Metso Outotec Corp

Good afternoon, good morning, everyone. This is Juha from Metsos Investor Relations, and I want to welcome you all to this conference call where we discuss our fourth quarter and full year 2024 results, which came out earlier this morning. The results will be presented by our president and CEO, Sami Takaluoma, and CFO, Eva Sipilä. And after the presentation, as usual, we will have the Q&A session. Before we get into it, I want to remind you about the forward-looking statements we will be making in this call, and with these words, I'll hand over to Sami. Please go ahead.

Thank you, Juha, and good afternoon also from my behalf, and welcome to this call where we look at Q4 performance. Highlights for the quarter, market activity was very much in line with our expectations, and we continued to have Minerals equipment orders coming through from the funnel that we have and for the quarter, we were having the healthy adjusted EBITDA margin of 16%. And also we were delivering strong cashflow from our operations during the quarter. Looking at that from the figures point of view, So orders received comparing to the 23 last quarter, they grew by 13%. And sales was then declining the 5% from the previous year last quarter, mainly because of the order intake slowness in the past. Adjusted EBITDA was $203 million. That was 10% below the last year number, bringing that then to the relative 16.0. And operating profit, 167 million. And earnings per share from the continuing operations in the quarter 4-24 was 13 euro cents. Cash flow from the operations, that was growing 32% compared to the year before. 286 million. That was in the nutshell of the Q4 key figures. Looking then for our two segments, starting from the aggregates where we were keeping the profitability remaining very healthy level in that sense. Orders received comparing the last year, end of the year, more or less the same level, 294 million. We did have one acquisition that we did for this segment and that was giving the support for the order volumes as well. Generally, we do see that the mobile equipment market especially is soft and remains soft at the moment. And both equipment orders and services orders were down by 1%. Sales, similar story. more or less at the same level than one year ago, 290 million now. So services share, no changes there either. So we remain in 35% of the sales coming from the services. Adjusted EBITDA, despite the lowish cycle of orders, We are having 46 million for the quota that is giving us the margin for the segment 16.0. And this is a result of very active cost management, how we have been able to maintain the healthy margin level for the segment aggregates. Then looking at the minerals where we did see the strong equipment orders coming through in the Q4, continuing what we started to see in the Q3 already. So the orders for the portal close to 1.1 billion, significant growth for year before. Heavily this was driven by the copper and gold customers that clearly started to be more active in releasing the orders. Equipment orders grew 40% and the services orders grew 3% in the quarter comparing the previous year. Sales was 982 million. Services was 4% down from the year before and equipment 11% down. The share of services because of the product mix was now then moving to 64% compared to 62 year before. Adjusted EBITDA for the mineral segment, 167 million euro. That gives the margin of 17 exactly the same as it was year before. Same story here. We have been maintaining the resilience for the margin by having active cost management and also sales mix was supporting this quarter. Worthwhile noticing that in the Q4 minerals segment numbers we have few million additional warranty costs that were identified at the end of the year and these are one of costs that we now recorded in. And then for the proposal that board has made is to increase the dividends. It's now 64% of the EPS from the continuing operations. So 38 Euro cents from the 36 previous year. And as normal, we do it in two payments, one in May and one in October. And the total payout value with this proposal is 314 million Euro. And then, Eva, if you continue from here.

