Denmark’s FLSmidth will become a “pure-play” mining equipment and technology supplier before the end of 2025 after confirming divestment of its €540 million-a-year cement business to US-based Pacific Avenue Capital Partners in a deal worth €75 million.
There is an additional €75 million earn-out component but FLSmidth CFO Roland Andersen indicated on a call with analysts realisation of the earn-out could be “a couple of years ahead of us or maybe even later” and couldn’t provide any specifics on payment triggers.
“If everything goes the way we hope it will go there will be some sort of earn-out,” he said.
FLSmidth will take a €94 million cement business impairment hit in its 2025 second-quarter accounts and incur about €27 million of “transformation and separation costs” this year. Its circa-€2 billion-a-year mining business is expected to maintain a FY2025 14-14.5% adjusted EBITA margin sans the separation costs.
The company also announced a plan to buy back up to €190 million of its shares.
CEO Mikko Keto conceded while the disposal price was low the company had gone through “a thorough process with 90-to-100 interested parties” and was confident “this is the best market price we can get for the asset”.
FLSmidth had also shed ongoing cement arm restructuring costs that would now be borne by the US private equity firm.
Now, said Keto, it was free to pursue mining organic and inorganic growth, plus new capital allocation to shareholders, with a healthier balance sheet bolstered by the recently announced sale of its historic Valby head office building for €98 million.
“We are all-in in mining,” Keto said.
“We are 100% focused on mining and we can pursue the bolt-ons [and] bigger acquisitions with new vigour”
“After selling of the head office we are in all practical terms a debt-free company so we can actually invest into growth and [complete] a share buy-back program at the same time because of our financial health.
“Management has been a bit preoccupied [with the sale].
“That’s why we are very excited by this milestone because now we are 100% focused on mining and we can pursue the bolt-ons [and] bigger acquisitions with new vigour. We do have a funnel that we are looking at and we can become much more active with the funnel [and] engaging with the targets and so on.
“If we need funding for major acquisitions we are confident we can do it.”
Andersen said FLSmidth had “significant headroom” under its targeted net interest-bearing debt, or NIBD, to EBITDA leverage range of up to two-times, to fund deals and was also seeing cash generation improving from a mining business that was “doing quite well … as we outlined in Q1 this year”.
FLSmidth flagged the sale of its 140-year-old cement business early last year.
Keto said at the time the company was “creating a platform for long-term growth … whether it’s a pumping business, whether it’s a mill liner business or whether it’s [a] consumables business”.
“Once we are a clean mining entity it’s all about growth.”
FLSmidth acquired the circa-US$550 million-a-year thyssenkrupp Mining business for about $318 million in 2022.
Its primary mining-related activities are built around crushing, grinding, mineral concentration, refining and solid and liquid material movement equipment, plus a large aftermarket business.
Copenhagen-listed FLSmidth has a current market value of about €2.94 billion.
