Sweden-based tooling, materials technology, mining and construction engineering group Sandvik released its 2016 second quarter fiscal report on Monday and announced the divestment of its Mining Systems operations.
Sandvik signed an agreement to divest its Mining Systems operations to private equity company CoBe for an undisclosed price. The transaction is expected to close during Q4.
Sandvik said the transaction entails a capital loss of $93.4 million impacting the result of the company's discontinued operations for Q3. That loss includes a negative cash flow impact of $70.1 million.
Mining systems supplies design and engineering of material handling systems for the mining industry. The business had 1,100 employees in 2015 and sales of $580 million, representing 6 percent of Sandvik's total revenue.
"Divesting the Mining Systems is an important step in consolidating Sandvik to its core operations, which for Sandvik Mining and Rock Technology is high technology mining equipment and aftermarket offerings," said Björn Rosengren, president and CEO of Sandvik.
The divestment leaves Sandvik with three business areas: Sandvik Machining Solutions, Sandvik Mining and Rock Technology and Sandvik Materials Technology.
On March 16, Sandvik announced it will merge its Sandvik Mining and Sandvik Construction operations into one business — Sandvik Mining and Rock Technology — which went into effect on July 1.
Sandvik reported Q2 sales of $2.37 billion, down 8.5 percent year-over-year (down 4 percent at fixed exchange rates for comparable units). Gross profit declined 8 percent, operating profit declined 9 percent, while overall profit sunk 6.1 percent to $19 million.
"We saw weak demand in the energy segment among oil and gas-related customers," Rosengren said. "Underlying customer activity in the mining segment remained largely stable overall, with order intake for equipment declining slightly on tough comparables, while order intake for the aftermarket remained unchanged. Demand in the automotive and aerospace segments improved somewhat."
Sandvik said that Q2 order intake declined by 4 percent year-over-year at fixed exchange rates for comparable units. Asia order intake grew 5 percent from last year, Europe declined 1 percent and North America declined 10 percent.