Thank you, Sami. Good morning, good afternoon to all on my behalf as well. Building on what our CEO already discussed, I'd make a few additional comments on group income statement. So METSU's operating profit margin for 2024 was 15%, so a notch up from the previous year, despite the fourth quarter, including some 19 million of non-recurring costs, mainly from capacity adjustment costs in minerals. The net financial expenses continued to be very stable and ended up with exactly the same 80 million figure as in the previous year. Our effective tax rate for 2024 was 25%, well in line with our expectations. The earnings per share for 2024 from continuing operations were 59 cents. On a quarterly level, the graph on the right illustrates that the result from the discontinued operation was clearly positive in the fourth quarter after the big negative in Q3. The businesses under divestment delivered a positive result for the quarter, and that is supporting, of course, also The result, even more significant, however, in the fourth quarter was that we received confirmation that the Q3 business termination costs are tax deductible, and we booked the full deferred tax asset on it, and hence the positive outcome for the discontinued operations. And this really ends closing partly the gap between the two earnings per share figures for the full year. Regarding our group balance sheet, the total assets at 7 billion euros were slightly down from the end of September and 140 million down from a year ago. Non-current assets are up following investments in both organic and non-organic growth, while current assets are down. Some of you have followed our inventories closely, so indeed we did deliver a reduction in them, some 50 million during the fourth quarter, which equals well to the change from end of 23 as well. Now, considering the need to finance the business termination that took place in September, we are satisfied that our interest-bearing liabilities or gross debt, if you may, was up less than 80 million in the year and down during the fourth quarter. With the second chunk of the dividend consuming some 150 million of cash in the fourth quarter, the net debt remained flat at 1.2 billion euros from the end of September. Group cash flow from operating activities for the fourth quarter was strong at 286 million euros. We made half of the 2024 cash flow of 576 million in the final quarter. Continued healthy profitability and a release of cash from networking capital contributed to the outcome. I would conclude that delivering clearly better net cash flow from operating activities in 2024 versus 2023 is a good achievement if you remember the one-off cash flow of $275 million in discontinued operations in the third quarter. Moving to my final slide on our financial position, I already touched on cash and net debt, noting just that liquid funds consisting of cash and cash equivalents amounted to 431 million at the end of December. And the final thing to mention on the funding side is that during the fourth quarter, we drew half of a new 150 million euro loan. Our gearing was just below 45% and debt to capital just below 36% at the end of the year. And with that, I would hand it back to you, Sami.

Thank you, Eva. Let's then take a look of the sustainability, a little bit of our outlook and the management agenda for the first half of 2025. Our sustainability KPI dashboard, METSO+. previously known as Planet Positive. Metso Plus is our value at offering our customers, including the sustainability impact. Our target there is to grow this portfolio faster than our overall sales. Well, now in 2024, it was not really growing anything as explained. And also the product mix that we had was then putting this number to the red in our KPI measurement. However, need to mention that the positive order development that we have been reporting here now in the second half of 2024 is changing this KPI back to the green again. The second one is our net zero, where we are doing our actions to make our operations net zero by 2030. We are spot on in the target. We have reduced 72% our CO2 emissions until this date. And that's a result of more than 45 CO2 and or energy savings projects that we have already completed. And we continue these projects during 2025 as well. Logistic CO2 emissions target is to reach 20% reduction by 2025, which is this year. We had a good progress during 2024, but that said, the hockey stick that we need to do during this year is quite a significant, but we will continue with that one. This is of course the team effort with our logistic partners to get the CO2 emissions down for the logistic supply chain lanes. And then the spend from the suppliers who are committed to the science-based emission targets. There our target is to reach at the end of this year, 30% of our suppliers to be included and happy to report that already at the end of 2024, our achievement is 31.1%, which means that we will continue achieve our target and go beyond. And during last year, we had close to 140 new suppliers that enrolled to the SBTIs together with us. From the market outlook perspective, we expect that the market activity in both minerals and aggregates will remain at the current level. And as a reminder, what did we say previously was that both minerals and aggregates will remain at the current level. That is our market outlook. And then for the management agenda for the first half of the year, obviously the market is offering some potential and our target is to maximize our share of that potential. We have seen good development in orders coming from the gold and copper companies in the mineral side and we are working with several projects with the copper and gold customers as well as other commodity customers as well. That is really where we put our effort now from the management to make sure that we do max out the potential that is out there. Improving the safety performance is something that we have taken even strongly to our management agenda, working to build even stronger safety culture within METSO. And that means that we want to keep our own employees safe, we want to keep our contractors safe, and we also want to keep our customers safe that we work with. That is our mission and clear focus area for the first half going forward. We continue our work in normalizing the inventory levels. We did see the good development now in the Q4 as expected, and we will continue that work as communicated earlier. We have started our strategy process and we will run that throughout the first half. That will pave the road for the Metso's success then in the future years. And as communicated earlier this year, we will have a CFO transition. This is Erva's last call. here with me and we will then make sure that it is seamless and effective transition when Pasi Kykling will take over the CFO role in Metso. And cannot emphasize enough the importance of the company culture, which is in a very good shape, but there is always areas to focus on and further strengthen the great culture that is delivering then the results for the customers and for the company's results as well.

