 2019 Change (%) Order intake (gross) 6,526 5,640 16% - Hereof service order intake 2,931 2,648 11% - Hereof capital order intake 3,595 2,992 20% Order backlog 15,591 17,824 -13% Revenue 4,525 4,416 2% - Hereof service revenue 2,606 2,414 8% - Hereof capital revenue 1,919 2,002 -4% Gross profit 1,047 1,081 -3% Gross profit margin 23.1% 24.5% SG&A cost (728) (686) 6% SG&A ratio 16.1% 15.5% EBITDA before special non-recurring items 319 395 -19% EBITDA margin before special non-recurring items 7.0% 8.9% EBITA 228 312 -27% EBITA margin 5.0% 7.1% EBIT 146 218 -33% EBIT margin 3.2% 4.9% Number of employees 11,999 12,270 -2%
chase of critical parts to ensure continued plant production, as they are concerned about potential supply delays related to COVID-19. Mining capital orders included three large announced orders in Russia and Belarus, a region where FLSmidth has successfully expanded its presence in recent years. The orders had a combined value of around DKK 2.4bn.
Cement service order intake was stable compared to Q1 2019 but total Cement order intake declined 50% due to hesitation on capital investments and the absence of large project orders. The comparative quarter contained two large cement plant orders with a combined value of around DKK 900m.
| Growth in order intake Q1 2020 | FLSmidth | ||
|---|---|---|---|
| (vs. Q1 2019) | Mining | Cement | Group |
| Organic | 73% | -51% | 16% |
| Acquisition | 3% | 0% | 1% |
| Currency | -3% | 1% | -1% |
| Total growth | 73% | -50% | 16% |
Based on recent market developments, it is expected that some customers in both Mining and Cement will defer part of their capital investments to later in the year, which could adversely impact our capital order intake. The service business has so far been more resilient, with a relatively stable demand for spare and wear parts in line with production rates, whereas plant shutdowns and restricted access to sites are significantly reducing the activity level within technical services and commissioning. Mining and Cement are, however, deemed "essential" industries in many parts of the world which helps sustain production during the virus outbreak.
Order backlog for the Group increased to DKK 15,591m (end of 2019: DKK 14,192m). The increase of DKK 1.4bn was explained by higher order intake than the level of revenue recognised of DKK 2.0bn, less foreign exchange adjustments of DKK -0.6bn. There were no significant order terminations in Q1.
Approximately 56% of the backlog is expected to be converted to revenue in 2020, 23% in 2021, and 21% in 2022 and beyond.
Revenue increased 2% to DKK 4,525m in Q1 2020 (Q1 2019: DKK 4,416m), explained by a 6% growth in Mining, partly offset by a 3% decline in Cement. Organic growth for the Group was 4%.
Service revenue in Mining accounted for 61% of the total Mining revenue (Q1 2019: 64%). Mining saw a 15% growth in capital revenue and a 1% growth in service revenue.
| Growth in revenue Q1 2020 | FLSmidth | ||
|---|---|---|---|
| (vs. Q1 2019) | Mining | Cement | Group |
| Organic | 9% | -4% | 4% |
| Acquisition | 1% | 0% | 0% |
| Currency | -4% | 1% | -2% |
| Total growth | 6% | -3% | 2% |
Service revenue in Cement accounted for 52% of the total Cement revenue (Q1 2019: 41%). Cement saw a 23% growth in service revenue and a 20% decline in capital revenue.
Profitability was impacted by extraordinary costs related to business improvement initiatives and costs associated with more complex logistics and lower capacity utilisation because of the pandemic. Consequently, the group EBITA margin declined to 5.0%.
Extended business improvement initiatives
In the third quarter of 2019, we announced that we accelerated ongoing business improvement initiatives, including site consolidation, an improved logistical setup and a reduction of headcount. Within Mining, our project execution is being consolidated into fewer centres to strengthen competencies in the main centres and ensure better absorption of resources in line with fluctuating capital order intake. Within procurement, we are optimising our warehouse infrastructure and ensuring a better utilisation at manufacturing and assembly sites.
In total, the initiatives were expected to generate an annual EBITA improvement of DKK 100m with a full run-rate from end of 2020. The implementation costs were anticipated to be around DKK 150m. Based on the current market environment, the program has been extended with a further EBITA improvement of DKK 50m at a cost of DKK 30m which gives the combined program a total EBITA improvement of DKK 150m at a cost of DKK 180m. The program contains sustainable improvements only. It does not include temporary savings such as employees on furlough and reduced travel expenses.
| Initial | Extended | Run-rate | Run-rate | |
|---|---|---|---|---|
| Savings, DKKm | program | program | end Q1 | end 2020 |
| EBITA improvement1 | 100 | 150 | 75 | 150 |
| Initial | Extended | Realised | ||
|---|---|---|---|---|
| Costs, DKKm | program | program | Q1 2020 | 2020 |
| Implementation costs1 | (150)2 | (180)2 | (53) | (140) |
1) Mining and Cement Impact based on the segment's relative share of Group revenue 2) Includes DKK 40m of costs in 2019
The EBITA improvement run-rate by the end of Q1 2020 was DKK 75m, and the implementation cost in Q1 was DKK 53m. 350 employees were terminated in Q1 and an additional 250 employees will be terminated in April.
The business improvement program is on track with respect to workforce adjustments. The other initiatives, such as the improved logistical setup, are also progressing well but the pace of implementation could be impacted by the current virus outbreak.
Gross profit declined 3% to DKK 1,047m (Q1 2019: DKK 1,081m). The gross margin decreased to 23.1% (Q1 2019: 24.5%), attributable to both Mining and Cement. The decline was a result of impacts from COVID-19, costs related to the implementation of business improvement initiatives, and the previously communicated lower profitability in the Mining capital business.
Lockdowns and mobility restrictions related to the virus outbreak has impacted our internal and external supply chain, resulting in more complex and costly logistics and increased costs related to quality control. It has also affected utilisation of our workshops and global service technicians.
On the positive side, we have managed to maintain our capability to deliver, due to a flexible supply chain enabling us to switch between in-house workshops and between external suppliers across countries and continents.
In January, our large workshop in Qingdao, China was shut down because of the virus outbreak. This workshop, and our other Chinese facilities are now back to normal operation but transportation of goods to and from China remains challenging.
Supply chain disruptions have since moved to Western Europe, South Africa and India, although some countries have started easing restrictions. Other regions have, so far, seen only little or moderate supply chain impact.
In Q1 2020, total research and development costs (R&D) amounted to DKK 66m (Q1 2019: DKK 63m), representing 1.5% of revenue (Q1 2019: 1.4%), of which DKK 26m was capitalised (Q1 2019: DKK 24m) and the balance of DKK 40m expensed as production costs (Q1 2019: DKK 39m). R&D costs in Q1 related to several projects, including new sustainable cement technologies, digitalization, standardisation and dry stack tailings.
Sales, general and administrative costs (SG&A) and other operating items increased 6% to DKK 728m in Q1 2020, explained by costs related to the implementation of business improvement initiatives. The cost percentage was 16.1% of revenue, compared to 15.5% in Q1 2019. Adjusted for costs related to the implementation of business improvement initiatives, the SG&A ratio was 15.3% in Q1 2020.
Sales costs increased 10% in Q1 2020, reflected in the strong order intake for the quarter. Administrative costs increased 3% in Q1, but decreased if adjusted for costs related to the business improvement initiatives.
We are monitoring the development of the virus outbreak and its impact on our business, and we are taking actions to align the cost base with prevailing market conditions.
Depreciation increased to DKK 91m (Q1 2019: DKK 83m) attributable to leased assets.
EBITA decreased 27% to DKK 228m (Q1 2019: DKK 312m), as a result of the extraordinary costs related to business improvement initiatives of DKK 53m and COVID-19 (estimated at DKK 47m, including currency impact), as well as lower profitability in the Mining capital business of DKK 26m. Consequently, the EBITA margin decreased to 5.0% (Q1 2019: 7.1%). Adjusted for extraordinary costs, the EBITA margin was 7.2% in Q1 2020.
Amortisation of intangible assets decreased to DKK 82m (Q1 2019: DKK 94m), equally explained by completed R&D projects and lower purchase price allocations. Purchase price allocations amounted to DKK 24m (Q1 2019: DKK 30m).
Earnings before interest and tax (EBIT) decreased 33% to DKK 146m (Q1 2019: 218m).
Net financial items amounted to DKK 3m (Q1 2019: DKK -3m), of which foreign exchange and fair value adjustments amounted to DKK 22m (Q1 2019: DKK 0m) and net interest amounted to DKK -19m (Q1 2019: DKK -3m).
