Specialty steel and tool maker Sandvik has reported a bigger-than-expected rise in second-quarter pre-tax profits, citing strong demand which led to higher volumes and allowed it to raise prices.
The Swedish company, which has extensive operations in the West Midlands and employs about 1,400 people in the UK, saw earnings rise to £167 million from £132 million a year ago, topping all forecasts from analysts who expected on average £158 million. The highest analyst estimate was about £163 million.
The firm, which makes products from steel tubes to milling machines for the auto industry has operations across the region including, Sandvik's main UK offices in Halesowen, the UK arm of Sandvik's Hard Materials division in Coventry, Sandvik Saxon in Rugby and Kanthal in Stoke.
"Demand during the quarter remained favourable in all market areas and all business areas reported continued growth," the firm said in a statement.
Sales in the quarter rose to £1.2 billion from £1.04 billion a year ago and well above the £1.16 billion expected by analysts.
"The firm posted good numbers for the second quarter, but especially the order bookings were strong. They have picked up momentum again in all business areas," Kaupthing Bank analyst Peder Frolen said.
Shares in Sandvik have gained nearly 13 per cent over the past month as strong figures from competitors have stoked expectations ahead of its report.
"It was a very strong report, both in terms of results and
order intake," Swedbank analyst Mats Liss said. "There was some concern over the impact of exchange rates, but they have not really affected Sandvik so far."
Sandvik said currency swings cut about £2.23 million from operating earnings in the quarter, which was more than offset by demand.
Group order bookings rose to £ 1 . 3 billion from £1.07 billion a year ago and new orders in Europe, its biggest market, rose 16 per cent at fixed exchange rates for comparable units.
"In Germany and eastern Europe demand remained high while it was somewhat weaker in southern Europe and the UK," it said.
Sandvik is the last of Sweden's blue-chip engineering firms to report on a quarter which has featured forecastbeating results from domestic rival Atlas Copco as well as the likes of SKF and Alfa Laval.
The sector has benefited from firm demand which has allowed companies to raise prices and offset high costs of raw materials. "In terms of individual business areas, it is noteworthy that its mining operations are doing better than those of Atlas Copco," Swedbank's Liss said.
Order bookings at the group's mining and construction unit rose 33 per cent for comparable units while sales and earnings rose by more than 30 per cent to put the operating margin at 12.6 per cent, up from 11.4 per cent a year earlier.
"The business area is expanding its capacity by establishing assembly plants in Poland, India and China. The units will be taken into operation in autumn 2005," it said.
Sandvik's key tooling division, the group's biggest and most profitable business area, posted an operating margin of 21.3 per cent, above a year-ago 19.4 per cent and 20.8 per cent expected by analysts, while order intake rose 13 per cent for comparable units to £409.6 million.