Thanks Sami, thanks Eva. Before we jump into our Q&A, let me share some save the date information. So we will have capital markets this year. Like Sami said, the first half we will spend in going through our strategy. And then we will discuss outcome of that process in our Capital Markets Day, which is planned to be arranged on October 2nd this year. Location will be Clarion Hotel at Helsinki Airport. So it's a good site for both our local audience as well as for anybody who's going to travel from abroad. This is save the date, so please mark it in your diaries, and we'll follow up with more information in due course. But now we are ready for the Q&A, so operator, please open the lines.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Chitritha Sinha from JP Morgan. Please go ahead.

Hi, both. Thank you for taking my questions. I have three, please. So firstly, it's just on the minerals market, given the very strong Q4 orders. Can you please comment on how the underlying pipeline is looking versus, say, three or six months ago? Is the pipeline now stronger, or is it that you're just seeing the orders finally coming through from the pipeline?

Thank you for the question. The pipeline is strong as has been communicated. These orders that we have been now receiving both in Q3 and Q4, they are of course coming from the pipeline. And while they are removed from the pipeline, there are new opportunities that come into the pipeline. More or less, I would say that the pipeline remains the same despite these orders now released from the pipeline.

Perfect, thank you. And then on my second question, just on mineral services, so there's obviously still weakness in rebuild and modernization. Do you still expect this slow decision-making to persist in 2025, or like equipment, do you see orders starting to pick up?

Yeah, there is a certain cycle with these ones always, and it's also linked to the mining customers not wanting to have the extra shutdown to install the upgrades. So from that perspective, when the spot prices of gold especially, but also copper are quite strong, so certain amount of hesitation will continue when the customers change. calculate the right time to make these installations. And that is then reflected for the order situation. But then on the other hand, there is already kind of like build up for the backlog for those. So the expectation is that 2025, we do see those orders coming in as well.

Thank you. Very clear. And my final question is just on the contribution of acquisitions on orders in aggregate. The contribution was around 18 million this quarter. And can we expect this level of orders for the coming three quarters, or was there some seasonality in the acquired businesses?

Thanks, Chitradada. Obviously, the acquired business is such... kind of are similar to what we have, and hence there are certain seasonality patterns. Now, perhaps just one note that the infrastructure recycling business is one where also sort of natural hazards have their place, so there was some benefit in the order intake due to the hurricane season in the U.S. And those, of course, we cannot really predict, but typically are more in the – we would expect perhaps less of them in the Q1, but then otherwise the seasonal uptick should be quite similar. So that would – yeah, that's how I would answer.

Thank you very much, both, and good luck, Eva.

The next question comes from Michael Harlow from Morgan Stanley. Please go ahead.

Oh, hello. Thank you for taking questions, and thank you for the presentation. I just want, in the press release, you made this comment on the market activity for aggregates remaining at the level of the previous quarter, and you say that you have not seen yet the anticipated positive impact of the spring season. I was wondering if you could give us a little bit more color on that, why this is the case, and if we should expect an improvement later in the year. Thank you.

Yeah, thank you. That's how it is and normally the seasonality would be starting to be visible now at the end of the Q4 and this year it did not come visible for us and there's a reason for that, that there is a certain amount of inventory in our distributors that are taking the first first wave of the seasonality orders. So that's the reason why we do not see that seasonality in METSO yet.

Okay. Thank you very much.

The next question comes from Edward Hussey from UBS. Please go ahead.

Hi there, thanks for taking my questions. So the first question is just on the large order you received from the gold processing plant in Turkey for 70 million euros. Could you just confirm whether this was booked as an order in December or whether it's gonna be booked in January?

Yes, Edward, that was booked in December.

Okay, thank you. And then secondly, just on the, there's a fire at the Gresik smelter in Indonesia. Do you just let us know what has been the outcome of this and whether there are any potential liabilities? I know Freeport said in their earnings call in Q3 that it should be covered by insurance, but I just wanted to confirm this is the case.