Cement Copper Gold Coal Iron ore Fertilizer Other
Tax for the period was DKK -44m (Q1 2019: DKK -70m), corresponding to an effective tax rate of 29% (Q1 2019: 33%).
Profit for the period decreased to DKK 101m (Q1 2019: DKK 136m) as a result of the lower operating income.
Profit from continuing activities decreased to DKK 106m (Q1 2019: DKK 145m).
Loss from discontinued activities was DKK -5m in Q1 2020 (Q1 2019: DKK -9m). As previously disclosed, FLSmidth retains the responsibility to finalise legacy projects, which are expected to be finalised during 2020. See note 8 for further information about discontinued activities.
Earnings per share decreased to DKK 2.0 per share (diluted) (Q1 2019: DKK 2.8).
The number of employees was 12,001 at the end of Q1 2020 (end of 2019: 12,346). The decrease reflects the workforce adjustment which took place in Q1 as part of our business improvement initiatives.
The method for counting employees has been changed in 2020, as temporary workers now are included in the reported headcount. The comparison number for 2019, above, has been restated to also reflect this change.
In January, FLSmidth acquired a service centre to strengthen its Mining service business in North America as part of the strategy to expand sales of standardised products and services.
FLSmidth has a strong financial position with a net debt to EBITDA of 1.4 and undrawn committed credit facilities of DKK 3.4bn by the end of March. Despite strong collection of receivables, Q1 saw a negative free cash flow. ROCE decreased to 10.2% due to higher capital employed.
Despite DKK 0.6bn reduction in trade receivables, net working capital increased slightly to DKK 2,792m at the end of Q1 2020 (end of 2019: DKK 2,739m), because of lower trade payables and a lower level of prepayments from customers. The corresponding net working capital ratio was 13.5% of 12-months trailing revenue (end of 2019: 13.3% of revenue). Excluding currency adjustments, net working capital would have been DKK 168m higher by the end of Q1 2020, which is reflected in the net working capital development in the cash flow statement.
Supply chain financing led to a moderate decrease in trade payables (increase in net working capital) in Q1.
ROCE decreased to 10.2% in Q1 2020 (Q1 2019: 10.8%) because of a higher capital employed, whereas 12-months trailing EBITA increased to DKK 1,579m (Q1 2019: DKK 1,554m). Average capital employed increased to DKK 15.4bn in Q1 2020 (Q1 2019: DKK 14.3bn). The increase was related to working capital and intangible assets.
Due to the negative free cash flow, net interest-bearing debt (NIBD) increased to DKK 2,663m (end of 2019: DKK 2,492m). Consequently, the Group's financial gearing was 1.4 (end of 2019: 1.2), still well below the long term maximum threshold of two times NIBD to EBITDA.
Given the global uncertainty caused by the COVID-19 pandemic, the Board of Directors decided on 23 March to withdraw the proposal to pay a dividend of DKK 8 per share to ensure resilience in a period of market uncertainty and to further strengthen FLSmidth's financial position. Once market conditions have stabilised, the Board will revisit the capital structure and allocation to shareholders.
By the end of March, FLSmidth had DKK 6.5bn of available committed credit facilities of which DKK 3.4bn was undrawn.
On 3 April 2020, FLSmidth obtained additional committed credit facilities of DKK 500m to bolster its liquidity buffer in a period of extraordinary uncertainty.
The committed credit facilities have a weighted average time to maturity of 4.2 years. DKK 1.7bn of credit facilities are maturing in 2022 and the majority, DKK 5.0bn, is maturing in 2025. The remaining DKK 0.3bn is maturing in later years.
Equity at the end of Q1 2020 increased to DKK 8,537m (end of Q1 2019: DKK 8,201m), explained by the profit for the period and currency translation effects. The equity ratio was 38.3% (end of Q1 2019: 35.7%), well above the long-term target of minimum 30%.
CFFO decreased to DKK -35m in Q1 2020 (Q1 2019: DKK 234m), due to a lower EBITDA and cash outflow from working capital. CFFO in discontinued activities amounted to DKK 1m (Q1 2019: DKK -72m). Discontinued activities are not expected to generate any significant net cash flow in 2020. There can, however, be a timing difference between cash paid and cash received related to the outstanding net working capital and provision balances.
Change in net working capital had a DKK 197m negative impact in Q1 2020 (Q1 2019: DKK 58m positive impact), of which discontinued activities accounted for a DKK 10m positive impact (Q1 2019: DKK 9m positive impact).
Change in provisions had a DKK 58m negative impact in Q1 2020 (Q1 2019: DKK 120m negative impact). The change related mainly to used provisions in continuing activities. Provision changes related to discontinued activities had a DKK 5m negative impact in Q1 2020.
Cash flow from investing activities amounted to DKK -109m in Q1 2020 (Q1 2019: DKK -85m). The increase related to an investment in a service centre in North America. Excluding this, the level of investments was below last year, and investments are currently being curtailed.
Free cash flow adjusted for acquisitions and disposals amounted to DKK -103m (Q1 2019: DKK 155m).
| Mining | Cement |
|---|---|
| ~90% of sites in operation. Some sites operating at reduced capacity. Largest impact in South Africa and India. Lower impact in the Americas. |
~80% of cement plants* in operation but some with reduced capacity. Largest impact in India and The Middle East but all regions are impacted. |
| Running well overall. Impact from lockdown in India and South Africa. Around 70% of employees working remotely. Low capacity utilisation for service technicians and some sites. |
|
| More complex logistics. High disruption in India, South Africa and Western Europe - Other regions less impacted. Flexibility to switch between own workshops and between external suppliers. |
|
The COVID-19 outbreak has caused a severe economic downturn and it has triggered travel restrictions and shutdowns complicating the run of mining operations and disrupting supply chains around the world. At this point, it is not possible to assess the impact on our mining business, not least because some governments continue lockdowns or impose additional restrictions, while others have started to ease restrictions.
In many countries, mining is deemed an "essential" industry and around 90% of mine sites are currently in operation with some operating at reduced capacity. Plant shutdowns appear to be driven by regulatory restrictions and not lack of demand. In North America, all US sites remain open but the crisis has led to the shutdown of all sites in Mexico and some sites in Canada. Activity in India is very low at present.
In South America, national lockdowns and regionally imposed restrictions on movement have reduced activity in a number of countries. In South Africa, almost all miners had declared force majeure by mid-April. At the same time, the situation had improved in Europe and Russia where all of our customers' mine sites are in operation. In Asia most mines are open, and in Australia all mines are operating.
Several producers have started to defer investments during the outbreak, which has impacted our capital order intake since March and several projects in the pipeline are being postponed to later in the year. However, we still see opportunities and Q1 showed strong activity in the service business, as we saw increased demand for our local resources and digital solutions as access to sites becomes limited by virus control activities, our customers have increasingly been looking at digital and remote capabilities and there has been an increased focus on digitalized aftermarket support. We also see continued interest in
solutions to operate more sustainably. As such, service activity increased in some regions during the quarter based on the response to the impact of the pandemic. The increase in gold price has also provided gold mining companies with a good incentive to invest. It is uncertain to what extent mine disruptions will impact our service business, but so far, the impact has been limited to technical services and commissioning.
As for many other industries, the COVID-19 crisis is having negative implications for the global mining industry, but it will also create an opportunity for a significant rebound as restrictions are eased. The extensive global policy response already seen, such as the proposed USD 2 trillion infrastructure package in the US, could fuel growth in metals demand and prices. By the end of March, copper was trading at a four-year low, but improved in April when data showed that Chinese copper imports had increased as the manufacturing sector resumed production.
Order intake in Q1 2020 increased by 73% to DKK 5,214m (Q1 2019: DKK 3,008m), driven by an exceptionally strong capital order intake and a strong increase in service orders. The increase in capital orders was related to the three large announced orders received in Russia and Belarus, with a combined value of around DKK 2.4bn. Due to the virus outbreak, customers in many other regions are delaying decisions on larger capital investments, and several projects are currently being postponed.
We continued to see strong activity in the service business, as we saw increased demand for our local resources and digital solutions. Mining service order intake increased by 16% to DKK 2,083m compared to the first quarter in 2019 (Q1 2019: DKK 1,802).
Acquisitions had a 3% positive impact on order intake while currency effects had a 3% negative impact on order intake compared to the same quarter last year.
Revenue increased by 6% to DKK 2,735m (Q1 2019: DKK 2,579m). This increase was mainly driven by a strong capital revenue, which increased by 15% compared to the same quarter last year. Service revenue increased 1% year-onyear.
Acquisitions had a 1% positive impact on revenue while currency effects had a 4% negative impact on revenue in the quarter.
