FLSmidth
Interim Report Q1 2021 8
PROFIT
Gross margin improved 2.1%-points
due to business improvement ac-
tivities and a higher share from ser-
vice during the quarter. EBITA de-
clined by 17% due to lower
revenue entirely attributable to Ce-
ment. Owing to a 1.5%-points
higher EBITA margin year-on-year
in Mining, the Group EBITA margin
increased slightly to 5.1%.
Gross profit and margin
Gross profit declined 11% to DKK 935m (Q1 2020:
DKK 1,047m), explained by the decline in reve-
nue. Gross margin improved to 25.2% (Q1 2020:
23.1%) due to the successful implementation of
business improvement activities and a higher
share from service in both Mining and Cement.
In Q1 2021, total research and development costs
(R&D) amounted to DKK 52m (Q1 2020: DKK
66m), representing 1.4% of revenue (Q1 2020:
1.5%).
R&D costs in Q1 related especially to new sus-
tainable cement technologies, mining products
and digital solutions. In addition to the reported
R&D, products and solutions are being devel-
oped on-site in cooperation with customers as
part of the ordinary business.
SG&A costs
Sales, general and administrative costs (SG&A)
and other operating items decreased 11% to DKK
648m (Q1 2020: DKK 728m), due to savings from
business improvement activities and low travel
costs. Despite the reduction in SG&A, costs as a
percentage of revenue increased to 17.5% (Q1
2020: 16.1%). SG&A costs are expected to in-
crease somewhat in the coming quarters as the
activity level expectedly picks up.
EBITA and EBITA margin
EBITA decreased by 17% to DKK 190m compared
to the same quarter last year (Q1 2020: DKK
228m) as a result of the decline in revenue which
could not be fully offset by the higher gross mar-
gin and lower SG&A costs. The decline in EBITA
was attributable to Cement, whereas Mining
EBITA increased by 6% compared to Q1 2020.
Owing to a high share from service and a 1.5%-
points higher EBITA margin in Mining, the Group
EBITA margin increased to 5.1% (Q1 2020: 5.0%).
Cement was loss-making due to the sharp reve-
nue decline and costs of reshaping the Cement
business.
Amortisation of intangible assets amounted to
DKK 89m (Q1 2020: DKK 82m). The effect of pur-
chase price allocations amounted to DKK 22m
(Q1 2020: DKK 24m) and other amortisation DKK
67m (Q1 2020: DKK 58m).
Earnings before interest and tax (EBIT) de-
creased 31% to DKK 101m (Q1 2020: DKK 146m),
mainly due to the lower revenue as explained
above.
Financial items
Net financial items amounted to DKK -10m (Q1
2020: DKK 3m), of which foreign exchange and
fair value adjustments amounted to DKK 4m (Q1
2020: DKK 22m) and net interest amounted to
DKK -14m (Q1 2020: DKK -19m).
Tax
Tax for Q1 2021 totalled DKK -35m (Q1 2020:
DKK -44m), corresponding to an effective tax rate
of 38% (Q1 2020: 29%). Reduced tax credits es-
pecially in Denmark, and an increase in the profit
before tax derived from countries with a higher
base corporate tax rate caused the increase in
the effective tax rate in Q1.
Profit for the period
Mainly due to the lower EBIT, profit for the period
decreased to DKK 54m (Q1 2020: DKK 101m),
equivalent to DKK 1.0 per share (diluted) (Q1
2020: DKK 2.0).
Return on capital employed
ROCE decreased to 4.8% (Q1 2020: 10.2%) as a
Employees
The number of employees decreased by 450 to
10,189 at the end of Q1 2021 (end of 2020:
10,639). The decrease related to a phase-out of a
Cement operations & maintenance contract and
ongoing activities to reshape the Cement busi-
ness, including a workforce reduction in coun-
tries where local labour restrictions related to
COVID-19 have prohibited us from right-sizing
the organisation earlier.
Revenue & EBITA margin
DKKm EBITA%
0
3,000
6,000
9,000
12,000
15,000
18,000
Q1
2019
Q2 Q3 Q4 Q1
2020
Q2 Q3 Q4 Q1
2021
Mining Cement
0%
2%
4%
6%
8%
10%
12%
14%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Q1
2019
Q2 Q3 Q4 Q1
2020
Q2 Q3 Q4 Q1
2021
Revenue EBITA margin
(100)
0
100
200
300
400
500
600
Q1
2019
Q2 Q3 Q4 Q1
2020
Q2 Q3 Q4 Q1
2021
Mining Cement