Yes, obviously, we leave that to the customer to comment, but indeed, we're sort of working very closely with Freeport on the case to ensure as fast as a ramp-up as possible. We obviously need to replace some of the equipment that was impacted, and we're working very hard to speed up all work. all of that work and yes indeed just to sort of everybody's better off if they are able to ramp up very quickly.

Great thank you and then just final question. You mentioned the warranty costs relating to certain consumables deliveries within minerals. Is this simply just a standard warranty provision that you've booked? And could we take this to mean that you've had a good quarter when it comes to consumables deliveries and that you've basically reduced consumables inventories, which has clearly been one of the sticking points with your inventories in recent quarters?

No, unfortunately, these costs are sort of real warranty costs. We had a few cases where we had to recall because of insufficient quality and then sort of replace with the correct quality. And these sort of recall cases are typically sort of from our point of view kind of, out of the ordinary, so to say, and obviously one-off by nature in a way, and those costs then impacted the result. The underlying business, there were no sort of specific adjustments like that. So this is really a few specific cases, but unfortunately that materialized.

Okay, thank you very much. That's really helpful. Actually, sorry, just one final one. I know I've taken a lot of questions already, but just the reduction you've had in inventories so far, I think you mentioned kind of 200 million-ish as a short-term target. In light of how you've performed this quarter, is there any change to the sort of short-term target? Do you think perhaps you could actually get an even greater decrease in inventories?

No change. This is the program that we are running, and these were the results in the Q4, and we continue that program to the finish line.

Brilliant. Thanks so much for taking my questions.

The next question comes from Klaas Bergelund from Citi. Please go ahead.

Thank you. Hi, Sami and Eva. So first on the inventory reduction, which is good to see, can I ask you for the volume number, i.e., X M&A and FX? Because I assume it was larger than the reported number in the balance sheet as you had M&A adding to it. And just on the previous question there, target still 200 million. It looks like you're analyzing around 300 million. Just to confirm as well that this is more supply chain improvement, warehouse optimization driving this rather than any production cuts. I'll start there. Thank you.

Yeah, sure, Klaas. So, indeed, a couple of acquisitions in the fourth quarter that basically we closed in early October. So, their impact in the aggregates inventories was some 24 million. So... In that sense, the real inventory reduction is indeed sort of the 50-ish plus that. And yes, the currencies had a negative impact on several lines, not least on orders and sales. So sort of a... bit of that, but they, of course, they come and go. So I think this sort of maybe the real way to look at it is just looking at the change and then this sort of non-organic addition, which you rightly point out. Now, then on to sort of your second question. Obviously, it will depend on the market environment. We've been quite clear to say that despite the sort of slower start on the execution of the actions in roughly a year back or somewhere last year, that now we're very focused to deliver on this program by the EU. by the second quarter, and then in a way to see where the, especially in aggregates, the cycle turns, because if we would, there is a positive scenario where the U.S. market starts to pick up, and that, of course, then could sort of impact a bit on what we can and should be doing. But these are really related to so-called excess, if you may, and kind of just us thinking ensuring that we don't have unnecessary buffer stocks and cleaning them through the normal sales.

Okay, that's good. My second one is on minerals service orders. Can we talk about the moving parts here behind the mid-single-digit growth X currency? We're seeing production of miners increasing a lot at the moment on the copper side. Or you think spares, where is consumables picking up, where is the sort of shutdown services still being slow to come through? So shutdown is then going to add to it, basically, just to confirm the moving parts.

Yes, that's quite a good analysis of the market situation. So there is a good activity of running the crushers, mills, and the processes, and that requires the... the standard amount of wear parts consumables and then also the standard spare parts if you put it so. And then on top of these day-to-day services sales, there are these larger upgrades and modernizations that come to the question.

Good. My final one, promise to be quick, is on the aggregate side and the seasonality sort of taking up by the dealer inventory first. When you look at dealer inventories, particularly in North America, speaking to others at least, they're saying that we're coming towards an end, towards, not at an end. Do you see that as well? How many more quarters of destocking do you think we should expect here? I mean, it's been extraordinary in terms of the preordering or the overordering, if you like, and then the very, very long destocking. Final demand. U.S. construction doesn't seem to be a big problem. So when the de-stopping ends, there could be quite a lot of growth there. I'm just curious on the timing. Thank you.