Gross profit, before allocation of shared costs, was slightly down to DKK 680m (Q1 2019: DKK 689m). The gross margin decreased to 24.9% (Q1 2019: 26.7%), due to a combination of impacts from COVID-19, costs related to the implementation of business improvement initiatives and lower profitability in the Mining capital business. EBITA decreased 18% year-on-year to DKK 201m (Q1 2019: DKK 246m) and the corresponding EBITA margin decreased to 7.3% (Q1 2019: 9.5%).
| (DKKm) | Q1 2020 | Q1 2019 | Change (%) |
|---|---|---|---|
| Order intake (gross) | 5,214 | 3,008 | 73% |
| - Hereof service order intake | 2,083 | 1,802 | 16% |
| - Hereof capital order intake | 3,131 | 1,206 | 160% |
| Order backlog | 9,621 | 9,171 | 5% |
| Revenue | 2,735 | 2,579 | 6% |
| - Hereof service revenue | 1,673 | 1,654 | 1% |
| - Hereof capital revenue | 1,062 | 925 | 15% |
| Gross profit before allocation of shared cost | 680 | 689 | -1% |
| Gross profit margin before allocation of shared cost | 24.9% | 26.7% | |
| EBITA before allocation of shared cost | 414 | 442 | -6% |
| EBITA margin before allocation of shared cost | 15.1% | 17.1% | |
| EBITA | 201 | 246 | -18% |
| EBITA margin | 7.3% | 9.5% | |
| EBIT | 143 | 180 | -21% |
| EBIT margin | 5.2% | 7.0% | |
| Number of employees | 5,682 | 5,208 | 9% |
The COVID-19 outbreak is disrupting the construction and building materials markets in many parts of the world. In some countries, the activity level has decreased significantly due to lockdowns and construction site closures. The cement industry, however, is deemed an "essential" industry in many countries and around 80% of the world's cement plants (excluding China) are currently in operation, some operating at reduced capacity. The market for services was relatively stable in the first quarter, but cement consumption is being impacted by reduced construction activity, and plant shutdowns and restricted access to sites has reduced the activity level within technical services and commissioning. Despite the pandemic, there is still an ongoing market activity in most regions.
In Europe, Russia and North Africa, cement plants are still in operation in most countries and the supply and demand situation has so far only been slightly negatively impacted. The majority of the plants in the region are in operation, but some at reduced capacity. In Asia (excluding China), most plants are operating, but we see shutdowns in Malaysia and the Philippines. In January and February, Chinese cement consumption declined by 30%, but the Chinese government is now pushing to get construction and production back on track. In North America, about 15% of our installed base is currently shut down (all Mexican sites are closed), but the demand for service bundles remains strong with a record high order intake the first quarter. In South America, we see significantly reduced activity. In Peru and Argentina, national lockdowns have reduced activity at cement plants, and in the case of Colombia, some customers have decided to either reduce or suspend production. In Australia, plants are running at full capacity.
We see the biggest impact from COVID-19 in India and The Middle East, where activity is very low. Across regions, many cement producers are suspending capital investments until the COVID-19 impact on the macroeconomic outlook is clearer. We do, however, see continued interest for our sustainability upgrades and a growing interest in our digital solutions and remote support, driven by the restrictions of on-site services. Also, several customers are looking for services that can drive down OPEX in the short term to manage the impact of the pandemic.
As for many other industries, the virus outbreak is having negative implications for the cement industry, but the duration and impact of the disruption is still unknown. Strong supportive measures are being implemented world-wide to boost the economy, including prospects for infrastructure stimulus, which could speed up the recovery in several local cement markets.
Order intake in Q1 2020 decreased 50% year-on-year to DKK 1,312m (Q1 2019: DKK 2,632m). The decrease was attributable to capital order intake which to a large extent can be explained by the exceptionally strong comparative quarter in 2019, which included two large cement plant orders together worth around DKK 900m. Adjusted for these two large capital orders, order intake in Q1 2020 decreased by 24% compared to Q1 2019. Service order intake was stable at DKK 848m (Q1 2019: DKK 846m). Currency effects had a 1% positive impact on order intake compared to the same quarter last year.
In Q1 2020, revenue decreased by 3% to DKK 1,790m compared to the same quarter last year (Q1 2019: DKK 1,837m). Cement service revenue increased by 23% while capital revenue declined by 20%. Currency effects had a 1% positive impact on revenue in the quarter.
The development in revenue mix should be seen in the context of our continued efforts to grow services and standardised products while being selective with respect to large orders.
Gross profit, before allocation of shared cost, was slightly down to DKK 391m (Q1 2019: DKK 408m) and gross margin decreased to 21.8% (Q1 2019: 22.2%). Cement profitability was affected by a combination of the lower revenue, increased costs due to the COVID-19 pandemic, as well as costs related to the implementation of business improvement initiatives. Consequently, EBITA decreased by 54% year-on-year to DKK 32m (Q1 2019: DKK 69m) and the corresponding EBITA margin decreased to 1.8% (Q1 2019: 3.7%).
| (DKKm) | Q1 2020 | Q1 2019 | Change (%) |
|---|---|---|---|
| Order intake (gross) | 1,312 | 2,632 | -50% |
| - Hereof service order intake | 848 | 846 | 0% |
| - Hereof capital order intake | 464 | 1,786 | -74% |
| Order backlog | 5,970 | 8,653 | -31% |
| Revenue | 1,790 | 1,837 | -3% |
| - Hereof service revenue | 933 | 760 | 23% |
| - Hereof capital revenue | 857 | 1,077 | -20% |
| Gross profit before allocation of shared cost | 391 | 408 | -4% |
| Gross profit margin before allocation of shared cost | 21.8% | 22.2% | |
| EBITA before allocation of shared cost | 197 | 235 | -16% |
| EBITA margin before allocation of shared cost | 11.0% | 12.8% | |
| EBITA | 32 | 69 | -54% |
| EBITA margin | 1.8% | 3.7% | |
| EBIT | 8 | 41 | -80% |
| EBIT margin | 0.4% | 2.2% | |
| Number of employees | 4,784 | 5,559 | -14% |
At the end of 2019, we launched our new sustainability programme MissionZero with the objective to enable our customers to operate with zero emissions by 2030. Sustainability challenges, such as emissions, water- and energy consumption are increasingly impacting our customers' operations in terms of productivity, costs and license to operate. With MissionZero we are accelerating our efforts to deliver new solutions to support our customers and further position ourselves as a premium supplier. During the first quarter of 2020 we have received strong interest from customers and decision makers in the programme.
In February, FLSmidth and The Vietnam National Cement Corporation (VICEM), the leading cement producer in Vietnam, announced a cooperation to pioneer new solutions to significantly improve the sustainability of the cement sector in Vietnam. The goal is to implement technologies that radically reduce greenhouse gas emissions, pioneer solutions for using alternative fuels and improve air quality.
Vietnam is one of the fastest growing countries in terms of cement production with output expected to double in the next ten years. It is also one of the world's leading exporting countries in the global cement industry. The government is committed to fighting climate change and has set objectives to improve efficiency and reduce the environmental impact of its cement production.
As the largest cement producer in Vietnam, VICEM's ambition is to take an industry leadership role and implement solutions to reduce the environmental impact of cement production. This will specifically focus on reducing the emission of particulate matter, CO2, NOX and SO2, there-of preventing air, soil and water pollution from waste burning and landfills.
The cooperation between the two companies includes the commitment to jointly develop industrial-scale innovations to accelerate sustainable cement production. A key focus will be on the utilisation of municipal and other waste streams as alternative fuel sources, thereby preventing air pollution from waste burning, for instance. While management of waste is a growing concern in Vietnam, FLSmidth is developing solutions that enable a 100% switch to alternative fuels, which can reduce carbon emissions by approximately 33%. Other areas of the partnership will focus on solutions related to energy efficiency and waste-heat recovery.
The International Energy Agency (IEA) invited FLSmidth to peer review its upcoming report on decarbonising energy intensive industries such as cement and the building industry. This invitation reflects our responsibility as leader in sustainable technology to enable the transition of the sector towards zero emission.
The IEA is an autonomous intergovernmental organisation committed to shaping a secure and sustainable energy future for all. The IEA's reports act as reference documents for governments around the world guiding them on what is feasible within industries, highlighting trends and outlining potential future scenarios for decarbonisation.
Peer reviewing is an opportunity to highlight what we believe is technologically feasible to reach zero emissions within cement in line with our sustainability ambition MissionZero.
During Q1, most of our efforts have been on developing a data-driven, commercial approach that will support the further operationalisation of the MissionZero programme. We are piloting two new methodologies that will help to better articulate the sustainability savings for our customers from our technologies. A bespoke data framework is being developed that aims to track our progress from an innovation and sales point of view. This will be rolled-out during Q2 and Q3 of this year.
