Atlas Copco to cut back amid mining slowdown
Atlas Copco announced that it would be cutting its overall workforce as it faces weaker demand for its drill rigs and loaders from the global mining sector.
Robust activity in services and industrial equipment stemmed a fall in group profit and orders but the company forecast that demand for mining gear would slip further in the near term, Reuters reported.
Mining is suffering a hangover from years of booming expansion and has slashed capital spending as softer prices for commodities such as coal, copper and gold have raise doubts about future investment returns.
For Atlas Copco, and its cross-town rival Sandvik, which together supply more than half the global market for underground mining gear, this has brought a sharp drop-off in equipment orders.
Further hurting Atlas Copco is that its single biggest mining exposure - around one third - is to gold whose price has slid more than 20 percent since year-end.
“It’s a pity but we will reduce the work force all over in the organization for mining,” Atlas Copco’s chief executive officer Ronnie Leten told Reuters.
He declined to specify the size of cuts beyond saying sales and research and development staff would be shielded.
Atlas Copco said order intake for its mining and excavation business fell 21 percent year-on-year and were also down compared with the initial months of 2013.
Some $30 million of mining orders were cancelled in the quarter.
Among other stocks in the Nordic cluster of mining suppliers, Denmark’s FLSmidth fell 1.7 percent and Finland’s Metso 2.6 percent.
Atlas's compressor and industrial business, which like mining and rock excavation accounts for roughly a third of sales, fared better and tempered the fall in group order bookings to 9 percent for the group, roughly in line with analysts' expectations.
Leten said in a conference call that mining equipment alone only accounted for 7-8 percent of its business.
The company also said overall demand for the group's products and services, which include construction gear, industrial tools as well as compressors and mining equipment, was expected to be unchanged in the near term.