Yeah, I think we've sort of guided earlier in class that kind of we would think that this kind of needs to run the sort of first months of the year in a way to get the seasonal impact a bit kicking in and then towards the second quarter on the optimistic scenario you could start to see an impact of that and then the sort of more cautious scenario is that it goes into into the second half. I think it's moving along those lines. We have certainly seen the inventories move in the right direction in the early part of this year, but still, of course, as you will appreciate, there's a lot happening in the U.S. currently on a daily basis, so we would shy on giving much estimates on that.

Makes sense. Thank you.

The next question comes from Christian Hinderacker from Goldman Sachs. Please go ahead.

Yes, good morning, Sammy. Good morning, Ava. I wanted to ask about the minerals business. Aftermarket was 66% of the revenue mix in 2024, but you had a pretty strong equipment order print for Q4, meaning that aftermarket was just 53% of the orders in the quarter. If we see that sort of 50%, 55% service mix continue, given the strength of potentially an OE up cycle, Do you think that can limit the margin expansion potential for minerals, or do you think that margins can continue to rise?

Well, I think the quarterly numbers are quite volatile in a way. And as you've seen, so we indeed had a very, very good quarter on the equipment. Now, obviously, the margins are higher on the aftermarket side. Then again, just having enough volume sort of coming through from a leverage point of view is not something to ignore on the equipment side either. I think our sort of base case is an expectation to start to see the services side pick up, and it was a bit worse hit by the currencies as well, so the underlying number is more flattish than anything else. But, yeah, so I wouldn't sort of still say that we're in for a scenario of 50-50 business, but even despite this one quarter. Okay.

Okay. Maybe just moving to inventory, 1.9 billion in Euro terms, 143 days. Can you just help us around the thinking here? I know you've got basically this 200 million efficiency target and that's 50-50 split across the two segments. But how do we think about that inventory days figure across the two businesses, aggregates and minerals? And then how should we think about the sort of structural potential for inventories in the long term?

Well, because of the rather sharp decline in aggregate sales, if one compares So the 23 to 24, obviously, the days look a lot worse in aggregates and minerals, which is impacted as well, and hence the sort of – kind of the signal value of the days of inventories is somewhat sort of affected really by that sort of these big swings and our program, what we're driving is therefore really based on absolute sort of stock amounts and focused actions on that and just to sort of avoid any doubt and Because, of course, what we consider excess from a supply chain point of view, it doesn't immediately change even if the sales pick up and the days would start to look better. We might actually look at more need to then think of prepping up on the component side and then work in progress obviously will then follow. That's maybe on that, but maybe sort of, Samia, you want to comment on the sort of structural potential from your point of view. Obviously, the strategy work is ongoing in a way, and this will be one of the angles to look at.

Correct, Eva. So we are working with the strategy. We are looking, obviously, at the growth opportunities and the roadmap for that, and then the Inventory plays a big role in our business development in many ways because we are in the business where especially the services that does require the inventory and it needs to be the right inventory in the right location and same applies also very much for the aggregate equipment as well that the speed of deliveries in certain time of the business cycle is critical and that's why it's going to be part of our strategy work in very much for the

Okay, understood. Maybe just a final one if I can squeeze it in. Are you able to quantify the magnitude of the warranty impact in the quarter and then just define why it wasn't treated as a one-off?

Well, personally, quality issues can happen in a business as part of it. It's not something we like and not something we plan for, but I still would would have a high bar in sort of labeling them non-recurring in a way. We focus on the non-recurring really on capacity adjustments, real sort of bigger changes in the business model or how we do. So to me it's very obvious that they are part of the normal cost and we're talking roughly around about a five million impact.

Thank you very much.

The next question comes from Antti Kansanen from SEB. Please go ahead.

Hi, guys. It's Antti from SEB. I only had a one follow-up question on the previous one on the minerals sales mix and sales levels in 25. I mean, backlog is fairly sluggish and equipment orders as well on 24, but quite back and loaded. How is the revenue contribution from equipment side? Is it more tilted towards, let's say, this year's back half and going into 26 or how does it contribute on the sales line or minerals?