Year-to-date, our Q1 2020 Total Recordable Injury Rate decreased to 1.0 against a 2020 target of ≤ 2.5. This decrease is mainly explained by the COVID-19 situation since a larger part of our workforce is working from home. Any potential work-related incidents occurring at home during the "working from home" restrictions are still reported and counted in our statistics.
As a result of our efforts to encourage whistleblowing, Group Compliance continues to see an increasing number of reports through the whistleblower hotline. To promote the disclosure of any potential wrongdoings, we have also increased resources to conduct internal investigations. In 2020 Q1, 107 due diligence reports were completed, which is on track for our target of 200 for the year.
In Q1 2020, our share of women managers increased slightly from 11.2% to 11.4%, against our target of 12.5% and our overall share of women employees was relatively unchanged. Due to the ongoing virus outbreak, there has been a decrease in recruiting which could impact our ability to achieve our recruitment targets for women in the near term.
The global lock down of facilities and offices due to the virus outbreak is also reflected in the carbon footprint. Compared to the same period last year, our carbon intensity has decreased by 21.8% to 2.26 tonnes/DKKm revenue.
Due to the ongoing travel restrictions, supplier visits and thereby also supplier screenings have been very limited in Q1 2020. In 141 screenings completed (annual target of 800), 7 findings have been identified. Limited resources at suppliers' sites have resulted in a lower level of agreed improvement plans than targeted.
So far in 2020, we have conducted two off-site human rights audits and no on-site audits. This is due in part to travel restrictions in light of the COVID-19 situation. We are currently revising our strategy for human rights.
All data will be externally assured by year end 2020.
Suppliers assessed for sustainability
| DKKm | 2018 | 2019 | 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | |
| INCOME STATEMENT | |||||||||
| Revenue | 4,235 | 4,730 | 4,335 | 5,450 | 4,416 | 5,472 | 4,736 | 6,022 | 4,525 |
| - Hereof service revenue |
2,507 | 2,599 | 2,489 | 2,613 | 2,414 | 2,794 | 2,703 | 2,866 | 2,606 |
| - Hereof capital revenue |
1,728 | 2,131 | 1,846 | 2,837 | 2,002 | 2,678 | 2,033 | 3,156 | 1,919 |
| Gross profit | 1,074 | 1,181 | 1,126 | 1,312 | 1,081 | 1,315 | 1,126 | 1,327 | 1,047 |
| SG&A costs | (678) | (741) | (718) | (730) | (686) | (741) | (667) | (747) | (728) |
| EBITDA before special non-recurring items | 396 | 440 | 408 | 582 | 395 | 574 | 459 | 580 | 319 |
| Special non-recurring items | 3 | 0 | 0 | (5) | 0 | 0 | 0 | 0 | 0 |
| Depreciation and impairment of property, plant and equipment | (56) | (59) | (58) | (66) | (83) | (87) | (82) | (93) | (91) |
| EBITA | 343 | 381 | 350 | 511 | 312 | 487 | 377 | 487 | 228 |
| Amortisation and impairment of intangible assets | (95) | (82) | (96) | (92) | (94) | (106) | (83) | (94) | (82) |
| EBIT | 248 | 299 | 254 | 419 | 218 | 381 | 294 | 393 | 146 |
| Income from associates | 0 | 0 | 0 | 0 | 0 | 0 | 2 | 1 | 1 |
| Financial income/costs, net | (35) | (16) | (17) | (93) | (3) | (32) | (12) | (71) | 3 |
| EBT | 213 | 283 | 237 | 326 | 215 | 349 | 284 | 323 | 150 |
| Tax for the period | (66) | (95) | (66) | (21) | (70) | (115) | (94) | (94) | (44) |
| Profit on continuing activities for the period | 147 | 188 | 171 | 305 | 145 | 234 | 190 | 229 | 106 |
| Loss on discontinued activities for the period | (11) | (20) | (9) | (136) | (9) | (11) | 0 | (2) | (5) |
| Profit/loss for the period | 136 | 168 | 162 | 169 | 136 | 223 | 190 | 227 | 101 |
| Effect of purchase price allocation | (40) | (40) | (40) | (40) | (30) | (30) | (32) | (36) | (24) |
| Gross margin | 25.4% | 25.0% | 26.0% | 24.1% | 24.5% | 24.0% | 23.8% | 22.0% | 23.1% |
| EBITDA margin before special non-recurring items | 9.4% | 9.3% | 9.4% | 10.7% | 8.9% | 10.5% | 9.7% | 9.6% | 7.0% |
| EBITA margin | 8.1% | 8.1% | 8.1% | 9.4% | 7.1% | 8.9% | 8.0% | 8.1% | 5.0% |
| EBIT margin | 5.9% | 6.3% | 5.9% | 7.7% | 4.9% | 6.9% | 6.2% | 6.5% | 3.2% |
| Cash flow from operating activities | 343 | (412) | 357 | 97 | 234 | 143 | 244 | 327 | (35) |
| Cash flow from investing activities | (42) | (83) | (109) | (51) | (85) | (373) | (111) | (92) | (109) |
| Net working capital | 1,590 | 2,003 | 1,809 | 2,200 | 2,207 | 2,519 | 2,624 | 2,739 | 2,792 |
| Order intake, continuing activities (gross) | 5,018 | 5,056 | 7,164 | 4,503 | 5,640 | 4,954 | 4,571 | 4,389 | 6,526 |
| - Hereof service order intake |
2,885 | 2,773 | 2,569 | 2,680 | 2,648 | 2,784 | 2,928 | 2,890 | 2,931 |
| - Hereof capital order intake |
2,133 | 2,283 | 4,595 | 1,823 | 2,992 | 2,170 | 1,643 | 1,499 | 3,595 |
| Order backlog, continuing activities | 13,874 | 14,454 | 17,228 | 16,218 | 17,824 | 16,762 | 16,088 | 14,192 | 15,591 |
| DKKm | 2018 | 2019 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | ||
| SEGMENT REPORTING | ||||||||||
| Mining | ||||||||||
| Revenue | 2,418 | 2,780 | 2,242 | 3,117 | 2,579 | 3,221 | 2,832 | 3,537 | 2,735 | |
| - Hereof service revenue |
1,689 | 1,844 | 1,644 | 1,681 | 1,654 | 1,876 | 1,916 | 1,924 | 1,673 | |
| - Hereof capital revenue |
729 | 936 | 598 | 1,436 | 925 | 1,345 | 916 | 1,613 | 1,062 | |
| Gross profit before allocation of shared costs | 653 | 739 | 711 | 853 | 689 | 840 | 713 | 829 | 680 | |
| EBITA before allocation of shared costs | 434 | 493 | 456 | 589 | 442 | 541 | 463 | 528 | 414 | |
| EBITA | 227 | 276 | 299 | 387 | 246 | 336 | 261 | 323 | 201 | |
| EBIT | 165 | 221 | 228 | 323 | 180 | 274 | 195 | 256 | 143 | |
| Gross margin before allocation of shared costs | 27.0% | 26.6% | 31.7% | 27.4% | 26.7% | 26.1% | 25.2% | 23.4% | 24.9% | |
| EBITA margin before allocation of shared costs | 18.0% | 17.8% | 20.3% | 18.9% | 17.1% | 16.8% | 16.3% | 14.9% | 15.1% | |
| EBITA margin | 9.4% | 9.9% | 13.3% | 12.4% | 9.5% | 10.4% | 9.2% | 9.1% | 7.3% | |
| EBIT margin | 6.8% | 7.9% | 10.2% | 10.4% | 7.0% | 8.5% | 6.9% | 7.2% | 5.2% | |
| Order intake (gross) | 3,339 | 3,297 | 3,250 | 2,980 | 3,008 | 3,075 | 3,148 | 2,833 | 5,214 | |
| - Hereof service order intake |
2,084 | 1,948 | 1,702 | 1,707 | 1,802 | 1,901 | 2,024 | 1,807 | 2,083 | |
| - Hereof capital order intake |
1,255 | 1,349 | 1,548 | 1,273 | 1,206 | 1,174 | 1,124 | 1,026 | 3,131 | |
| Order backlog | 6,900 | 7,526 | 8,579 | 8,350 | 9,171 | 8,757 | 8,544 | 7,683 | 9,621 | |
| Cement | ||||||||||
| Revenue | 1,841 | 1,990 | 2,038 | 2,335 | 1,837 | 2,251 | 1,904 | 2,485 | 1,790 | |
| - Hereof service revenue |
818 | 754 | 846 | 932 | 760 | 918 | 787 | 942 | 933 | |
| - Hereof capital revenue |
1,023 | 1,236 | 1,192 | 1,403 | 1,077 | 1,333 | 1,117 | 1,543 | 857 | |
| Gross profit before allocation of shared costs | 433 | 456 | 432 | 475 | 408 | 496 | 434 | 543 | 391 | |
| EBITA before allocation of shared costs | 304 | 295 | 150 | 321 | 235 | 319 | 263 | 331 | 197 | |
| EBITA | 116 | 97 | 41 | 127 | 69 | 143 | 111 | 163 | 32 | |
| EBIT | 82 | 71 | 16 | 99 | 41 | 99 | 94 | 136 | 8 | |
| Gross margin before allocation of shared costs | 23.5% | 22.9% | 21.2% | 20.4% | 22.2% | 22.0% | 22.8% | 21.9% | 21.8% | |
