By Johannes Hellstrom
SANDVIKEN, Dec 8 (Reuters) - Specialty steel and tool maker
Sandvik said it is braced for tough market conditions in its
mining and construction business in the coming years, and said
more job cuts were likely.
The head of Sandvik's mining and construction division,
which accounted for about 40 percent of group revenue last year,
told Reuters on Monday in an interview the unit's outlook for
2009 and 2010 was bleak, but it had no plans to cut equipment
selling prices.
"I believe ... we should prepare for at least two years of
tough times," Lars Josefsson said.
"There will be differences between customer segments, but
that (the downturn) would pass overnight is not something we are
planning for."
Sandvik's Construction and Mining unit (SMC), which sells
equipment such as rock drills, has benefited from a boom in the
mining industry over recent years, but the slowdown in the
global economy has had a severe impact on demand for metals.
The Swedish company has announced more than 1,000 job cuts
in the division in recent weeks, mainly affecting employees on
temporary contracts.
Josefsson said he expected further cuts, but that layoffs of
fixed-contract staff were likely to be limited.
A number of small mining companies cancelled orders when the
financial crisis hit in the third quarter. Lately, large mining
customers have grown increasingly hesitant, Josefsson said.
"What has happened this last month is that even the big
customers have said they are considering cancelling or
postponing orders," he said.
Swedish rival Atlas Copco said last week it had seen a
"clear slowdown" in mining investments so far in the fourth
quarter, noting a double-digit percentage fall in orders for
mining equipment as well as order cancellations.
Josefsson said the picture was similar for Sandvik, though
the two companies' mining and construction businesses did not
overlap in all areas.
"But with regard to base metals such as copper, nickel and
zinc there is practically no difference between us," he said.
Sales of new equipment to base metal mines have been weakest
while business with coal mines and gold mines remain relatively
strong.
While sales of new equipment were expected to be down,
Josefsson said aftermarket sales would most likely cushion the
fall in the division's total sales next year.
Josefsson said the mineral exploration segment, which makes
up roughly 5 percent of the division's revenues, had been hit
hard by this year's sharp fall in metal prices, and demand for
exploration equipment has fallen steeply in recent months.
"That market is not completely dead, but radically changed
compared to the situation six months ago," he said.
In spite of the slowing market, Sandvik will not lower its
prices on its mining and construction products to maintain sales
volumes.
"Over recent years people have questioned why we didn't take
out more in terms of prices when metal prices rallied -- we held
prices stable. It is important that we stay there even in
tougher times," Josefsson said.
(Writing by Victoria Klesty; editing by John Stonestreet)
- 
- 
- 
Welcome,
Guest!
News