Thank you, Antti. You are right. It goes to the second half of 25 and quite many of these orders also go for the first half of 26.

All right. And then the second follow-up was actually on the inventory side and maybe seasonality. I mean, I see that you cleared inventories on the second half, but is there kind of a seasonal support also from the aftermarket business in a sense that you maybe order more on the first half and then deliver on the second half? And if we go into the first half of this year, will that curtail a little bit of the working capital improvements and inventory reductions on the minerals consumable part side?

Well, I don't think we – as I said, when our activities are really based on sort of – rather sort of deep bottom-up work on ensuring availability and then defining excess and working on those areas specifically, they're not so impacted by seasonality. Where I see seasonality having an impact is really in aggregates where – As discussed earlier, obviously we had some limitations on how much we could reduce inventories in the slow months of September, October, November, when the just demand overall is on a lower level. Now we clearly sort of made starting to see a bit more progress. But less really on the minerals aftermarket based on kind of where our actions are on.

If I continue a little bit of the aggregate. Okay. If I continue a little bit of the aggregate segment, services inventory. So yes, the high season in the Northern hemisphere being the summer months, then there is a need for consumables and spare parts. But then there is also the off season when there is a lot of maintaining of the equipment by the customers happening. So that's reducing the seasonality if we compare to the aggregate equipment.

Okay, and then this year on the aggregates equipment side, it would be more like Q2, which would then enable you to clear a little bit of that equipment inventory if the Q1 is still kind of driven by dealer destocking.

Indeed, yeah.

Okay, thank you. The next question comes from Benjamin Healan from Bank of America. Please go ahead.

Yeah, morning, thank you for the question. I wanted to have another go at the minerals margin question that you were asked earlier, because there is clearly a bit of a potential shift in terms of the OE versus aftermarket. So, I mean, as we look into 2025 and 2026, and you think about potentially some small shifts in mix, but there will be some, what you're looking to do in terms of inventory management, Can you just talk through how we should be thinking about the margin situation in minerals in particular as we look over the next couple of years and the kind of puts and the takes around that? Thank you.

Well, I think one angle which maybe sort of I didn't answer properly in the first time and then just referring to the second question. So if you are looking at sort of sales and then sales margin for 25, it is really good to bear in mind that the revenue recognition of these capital equipment that has now been coming a bit sort of in a bigger wave in the second half of last year, their impact nevertheless is really over many, many quarters and into 26, like Sami said earlier. So I wouldn't just think that if we have a quarter where in order intake the balance is more 50-50, I wouldn't sort of use that as a proxy for sales mix because indeed the aftermarket is – is really and can and will act quicker. So that's maybe a comment on just this year, if you're thinking of sales margins in 25. And then, obviously, as I said, there is an element of aftermarket also moving forward. If these bigger projects start to move, there's also an aftermarket element. So, I think what we've been missing really is this modernization and the sort of slightly bigger project type of aftermarket work for the reasons discussed earlier. in a way there is no reason why we wouldn't start to see an improvement in Indium in 2025 and that of course then can quickly balance this question of mix as if we think about 26 mix obviously at this point very early to sort of have a view on the mix of 26 but as I said I think it will be more balanced that it now looks based on this one quarter so I wouldn't sort of draw too many conclusions.

Okay, fine, but then if we think about the margin overall outside of mix, can you talk a little bit about the dynamics over the next couple of years within minerals and what we should be thinking about, obviously outside of mix that you've just commented on?

Yeah, we have very clear initiatives and roadmaps already in place which we have been conducting, so we are looking to create internal efficiency in the capital side by by pre-engineering and productizing more the work there, and the same way then making sure that we remove all kind of waste in the internal processes and make sure that we are very valid in the marketplace when it comes to the pricing. So from that perspective, the outlook for the future is that we will continue the work in the mineral segment as well when it comes to the profitability.

Okay, thank you.

The next question comes from Nick Housden from RBC. Please go ahead.