| EBITA margin before allocation of shared costs | 16.5% | 14.8% | 7.4% | 13.7% | 12.8% | 14.1% | 13.8% | 13.3% | 11.0% | |
| EBITA margin | 6.3% | 4.9% | 2.0% | 5.4% | 3.7% | 6.3% | 5.8% | 6.6% | 1.8% | |
| EBIT margin | 4.5% | 3.6% | 0.8% | 4.2% | 2.2% | 4.4% | 4.9% | 5.5% | 0.4% | |
| Order intake (gross) | 1,707 | 1,792 | 3,858 | 1,524 | 2,632 | 1,879 | 1,423 | 1,556 | 1,312 | |
| - Hereof service order intake |
801 | 825 | 867 | 973 | 846 | 883 | 904 | 1,083 | 848 | |
| - Hereof capital order intake |
906 | 967 | 2,991 | 551 | 1,786 | 996 | 519 | 473 | 464 | |
| Order backlog | 7,057 | 7,003 | 8,653 | 7,872 | 8,653 | 8,005 | 7,544 | 6,509 | 5,970 |
| Q1 2019 | ||
|---|---|---|
| Revenue | 4,525 | 4,416 |
| Production costs | (3,478) | (3,335) |
| Gross profit | 1,047 | 1,081 |
| Sales costs | (378) | (343) |
| Administrative costs | (362) | (351) |
| Other operating items | 12 | 8 |
| EBITDA before special non-recurring items | 319 | 395 |
| Special non-recurring items | 0 | 0 |
| Depreciation and impairment of property, plant and equipment | (91) | (83) |
| EBITA | 228 | 312 |
| Amortisation and impairment of intangible assets |
(82) | (94) |
| EBIT | 146 | 218 |
| Income from associates | 1 | 0 |
| Financial income | 439 | 196 |
| Financial costs | (436) | (199) |
| EBT | 150 | 215 |
| Tax for the period | (44) | (70) |
| Profit for the period, continuing activities | 106 | 145 |
| Loss for the period, discontinued activities | (5) | (9) |
| Profit for the period | 101 | 136 |
| Attributable to: | ||
| Shareholders in FLSmidth & Co. A/S | 98 | 138 |
| Minority interests | 3 | (2) |
| 101 | 136 | |
| Earnings per share (EPS): | ||
| Continuing and discontinued activities per share | 2.0 | 2.8 |
| Continuing and discontinued activities per share, diluted | 2.0 | 2.8 |
| Continuing activities per share | 2.1 | 3.0 |
| Continuing activities per share, diluted | 2.1 | 3.0 |
| DKKm | Q1 2020 |
| Notes | DKKm | Q1 2020 | Q1 2019 |
|---|---|---|---|
| Profit for the period | 101 | 136 | |
| Items that will not be reclassified to profit or loss: |
|||
| Actuarial gains/(losses) on defined benefit plans |
0 | 0 | |
| Tax hereof, including reversal of impairment of tax assets |
0 | 0 | |
| Items that are or may be reclassified subsequently to profit or loss: | |||
| Currency adjustments regarding translation of entities |
(336) | 218 | |
| Cash flow hedging: | |||
| - Value adjustments for the period |
(31) | 9 | |
| - Value adjustments transferred to work in progress |
(1) | 3 | |
| Tax hereof | 0 | (2) | |
| Other comprehensive income for the period after tax |
(368) | 228 | |
| Comprehensive income for the period | (267) | 364 | |
| Attributable to: | |||
| Shareholders in FLSmidth & Co. A/S | (269) | 366 | |
| Minority interests | 2 | (2) | |
| (267) | 364 |
| DKKm | Q1 2020 | Q1 2019 | |
|---|---|---|---|
| EBITDA before special non-recurring items, continuing activities | 319 | 395 | |
| EBITDA before special non-recurring items, discontinued activities | (2) | (10) | |
| EBITDA | 317 | 385 | |
| Adjustment for gain on sale of property, plant and equipment and other non-cash items | 10 | 14 | |
| Adjusted EBITDA | 327 | 399 | |
| Change in provisions, pension and employee benefits | (58) | (120) | |
| 9 | Change in net working capital | (197) | 58 |
| Cash flow from operating activities before financial items and tax | 72 | 337 | |
| Financial items received and paid | (18) | (5) | |
| Taxes paid | (89) | (98) | |
| Cash flow from operating activities | (35) | 234 | |
| 7 | Acquisition of enterprises and activities | (41) | (6) |
| Acquisition of intangible assets | (35) | (40) | |
| Acquisition of property, plant and equipment | (32) | (39) | |
| Acquisition of financial assets | (3) | 0 | |
| Disposal of property, plant and equipment | 2 | 0 | |
| Cash flow from investing activities | (109) | (85) | |
| Addition of minority interests | 0 | 6 | |
| Exercise of share options | 0 | 4 | |
| Repayment of lease liabilities | (30) | (21) | |
| Change in net interest bearing debt | 23 | (50) | |
| Cash flow from financing activities | (7) | (61) | |
| Change in cash and cash equivalents | (151) | 88 | |
| Cash and cash equivalents at beginning of period | 1,001 | 875 | |
| Foreign exchange adjustment, cash and cash equivalents | (39) | 21 | |
| Cash and cash equivalents at 31 March | 811 | 984 | |
| DKKm | Q1 2020 | Q1 2019 |
|---|---|---|
| Free cash flow | (144) | 149 |
| Free cash flow, adjusted for acquisitions and disposals of enterprises and activities |
(103) | 155 |
The cash flow statement cannot be inferred from the published financial information only.
| Notes | DKKm | 31/03 2020 | 31/12 2019 | 31/03 2019 | Notes | DKKm | 31/03 2020 | 31/12 2019 | 31/03 2019 |
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | EQUITY AND LIABILITIES | ||||||||
| Goodwill | 4,309 | 4,376 | 4,306 | Share capital | 1,025 | 1,025 | 1,025 | ||
| Patents and rights | 945 | 967 | 1,004 | Foreign exchange adjustments | (635) | (300) | (236) | ||
| Customer relations | 564 | 609 | 669 | Cash flow hedging | (60) | (28) | (41) | ||
| Other intangible assets | 92 | 94 | 50 | Retained earnings | 8,191 | 8,082 | 7,439 | ||
| Completed development projects | 235 | 203 | 288 | Proposed dividend | 0 | 0 | 0 | ||
| Intangible assets under development | 343 | 362 | 230 | Shareholders in FLSmidth & Co. A/S | 8,521 | 8,779 | 8,187 | ||
| Intangible assets | 6,488 | 6,611 | 6,547 | Minority interests | 16 | 14 | 14 | ||
| Equity | 8,537 | 8,793 | 8,201 | ||||||
| Land and buildings | 1,524 | 1,575 | 1,618 | ||||||
| Plant and machinery | 409 | 439 | 470 | Deferred tax liabilities | 234 | 352 | 318 | ||
| Operating equipment, fixtures and fittings | 96 | 106 | 104 | Pension obligations | 362 | 362 | 272 | ||
| Tangible assets in course of construction | 90 | 80 | 77 | 5 | Provisions | 455 | 467 | 491 | |
| Property, plant and equipment | 2,119 | 2,200 | 2,269 | Lease liabilities | 182 | 204 | 234 | ||
| Bank loans and mortgage debt | 3,095 | 2,890 | 2,550 | ||||||
| Lease assets | 282 | 312 | 309 | Prepayments from customers | 192 | 251 | 235 | ||
| Other liabilities | 100 | 90 | 41 | ||||||
| Deferred tax assets | 1,149 | 1,246 | 1,186 | Non-current liabilities | 4,620 | 4,616 | 4,141 | ||
| Investments in associates | 147 | 165 | 0 | ||||||
| 12 | Other securities and investments | 44 | 44 | 43 | Pension obligations | 3 | 4 | 13 | |
| Other non-current assets | 1,340 | 1,455 | 1,229 | 5 | Provisions | 489 | 551 | 681 | |
| Lease liabilities | 108 | 114 | 78 | ||||||
| Non-current assets | 10,229 | 10,578 | 10,354 | Bank loans and mortgage debt | 91 | 285 | 171 | ||
| Prepayments from customers | 1,301 | 1,517 | 1,539 | ||||||
| Inventories | 2,726 | 2,714 | 2,966 | 10 | Work in progress | 1,595 | 1,578 | 1,880 | |
| Trade receivables | 4,452 | 5,068 | 4,454 | Trade payables | 3,934 | 4,350 | 4,033 | ||
| 10 | Work in progress | 2,440 | 2,612 | 2,662 | Income tax liabilities | 340 | 315 | 279 | |
| Prepayments | 540 | 591 | 451 | Other liabilities |
1,287 | 1,409 | 1,985 | ||
| Income tax receivables | 193 | 164 | 286 | Current liabilities | 9,148 | 10,123 | 10,659 | ||
| Other receivables | 914 | 804 | 844 | ||||||
