Sandvik boss rules out longwall acquisitions

Staff Reporter

Sandvik Mining & Construction president Anders Ilstam says the company will remain an active participant in the global underground coal mining equipment business, but is not one of the companies in the running to acquire Long-Airdox Company or its US rival Joy Mining Machinery.

In an exclusive interview in the March edition of Australia's Mining Monthly, publisher of ILN, Ilstam says the group has no interest in being a longwall equipment manufacturer.

"No, we don't want to expand in that area," he said. "We have a very good program in continuous miners and other smaller machines (where) each order is not so dramatically big as it is in the longwall area. We know there is growth in that area longer term, but even so they always need the continuous miners to prepare the longwalls. And so I think we will concentrate on being the best where we are.

"If you look at the continuous miner market, really the only competitor we have is Joy and they have problems at the moment. And so we'd like to compete with them and maybe take some more market share. Right now, we are dramatically taking market share away from them."

SMC last week reported its 1999 operating profit had nearly doubled compared with the previous 12 months, to $A123 million, despite a 6% drop in 1999 sales to $A1.6 billion. The company is one of three main business arms of Swedish specialty steels and carbide-steel manufacturing tools group, Sandvik.

The group's connection with the underground coal mining equipment business was reinforced with Sandvik's 1998 acquisition of remaining shares in Finland's Tamrock Oy, which gave it full ownership of the drilling and loading equipment manufacturer. Tamrock bought Austria's Voest- Alpine in 1995, increasing its exposure to the worldwide underground coal and tunnelling markets. Voest-Alpine was subsequently combined with Tamrock's US-based Eimco (EJC) coal equipment division and this (VA-Eimco) now forms parts of SMC.

Ilstam said after being a troublesome acquisition for Tamrock, Voest-Alpine was "a little bit over break even level" for the 1999 year. He said SMC's four divisions — Sandvik Tamrock, VA- Eimco, Driltech and Roxon — were all aiming for 10% EBIT (earnings before interest and tax) margins over the "course of the current business cycle". He was confident VA-Eimco would get over the hurdle.

The Sandvik group last month posted a net profit of 3.62 billion Swedish crowns ($A658 million) for the year ended December 31 1999. Pre-tax profit of SEK5465 million ($994 million) exceeded most analyst's expectations. Excluding a SEK1625 million ($295 million) capital gain from last September's sale of Sandvik Saws and Tools to US group Snap-on Inc, Sandvik's full-year net profit was SEK2.34 billion ($425 million) compared with SEK2.095 billion ($381 million) for the previous 12 months. The result was achieved on sales which were down 5% on the previous year at SEK39.65 billion ($7.2 billion).

Sandvik has about 34,000 employees at 300 companies in 130 countries.

A comprehensive study on Sandvik Mining & Construction appears in the upcoming March 2000 edition of Australia's Mining Monthly, Australia's leading national mining business magazine.