Yes, hi, everyone. Thanks for taking my question. I just have one left. And it's about the market outlook for aggregate to the North American. And I noticed that one of your big competitors specifically called out improving sentiment in US infrastructure a couple of weeks ago. So I'm just wondering if you're seeing a similar trend there.

I think the optimistic view indeed is that, and I think we clearly saw the impact of the uncertainty around the election impacting in the second half of last year, and now as things start to clarify and certain sort of initiatives and programs move forward, the underlying And the line economy is obviously showing also quite a bit of strength. And the demand, in-customer demand is there. But, yeah, as I said, it's been a sort of turbulent few weeks. So just maybe being a bit shy on trying to sort of portray us as experts on the U.S. economy. But, yeah. Yeah.

Thank you very much.

The next question comes from Vlad Sergeevski from Barclays. Please go ahead.

Yes, thanks very much. I have a few questions if I can start with demand. You obviously see stable demand and I was just wondering is it across commodities? Is it gold stable, copper stable, iron ore stable or there are certain variations between all of them? And in particular, I'm interested if you're seeing any sign of this current very favorable gold prices and gold profits actually starting to translate into more orders and more business for Mesa.

Yeah, I think that that's correct. Market outlook means that there is an activity level within the customers in those commodities you just mentioned, and we do see that that will remain on the same level as we have seen now in the Q4, for example.

Understood. That's helpful. If I can ask another question on inventories. Apologies for that. Can you specifically let us know whether this reduction in inventories was at least partially driven by finished goods inventories? Where do you see specifically finished goods inventories versus the levels you actually want to get to? And whether there are more finished goods inventories in aggregate, minerals, or both?

Indeed, our actions are very focused on the Finnish good inventories, and hence that's really what we're following, and that's where the change was evident. Then minerals as a business on the capital side has very little inventory as such. It's really in mining in the aftermarket where the – So obviously also from the customers are such that that exists, whereas in aggregates, the inventories are on both the capital and the aftermarket side. So that obviously that sort of structural difference is not going away and is hence why we mainly talk about minerals aftermarket and aggregates equipment or aggregates as a total when we talk about the inventory issue.

Understood. Thank you. My last one would be a housekeeping one. Obviously, solid free cash flow in Q4. To some extent, it was assisted by this $54 million inflow from discontinued operations. What's the nature of this $54 million? Because obviously, it's a big number for the scale of this discontinued operations.

Yeah, I touched it a lot earlier in my presentation and there was cash flow related items, the businesses were in positive territory and then the bigger impact was really a deferred tax asset booking of the Q3 business termination cost and that of course is is not fully cash, although it meant that already immediately in the fourth quarter we were paying less taxes in the U.S., but obviously that sort of amount will be consumed over a longer period and then support cash flow in the coming quarters as well.

That's super helpful, and sorry, then final clarification one on this. Should we expect a meaningful positive free cash flow from discontinued operations through 2025 as well, given what you just suggested, Eva?

No, I think we're very focused on hopefully concluding the divestments and then having that sort of role hopefully disappear from the books totally, but then otherwise in a way, the time they are in, I think we're doing our best to run the businesses with a small profit, but now I think this really, this third quarter, fourth quarter results are somewhat specific and this magnitude will not repeat itself. This is really specific now on the termination cost.

Very helpful. Thanks very much.

The next question comes from Panu Leidenmaki from Danske Bank. Please go ahead.

Hi, thanks. I have two questions. First on aggregates. So what if there will be end of war in Ukraine? What kind of impact could that have on the aggregates demand and what kind of exposure do you have in that region?

Yeah, obviously the rebuild of Ukraine is by all means. All sources it's gonna be one of the largest infrastructure project in the whole Europe after second world war. So there is definitely a demand for recycled aggregates and also all type of aggregates to be rebuilding the buildings and roads and airports and so on. So that is offering quite a lot of work for aggregate equipment and operators.

Thanks. Then secondly, on the discontinued operations, can you update us on the kind of process to divest those? So it's been a while when you decided that you could divest the former Metas businesses, but when could you actually do that?

Indeed, it's been a much lengthier process than hoped or planned, but we are in sort of very, I would say, intense discussions and do hope to have a partial outcome, at least in the very nearest future, let's put it this way. But, yeah, we've had a few twists and turns and disappointments on the way, but now we do feel that we are quite advanced.