| Cash and cash equivalents | 811 | 1,001 | 984 | Total liabilities | 13,768 | 14,739 | 14,800 | ||
| Current assets | 12,076 | 12,954 | 12,647 | ||||||
| Total equity and liabilities | 22,305 | 23,532 | 23,001 | ||||||
| Total assets | 22,305 | 23,532 | 23,001 |
| 2020 | 2019 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| DKKm | Share capital |
Currency adjust ments |
Cash flow hedging |
Retained earnings |
Share holders in FLSmidth & Co A/S |
Minority interests |
Total | Share capital |
Currency adjust ments |
Cash flow hedging |
Retained earnings |
Proposed dividend |
Share holders in FLSmidth & Co A/S |
Minority interests |
Total |
| Equity at 1 January | 1,025 | (300) | (28) | 8,082 | 8,779 | 14 | 8,793 | 1,025 | (454) | (53) | 7,277 | 461 | 8,256 | 10 | 8,266 |
| Comprehensive income for the period | |||||||||||||||
| Profit for the period | 98 | 98 | 3 | 101 | 138 | 138 | (2) | 136 | |||||||
| Other comprehensive income | |||||||||||||||
| Actuarial gains/(losses) on defined benefit plans |
0 | 0 | 0 | 0 | |||||||||||
| Currency adjustments regarding translation of entities |
(335) | (335) | (1) | (336) | 218 | 218 | 218 | ||||||||
| Cash flow hedging: | |||||||||||||||
| - Value adjustments for the period |
(31) | (31) | (31) | 9 | 9 | 9 | |||||||||
| - Value adjustments transferred to work in progress |
(1) | (1) | (1) | 3 | 3 | 3 | |||||||||
| Tax on other comprehensive income | 0 | 0 | 0 | (2) | (2) | (2) | |||||||||
| Other comprehensive income total | 0 | (335) | (32) | 0 | (367) | (1) | (368) | 0 | 218 | 12 | (2) | 0 | 228 | 0 | 228 |
| Comprehensive income for the period | 0 | (335) | (32) | 98 | (269) | 2 | (267) | 0 | 218 | 12 | 136 | 0 | 366 | (2) | 364 |
| Transactions with owners: | 0 | 0 | 0 | 0 | |||||||||||
| Dividend transferred to other liabilities | 0 | 0 | 11 | (461) | (450) | (450) | |||||||||
| Share-based payment | 11 | 11 | 11 | 11 | 11 | 11 | |||||||||
| Exercise of share options | 0 | 0 | 4 | 4 | 4 | ||||||||||
| Addition of minority interests | 0 | 0 | 0 | 6 | 6 | ||||||||||
| Equity at 31 March | 1,025 | (635) | (60) | 8,191 | 8,521 | 16 | 8,537 | 1,025 | (236) | (41) | 7,439 | 0 | 8,187 | 14 | 8,201 |
As a consequence of the current uncertainty due to the global COVID-19 pandemic, the Board of Directors decided to withdraw the dividend proposal of DKK 8 per share, totaling DKK 410m.
When preparing the financial statements, we are required to make several estimates and judgements. The estimates and judgements that can have a significant impact on the financial statements are categorised as key accounting estimates and judgements. Key accounting estimates and judgements are regularly assessed to adapt to the market conditions and changes in political and economic factors.
All key accounting estimates and judgements may have a significant impact to the financial statements. For further details, reference is made to The Annual Report 2019, Key accounting estimates and judgements, page 72 and to specific notes.
Compared to what was disclosed in the Annual Report 2019 the COVID-19 outbreak encountered during Q1-2020 is considered to impose significant uncertainty to the interim financial statements. The financial impacts of COVID-19 requires significant judgement and are included in the estimates of the activity of the group, the valuation of our asset base and the liquidity situation.
As for any other significant uncertainties we will, given the evolving nature of the pandemic and the uncertainties involved, monitor the situation and implication on Group's financial position, activities and cash flows. As of 31 March 2020, we have included updated estimates to assess the recoverability of our asset base, including expected credit losses (ECL). We have made no specific impairments of assets and no additional obligations or liabilities have been recognised as a direct result of COVID-19.
We have on 3 April 2020 bolstered our liquidity by ensuring additional DKK 500m of available credit facilities to accommodate for any significant uncertainty.
It is our policy to prepare the income statement based on an adjusted classification of the cost by function in order to show the earnings before special non-recurring items, depreciation, amortisation and impairment (EBITDA). Depreciation, amortisation, and impairment are therefore separated from the individual functions and presented in separated lines.
The income statement classified by function includes allocation of depreciation, amortisation and impairment:
| DKKm | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | 4,525 | 4,416 |
| Production costs, including depreciation, amortisation and impairment | (3,568) | (3,428) |
| Gross profit | 957 | 988 |
| Sales costs, including depreciation and amortisation | (395) | (364) |
| Administrative costs, including depreciation and amortisation | (428) | (414) |
| Other operating income | 12 | 8 |
| EBIT | 146 | 218 |
| Depreciation, amortisation and impairment consist of: Depreciation and impairment of property, plant and equipment and lease assets Amortisation and impairment of intangible assets |
(91) (82) |
(83) (94) |
| (173) | (177) | |
| Depreciation, amortisation and impairment are divided into: | ||
| Production costs | (90) | (93) |
| Sales costs | (17) | (21) |
| Administrative costs | (66) | (63) |
| (173) | (177) |
| Other | Con | Discon | |||||
|---|---|---|---|---|---|---|---|
| DKKm | Mining | Cement | Shared costs¹⁾ |
compa nies ²⁾ |
tinuing activities |
tinued activities³⁾ |
FLSmidth Group |
| Revenue | 2,735 | 1,790 | - | 0 | 4,525 | 0 | 4,525 |
| Production costs | (2,055) | (1,399) | (24) | 0 | (3,478) | 0 | (3,478) |
| Gross profit | 680 | 391 | (24) | 0 | 1,047 | 0 | 1,047 |
| SG&A costs | (231) | (170) | (323) | (4) | (728) | (2) | (730) |
| EBITDA before special non-recurring items | 449 | 221 | (347) | (4) | 319 | (2) | 317 |
| Special non-recurring items | 0 | 0 | - | 0 | 0 | - | 0 |
| Depreciation and impairment of property, plant and equipment | (35) | (24) | (32) | 0 | (91) | - | (91) |
| EBITA before allocation of shared costs | 414 | 197 | (379) | (4) | 228 | (2) | 226 |
| Allocation of shared costs | (213) | (165) | 379 | (1) | 0 | - | 0 |
| EBITA | 201 | 32 | 0 | (5) | 228 | (2) | 226 |
| Amortisation and impairment of intangible assets | (58) | (24) | - | - | (82) | - | (82) |
| EBIT | 143 | 8 | - | (5) | 146 | (2) | 144 |
| Order intake (gross) | 5,214 | 1,312 | 6,526 | 0 | 6,526 | ||
| Order backlog | 9,621 | 5,970 | 15,591 | 0 | 15,591 | ||
| Gross margin | 24.9% | 21.8% | 23.1% | 23.1% | |||
| EBITDA margin before special non-recurring items | 16.4% | 12.3% | 7.0% | 7.0% | |||
| EBITA margin before allocation of shared costs | 15.1% | 11.0% | - | - | |||
| EBITA margin | 7.3% | 1.8% | 5.0% | 5.0% | |||
| EBIT margin | 5.2% | 0.4% | 3.2% | 3.2% | |||
| Number of employees at 31 March 2020 | 5,682 | 4,784 | 1,533 | 11,999 | 2 | 12,001 | |
| Reconciliation of profit/(loss) for the period | |||||||
| EBIT | 146 | (2) | 144 | ||||
| Income from associates | 1 | 1 | |||||
| Financial income | 439 | 4 | 443 | ||||
| Financial costs | (436) | (4) | (440) | ||||
| EBT | 150 | (2) | 148 |
1) Shared costs consist of costs that are managed on Region or Group level and subsequently allocated to the divisions.
