(adds new financial targets, Q4 performance at division level)
STOCKHOLM (AFX) - Sandvik AB said its fourth-quarter profit after financials rose 23 pct to 3.151 bln skr, on the back of higher sales volumes, a better product mix, a positive price trend and increased efficiency.
Market expectations were for a fourth-quarter profit after financials of 2.972 bln skr, according to a survey by SME Direkt.
All business areas improved their profits, and the company said it is raising its group financial targets.
The company proposed a full-year ordinary dividend of 3.25 skr per share, versus 2.70 skr a share in 2005, and an extra dividend of 3.00 skr per share.
The total distribution of funds proposed amounts to 7.5 bln skr.
Sales rose 11 pct to 19.370 bln skr, ahead of market expectations of 19.001 bln skr.
Order intake amounted to 18.965 bln skr, up 19 pct from a year earlier.
'The strong global demand for Sandvik's products continued during the fourth quarter. Higher volumes and high internal efficiency contributed to improved earnings,' said Sandvik's chief executive, Lars Pettersson.
The company said that in view of its strong performance it is setting new financial targets.
It is now targeting organic growth of 8 pct from 2007 onwards versus its previous forecast of 6 pct.
Its target for return on capital employed from existing operations is raised to 25 pct from previous 20 pct, while its net to equity ratio is raised to 0.7-1.0 versus previous 'less than 0.7'.
Among the company's divisions, fourth -uarter operating profit increased by 14 pct to 1.347 bln skr at Sandvik Tooling. Operating margins improved to 23.6 pct from 21.5 pct and order intake rose 11 pct at fixed exchange rates and for comparable units.
'The profit increase was mainly attributable to high volumes, favourable price trends, high capacity utilization, better product mix and completed efficiency enhancements,' Sandvik said.
At Sandvik Materials Technology, operating profits jumped 35 pct to 772 mln skr, while operating margins rose to 14.5 pct from 11.6 pct.
'Operating profit (at Materials Technology) in the fourth quarter increased sharply as a result of higher sales volumes, a better product mix, favourable price trend and the effects of ongoing improvement efforts,' said Sandvik.
Sandvik Mining and Construction saw its operating profits climb 29 pct to 1.002 bln skr. Here also the increase in operating profit was mainly a result of higher volumes, high capacity utilisation and increased efficiency. Operating margins increased to 14.5 pct from 13.6 pct.
Cash flow from operations for the group amounted to 1.526 bln skr, down 31 pct on-year. simon.richardson@thomson.com sjr/jag/sjr/jr COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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