Okay, thank you.

The next question comes from Mikael Dopel from Nordea. Please go ahead.

Thank you, and good afternoon, everybody. I wanted to be to touch on potential tariffs and how you are positioned there. I mean, if you think about Canada, if you think about Mexico, if you think about Europe, how would you describe your positioning there? How would it impact your operations and your competitive position?

Yeah, I think the challenge is obviously sort of it's a broad topic and we don't really know where they could come or will come in a way. But if we now speak of the sort of the ones that are in the air, that is tariffs into U.S. from Canada and Mexico. So, yeah. There, the impact is rather limited. We have a consumables factory in Mexico, which we have used to support our U.S. customers, but we're talking about sort of 20 million-ish of sales, so it's not a huge number. Then on the Canadian side, we have on the Aggregates McCloskey brand, we have a factory in Canada that has been serving serving our u.s customers we can serve the u.s customers from northern ireland so from a customer point of view it's not an issue and actually same thing on the consumables will just chip somewhere else but uh but in that case it will be more difficult to find uh new markets for the canadian mccloskey factory than it will be for for the mexican rubber factory so uh If those do materialize, we will have some challenges from an absorption point of view in that. But again, we're not talking about huge numbers in the MESO context.

Okay. Okay. And then a different question on pricing overall. So how do you see your pricing trending now into 2020? in terms of selling prices? Would you say that it's still moving up? Is it flattish? And also combined with that, how do you see your underlying costs developing into the new year?

Let's take the pricing first. So we have several different type of products. Some of them require more labor to produce. Some of them require more So the pricing is reflecting really our quite a good work in understanding that what is not only the cost today, but what is going to be the cost tomorrow and then reflecting that for our sales prices. And from the cost point of view, similar way, we have quite a global supply footprint, meaning that we are sourcing materials from several countries and also manufacturing several countries. And this is the way to keep the cost under control and make also the decisions then based on this. Whatever was just going through from the tariffs, these are then the external things that have an impact on where do we produce and where do we ship to different countries. But when they are not in the question, then we are able to utilize our capabilities with the global supply footprint.

Okay. Well, that's clear. Then just finally, coming back to the warranty cost, about 5 million euros, which you mentioned that you booked in the quarter, just wanted to check, you know, when was the last time you booked similar kind of warranty costs, just to understand, you know, how usually you book these kind of costs?

Well, these recalls are quite rare. I don't now remember which year it was, but certainly my nine years at Metso, we had a few cases, but these are not annual. So, I mean, we will have occasional sort of issues, of course, that are more a part of the ordinary course of business. But this type of recall, that's why we mentioned it separately. I mean, otherwise we wouldn't raise the topic, but we knew that it was something that slightly sort of from the comparison point for you and your colleagues in a way was important information to understand perhaps the more underlying operational level of minerals.

Okay, that's fair. Thank you very much.

The next question comes from Panu Leidenmaki from Danske Bank. Please go ahead.

Hi, thanks. Just a quick follow-up to my previous question. So on Ukraine, do you have operations in the country at the moment, and is this sizable operation?

We had before the war, yes, and obviously still people in the country, but also partially, of course, outside of the country as well.

Okay, thank you.

The next question comes from Anders Roslund from Pareto Securities. Please go ahead.

Yes, hello. I just have a question regarding your financial targets for the divisions. You still remain with the total 15% for aggregates and 20% for minerals, and you very well passed the one in aggregates, and you are still behind in minerals. So what sort of timeframe do we talk about regarding the minerals achievement?

Yet there is, we have not updated the financial target. So the whole company for 17 and then the segments as you described, and we are taking a look of that in conjunction of this strategy process that we are conducting as we speak.

Okay, so that will be something coming in the CMD maybe or earlier than that.

CMD is a very good time.

Excellent. That's all questions for me, please. Thank you.

All right. We are at the hour, so we are going to wrap up this call now. And we thank you for your participation. We thank you for your discussions. A reminder that the first quarter, 25 results will be out April 24th. But, of course, looking forward to speak with many of you and seeing many of you before that. So that's it for now, and we say thank you and goodbye.