2) Other companies consist of companies with no activity, real estate companies, eliminations and the parent company.
3) Discontinued activities mainly consist of bulk material handling.
continued
| Other | Con | Discon | |||||
|---|---|---|---|---|---|---|---|
| DKKm | Mining | Cement | Shared costs¹⁾ |
compa nies ²⁾ |
tinuing activities |
tinued activities³⁾ |
FLSmidth Group |
| Revenue | 2,579 | 1,837 | - | 0 | 4,416 | 0 | 4,416 |
| Production costs | (1,890) | (1,429) | (18) | 2 | (3,335) | (3) | (3,338) |
| Gross profit | 689 | 408 | (18) | 2 | 1,081 | (3) | 1,078 |
| SG&A costs | (205) | (158) | (324) | 1 | (686) | (7) | (693) |
| EBITDA before special non-recurring items | 484 | 250 | (342) | 3 | 395 | (10) | 385 |
| Special non-recurring items | 0 | 0 | - | 0 | 0 | 0 | 0 |
| Depreciation and impairment of property, plant and equipment | (42) | (15) | (25) | (1) | (83) | 0 | (83) |
| EBITA before allocation of shared costs | 442 | 235 | (367) | 2 | 312 | (10) | 302 |
| Allocation of shared costs | (196) | (166) | 367 | (5) | 0 | 0 | 0 |
| EBITA | 246 | 69 | 0 | (3) | 312 | (10) | 302 |
| Amortisation and impairment of intangible assets | (66) | (28) | - | - | (94) | 0 | (94) |
| EBIT | 180 | 41 | - | (3) | 218 | (10) | 208 |
| Order intake (gross) | 3,008 | 2,632 | 5,640 | 0 | 5,640 | ||
| Order backlog | 9,171 | 8,653 | 17,824 | 111 | 17,935 | ||
| Gross margin | 26.7% | 22.2% | 24.5% | 24.4% | |||
| EBITDA margin before special non-recurring items | 18.7% | 13.6% | 8.9% | 8.7% | |||
| EBITA margin before allocation of shared costs | 17.1% | 12.8% | - | - | |||
| EBITA margin | 9.5% | 3.7% | 7.1% | 6.8% | |||
| EBIT margin | 7.0% | 2.2% | 4.9% | 4.7% | |||
| Number of employees at 31 March 2019 | 5,208 | 5,559 | 1,503 | 12,270 | 3 | 12,273 | |
| Reconciliation of profit/(loss) for the period | |||||||
| EBIT | 218 | (10) | 208 | ||||
| Income from associates Financial income |
0 196 |
0 5 |
0 201 |
||||
| Financial costs | (199) | (7) | (206) | ||||
| EBT | 215 | (12) | 203 |
1) Shared costs consist of costs that are managed on Region or Group level and subsequently allocated to the divisions.
2) Other companies consist of companies with no activity, real estate companies, eliminations and the parent company.
3) Discontinued activities mainly consist of bulk material handling.
Revenue arises from sale of life-cycle offerings to our customers. We sell a broad range of goods and services within the Mining and Cement Industries split into the main categories projects, products and services.
| DKKm | Q1 2020 | Q1 2019 |
|---|---|---|
| Point in time | 2,164 | 2,261 |
| Percentage of completion | 2,356 | 2,134 |
| Cash | 5 | 21 |
| Total revenue | 4,525 | 4,416 |
Seven Regions support the sales within the Mining and Cement Industries. Below, revenue is presented in the Regions in which delivery takes place. In Q1 2020, South America represented an 11% higher share of Group revenue than the same quarter last year, whereas the share of revenue in North America and Europe contracted.
| Q1 2020 | |||
|---|---|---|---|
| DKKm | Mining | Cement | Group |
| Projects | 731 | 520 | 1,251 |
| Products | 331 | 337 | 668 |
| Capital business | 1,062 | 857 | 1,919 |
| Service business | 1,673 | 933 | 2,606 |
| Total revenue | 2,735 | 1,790 | 4,525 |
| Q1 2019 | |||
|---|---|---|---|
| DKKm | Mining | Cement | Group |
| Projects | 636 | 746 | 1,382 |
| Products | 289 | 331 | 620 |
| Capital business | 925 | 1,077 | 2,002 |
| Service business | 1,654 | 760 | 2,414 |
| Total revenue | 2,579 | 1,837 | 4,416 |
| DKKm | 31/03 2020 |
31/12 2019 |
31/03 2019 |
|---|---|---|---|
| Provisions at 1 January | 1,018 | 1,279 | 1,279 |
| Foreign exchange adjustments | (17) | 16 | 20 |
| Additions | 72 | 439 | 77 |
| Used | (82) | (525) | (173) |
| Reversals | (47) | (191) | (31) |
| Provisions | 944 | 1,018 | 1,172 |
| The split of provisions is as follows: |
|||
| Warranties | 537 | 578 | 630 |
| Restructuring | 37 | 40 | 28 |
| Other provisions | 370 | 400 | 514 |
| 944 | 1,018 | 1,172 | |
| The maturity of provisions is specified as follows: |
|||
| Current liabilities | 489 | 551 | 681 |
| Non-current liabilities | 455 | 467 | 491 |
| 944 | 1,018 | 1,172 |
Used provisions amounted to DKK 82m in Q1 2020, a decrease of DKK 91m from Q1 2019. Provisions used in Q1 2020 related to discontinued activities amounted to DKK 5m (Q1 2019: DKK 71m). Refer to note 8 for a further description. The remainder of the used provisions were mainly to cover our warranty obligations and loss-making projects.
8. DISCONTINUED ACTIVITIES
Continued activities' share of Group provisions is shown below. The provisions from continued and discontinued activities add up to our total provisions.
Continued activities' share of Group provisions:
| DKKm | 31/03 2020 |
31/12 2019 |
31/03 2019 |
|---|---|---|---|
| Provisions at 1 January | 807 | 961 | 961 |
| Foreign exchange adjustments | (18) | 16 | 20 |
| Additions | 72 | 439 | 77 |
| Used | (77) | (418) | (102) |
| Reversals | (47) | (191) | (31) |
| Provisions | 737 | 807 | 925 |
No significant changes have occurred to the nature and extent of our contractual obligations and contingent assets and liabilities compared to what was disclosed in note 2.9 in the Annual Report 2019.
Contingent liabilities at 31 March 2020 amounted to DKK 2.7bn (31 December 2019: DKK 2.8bn), which primarily include performance bonds, payment guarantees and bid bonds at DKK 2.4bn (31 December 2019: DKK 2.5bn) issued to cover project-related risks.
7. BUSINESS ACQUISITIONS
On 31 January 2020, FLSmidth acquired the business Mill-Ore Group, an Eastern Canadian provider of equipment and aftermarket services to the mining industry.
The acquisition is part of our long-term commitment to increase the level of service and support to our customers in Eastern Canada.
The assets and liabilities in the opening balance are measured using the current available information. The purchase price allocation has not been finalised. If new information becomes available this could affect the values.
| Mill-Ore | ||
|---|---|---|
| DKKm | Group | Q1 2020 |
| Property, plant and equipment | 9 | 9 |
| Patens and rights acquired | 3 | 3 |
| Other intangible assets | 9 | 9 |
| Inventories | 6 | 6 |
| Carrying amount of net assets acquired | 27 | 27 |
| Goodwill | 14 | 14 |
| Transaction price, cash effect | 41 | 41 |
Discontinued activities effect on cash flow from operating activities:
| DKKm | Q1 2020 | 2019 | Q1 2019 |
|---|---|---|---|
| EBITDA | (2) | (19) | (10) |
| Adjustment for gain on sale of property, plant and equipment etc. |
0 | 3 | 3 |
| Adjusted EBITDA | (2) | (16) | (7) |
| Change in provisions | (5) | (108) | (71) |
| Change in net working capital | 10 | (58) | 9 |
| Cash flow from operating activities before financial items and tax |
3 | (182) | (69) |
| Financial items received and paid | 0 | (9) | (3) |
| Taxes paid | (2) | 0 | 0 |
| Cash flow from operating activities |
1 | (191) | (72) |
Discontinued activities' share of Group provisions:
| DKKm | 31/03 2020 |
31/12 2019 |
31/03 2019 |
|---|---|---|---|
| Provisions at 1 January | 211 | 318 | 318 |
| Foreign exchange adjustments | 1 | 0 | 0 |
| Used | (5) | (107) | (71) |
| Provisions | 207 | 211 | 247 |
Cash flow from discontinued operating activities totalled DKK 1m. The cash outflow was mainly due to change in provisions of DKK 5m.
Cash flow from net working capital from discontinued activities amounted to DKK 10m (Q1 2019: 9m), as net working capital related to discontinued business decreased from DKK 227m end of 2019 to DKK 215m end of Q1 2020.
