FLSmidth shares fall 2% as Q2 revenue drops despite in-line results

FLSmidth shares fell over 2% following Q2 results that revealed a 12% year-over-year revenue decline to DKK 3.4 billion, missing consensus by 8%, even as adjusted EBITA of DKK 513 million slightly surpassed expectations. A key concern for the market, as noted by Jefferies, is the Products division's significant loss-making status, evidenced by a negative 9.7% EBITA margin, which overshadowed a 3% increase in overall order intake and strong PC&V segment performance. Despite these divisional challenges, the company reaffirmed its full-year 2025 guidance, maintaining its outlook for DKK 14.5-15 billion in revenue and 15-15.5% adjusted EBITA margins.

Analysis

FLSmidth's stock declined over 2% following its second-quarter results, which presented a mixed financial picture. The company reported a significant 12% year-over-year revenue drop to DKK 3.4 billion, a figure that also fell 8% short of consensus expectations. Despite this top-line weakness, adjusted EBITA of DKK 513 million was 1% above consensus, reflecting a group EBITA margin of 15.2%. The primary concern, as highlighted by Jefferies, is the severe underperformance of the newly structured Products division, which recorded a negative 9.7% EBITA margin on a 43% revenue collapse, overshadowing its strong 44% growth in order intake. In contrast, the PC&V division demonstrated robust health with a 17% revenue increase and a 23.7% EBITA margin. The largest segment, Services, saw a modest 3% revenue decline. Despite the Q2 challenges, management reaffirmed its full-year 2025 guidance for revenue between DKK 14.5-15 billion and an adjusted EBITA margin of 15-15.5%, signaling confidence but placing significant pressure on second-half performance to bridge the current revenue gap.

Key Decisions for Investors

• Investors should closely monitor the operational execution within the Products division, as its strong 44% order intake growth suggests future revenue potential, but its current negative 9.7% EBITA margin remains the primary drag on group profitability and stock performance.
• Given the notable Q2 revenue miss, the reaffirmed full-year guidance should be treated with caution, making upcoming quarterly results critical for validating the company's ability to achieve a significant second-half acceleration.
• It is prudent to evaluate the company's valuation in light of its divergent divisional performance, weighing the strength in the PC&V segment against the persistent challenges in the larger Services and Products divisions.