Loss for the period from discontinued activities total DKK -5m (Q1 2019: DKK -9m), primarily consisting of SG&A cost.
Despite reduction in trade receivables net working capital increased at the end of Q1 2020, due to lower level of trade payables and lower level of prepayments from customers.
| DKKm | 31/03 2020 |
31/12 2019 |
31/03 2019 |
|---|---|---|---|
| Inventories | 2,726 | 2,714 | 2,966 |
| Trade receivables | 4,452 | 5,068 | 4,454 |
| Work in progress, assets | 2,440 | 2,612 | 2,662 |
| Prepayments | 540 | 591 | 451 |
| Other receivables | 769 | 710 | 733 |
| Derivative financial instruments | 86 | 36 | 36 |
| Prepayments from customers | (1,493) | (1,768) | (1,774) |
| Trade payables | (3,934) | (4,350) | (4,033) |
| Work in progress, liability | (1,595) | (1,578) | (1,880) |
| Other liabilities | (1,120) | (1,242) | (1,360) |
| Derivative financial instruments | (79) | (54) | (48) |
| Net working capital | 2,792 | 2,739 | 2,207 |
| Change in net working capital | (53) | (539) | (7) |
| Financial instruments and foreign exchange effect on cash flow |
(144) | 91 | 65 |
| Cash flow effect from change in net working capital |
(197) | (448) | 58 |
| DKKm | 31/03 2020 |
31/12 2019 |
31/03 2019 |
|---|---|---|---|
| Total costs incurred | 28,500 | 29,666 | 25,426 |
| Profit recognised as income, net | 2,946 | 2,479 | 2,094 |
| Work in progress | 31,446 | 32,145 | 27,520 |
| Invoicing on account to customers |
(30,601) | (31,111) | (26,738) |
| Net work in progress | 845 | 1,034 | 782 |
| Of which is recognised as work in progress: |
|||
| Under assets | 2,440 | 2,612 | 2,662 |
| Under liabilities | (1,595) | (1,578) | (1,880) |
| Net work in progress | 845 | 1,034 | 782 |
| DKKm | Q1 2020 | Q1 2019 |
|---|---|---|
| Profit for the year, continuing activities | 106 | 145 |
| Minority interests | (3) | 2 |
| FLSmidth's share of profit, continuing activities | 103 | 147 |
| Loss for the year, discontinued activities | (5) | (9) |
| FLSmidth's share of loss, discontinuing activities | (5) | (9) |
| FLSmidth's share of profit | 98 | 138 |
| Number of shares (1,000) | Q1 2020 | Q1 2019 |
|---|---|---|
| Average number of outstanding shares | 50,105 | 49,929 |
| Dilutive effect of share options in the money | 0 | 181 |
| Average diluted number of outstanding shares | 50,105 | 50,110 |
| DKK | Q1 2020 | Q1 2019 |
|---|---|---|
| Earnings per share from continuing activities | 2.1 | 3.0 |
| Earnings per share from discontinued activities | (0.1) | (0.2) |
| Earnings per share from continuing and discontinued activities | 2.0 | 2.8 |
| DKK | Q1 2020 | Q1 2019 |
|---|---|---|
| Diluted earnings per share from continuing activities | 2.1 | 3.0 |
| Diluted earnings per share from discontinued activities | (0.1) | (0.2) |
| Diluted earnings per share from continuing and discontinued activities | 2.0 | 2.8 |
| Q1 2020 | ||||
|---|---|---|---|---|
| DKKm | Level 1 | Level 2 | Level 3 | Total |
| Securities and investments |
6 | 38 | 44 | |
| Hedging instruments asset |
86 | 86 | ||
| Hedging instruments liability |
(79) | (79) | ||
| 6 | 7 | 38 | 51 |
| Q1 2019 | ||||
|---|---|---|---|---|
| DKKm | Level 1 | Level 2 | Level 3 | Total |
| Securities and investments |
9 | 34 | 43 | |
| Hedging instruments asset |
36 | 36 | ||
| Hedging instruments liability |
(48) | (48) | ||
| 9 | (12) | 34 | 31 |
Financial instruments measured at fair value are measured on a recurring basis and categorised into the following levels of the fair value hierarchy:
Securities and investments measured at fair value through profit/loss are either measured at quoted prices in an active market for the same type of instrument (level 1) or at fair value based on available data (level 3).
Hedging instruments are not traded on an active market based on quoted prices. Measured instead using a valuation technique, where all significant inputs are based on observable market data; such as exchange rates, interest rates, credit risk and volatilities (level 2).
There have been no significant transfers between the levels in Q1 2020 and Q1 2019.
On 3 April 2020, FLSmidth obtained additional committed credit facilities of DKK 500m to bolster its liquidity buffer in a period of extraordinary uncertainty, due to the COVID-19 pandemic. We are closely monitoring the development in the COVID-19 pandemic and the governments' and other businesses' responses which may have an impact on us.
We are not aware of any other subsequent matters that could be of material importance to the Group's financial position.
The condensed interim report of the Group for the first quarter of 2020 is presented in accordance with IAS 34, Interim Financial Reporting, as approved by the EU and additional Danish disclosure requirements regarding interim reporting by listed companies.
Apart from the below mentioned changes, the accounting policies are unchanged from those applied in the 2019 Annual Report. Reference is made to note 7.5, Accounting policies, note 7.6, Impact from new IFRS, note 7.7, New IFRS not yet adopted and to specific notes in the 2019 Annual Report for further details.
As of 31 March 2020, the FLSmidth Group has implemented all new or amended accounting standards and interpretations as adopted by the EU and applicable for the 2020 financial year. None of the new or amended standards or interpretations are expected to have significant impact on the consolidated financial statements.
The Board of Directors and Executive Management have today considered and approved the consolidated condensed interim financial statements for the period 1 January – 31 March 2020.
The consolidated condensed interim financial statements are presented in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU and Danish disclosure requirements for interim reports of listed companies. The consolidated condensed interim financial statements have not been audited or reviewed by the Group´s independent auditors.
In our opinion, the consolidated condensed interim financial statements give a true and fair view of the Group's financial position at 31 March 2020 as well as of the results of its operations and cash flows for the period 1 January – 31 March 2020.
In our opinion, the management review gives a fair review of the development in the Group's activity and financial matters, results of operations, cash flows and financial position as well as a description of the principal risks and uncertainties that the Group faces.
Valby, 28 April 2020
Thomas Schulz Group CEO
Annette Høi Butt Terndrup Group Executive Vice President
Vagn Sørensen Chairman
Tom Knutzen Vice Chairman
Gillian Dawn Winckler
Thrasyvoulos Moraitis
Richard Robinson Smith
Anne Louise Eberhard
Mette Dobel
Søren Dickow Quistgaard
Claus Østergaard
FLSmidth & Co. A/S' financial reports, whether in the form of annual reports or interim reports, filed with the Danish Business Authority and/or announced via the company's website and/or NASDAQ Copenhagen, as well as any presentations based on such financial reports, and any other written information released, or oral statements made, to the public based on this report or in the future on behalf of FLSmidth & Co. A/S, may contain forward looking statements.
Words such as 'believe', 'expect', 'may', 'will', 'plan', 'strategy', 'prospect', 'foresee', 'estimate', 'project', 'anticipate', 'can', 'intend', 'target' and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forwardlooking statements. Examples of such forward-looking statements include, but are not limited to:
These forward-looking statements are based on current plans, estimates and projections. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which may be outside FLSmidth & Co. A/S' influence, and which could materially affect such forward-looking statements.
FLSmidth & Co. A/S cautions that a number of important factors, including those described in this report, could cause actual results to differ materially from those contemplated in any forward-looking statements.
Factors that may affect future results include, but are not limited to, the severity, magnitude and duration of the COVID-19 pandemic, including impacts from governments' responses to the pandemic on our operations as well as derivative effects on our customers' businesses, and on global supply chains that may impact our operations, cash flows, financial performance and position, global as well as local political and economic conditions, including interest rate and exchange rate fluctuations, delays or faults in project execution, fluctuations in raw material prices, delays in research and/or development of new products or service concepts, interruptions of supplies and production, unexpected breach or termination of contracts, marketdriven price reductions for FLSmidth & Co. A/S' products and/or services, introduction of competing products, reliance on information technology, FLSmidth & Co. A/S' ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in legislation or regulation and interpretation thereof, intellectual property protection, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign enterprises, unexpected growth in costs and expenses, failure to recruit and retain the right employees and failure to maintain a culture of compliance. Unless required by law FLSmidth & Co. A/S is under no duty and undertakes no obligation to update or revise any forwardlooking statement after the distribution of this report.
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