Metso Outotec Corp

Hi everyone, it's Juha from Metsos Investor Relations and I want to welcome you all to this conference call where we discuss our second quarter and half year 2025 results which were published earlier this morning. Our president and CEO Sami Takalooma and CFO Pasi Kykling will walk you through the results and after that we will have time for your questions. During this call, we will be making forward-looking statements, and that's why we have the disclaimer in the first page of the presentation. And a reminder that this call will last approximately 60 minutes, so please keep that in mind when asking your questions so that we can accommodate as many questions and people as we can during this hour. With these remarks, I'll hand over to Sami. Please go ahead.

Thank you Juha and welcome also from my behalf. Agenda is pretty much unchanged, so we will continue with that one first about the results. Second quarter of 2025 market activity in both of our segments. They were very much in line with our expectations and that also then resulted healthy order growth in a period. We were able to make 6% growth in the order books in reporting currencies and noteworthy is that in a constant currencies that is representing 10% growth from the currencies, especially the US dollar did have an impact on that direction in the second quarter. Then obviously very low profitability compared to the previous quotas. And that is due to two things, temporary higher costs, and they are very much linked for our ERP implementation in the phase three, which went live in the second quarter that represented 60% of the business inside the company. And as such, implementation has been a success and we are happy to get the benefits of the new ERP in the coming quarters. But the impact was that in order to ensure the success of this go-live, there was an additional cost tied in for the preparation work in a very close for the go-live work. And that caused this temporary cost for the second quarter. On top of that, in the second quarter, we had unfavorable sales mix. So there was a decline in the services sales. So the capital versus aftermarket sales mix was unfavorable for the profitability point of view. And also inside the aftermarket, the mix was towards the less profitable services and products. So these two things in the second quarter did cause that our profitability was not in line with with the previous quotas and the levels that we have been delivering. Fourth element in the slide, the cash flow we continue to deliver. 147 million was the cash flow from the second quota. It's more or less in line with the comparison period from 24, but then when looking at the Q1, Q2 combined as a first half. So there's an improvement of double digit in the cash flow generation. From the key figures point of view, as a little bit already opened up, so orders received was increasing by six constant currencies, double digit. Sales was flat compared to the 24 second quarter. 2% increase in the constant currencies and adjusted EBITDA as mentioned 171 million clearly below the normal levels due to those two temporary deliverables that happened in the second quarter. Earnings per share was now with these numbers 12 euro cents compared to 16 a year ago. And that said, cash flow very close to the last year numbers, 147 compared to 152 year before. Let's take a look of the segments. Aggregates segment was having the order growth, 331 million was booked orders now in the second quarter compared to 314 a year before. We have two strong areas, North America and Europe, and both of them did perform as expected. during the period. And we then also had acquisitions that we completed end of last year supporting the order growth. Noteworthy here is that it was on the side of equipment orders. Services was below last year, and that's coming mainly from Europe, where simply the utilization of the machines is clearly below previous years, and thus the need for the services at this period was lower. Sales was 320 compared to 331 a year before. Equipment minus one, services minus seven. And with these numbers, the services share did decline to 31% of the total segment numbers. And in adjusted EBITDA, 45 million compared to the 55 million. So lower margin than we have been showing in the aggregate segment in the last eight quarters. and the reasons here are the sales mix as you can see and then also the higher costs that that are coming both from the erp work but also from the positive order intake for the capital side in the beginning of the year and that means that we have been able to call back our employees from the temporary layoffs to manufacture the machines and the sales of this work will then come in the Q3. And then for the minerals segment where orders did grow from 847 million to 903, a similar way as in the Q1 of this year. In the capital side, it comes mainly from the small equipment and small projects, and then the growth in the services orders. Noteworthy here, again, that services growth is 5% in a constant currency, it's a double digit 10. From the commodities, copper and gold pipeline remains very strong, including the activity levels and the fastest ones moving in the pipeline. They are currently the gold customers with their projects and their needs. sales for the segment minerals uh 892 million compared to 883 million last year so growth growth there which was coming mainly from the equipment side services did decline because of the lower order intake especially at the end of 2024 which is now materializing then as a sales And that also created for this period that the services share of the sales declined the 2% points to 64. Adjusted EBITDA. 143 million, 9 million less than a year before, created a margin of 16, which is also low. And here the sales mix did have an impact for this period and also the higher temporary costs where ERP work was heavily on this side of the segments. And then I give the microphone to Pasi to go a little bit more in detail.

Thanks Sami and good day, everyone. Let's go over financials through more in detail. Our second quarter sales was flat at a billion, 213 million. And with constant currencies, the organic growth was 2%. Services sales declined 3% year on year and services represented 55% of our total sales. Our adjusted EBITDA margin was 14.1% and 171 million euros. That represents a decline of 16% year on year. That's a disappointing level and our Q2 earnings were burdened by adverse sales mix and ERP rollout as Sami explained. The impact of sales mix was approximately 15 million negative in the quarter and the extra costs from ERP project were approximately 10 million in the quarter. Our net financial expenses increased year on year due to higher cross debt and then costs related to our tender offer, which we did during the second quarter. Effective tax rate for the quarter was 24% and EPS for continuing operations 12 euro cents, which is down 4 euro cents from the year before. Let's then move to financial position. During second quarter, we did a couple of important funding transactions. We renewed our RCF and upsized it from 600 million to 700 million. Additionally, we issued a new seven-year bond for 300 million euros and tendered 130 million worth of our outstanding 2027 notes. Our net debt has increased by approximately 240 million euros year on year, primarily due to waste to energy settlement that we did during second half of 24. We continue to have a BBB flat and BAA2 ratings from S&P and Moody's, both with stable outlook. Then when it comes to our cash flow, we have been able to improve our cash generation in H1 2025. Cash flow from operations was 343 million euros, which is 11% improvement year on year. We have also successfully completed our inventory reduction program where the starting point was end of second quarter last year. And we have brought the inventories down by approximately 200 million euros in 12 months period. And the level where we are end of second quarter this year is 1,830,000,000. And that includes some tens of millions from the acquisitions that we have completed during this 12 month period. Work to optimize cash flow continues to be our focus area, and that includes also inventory levels going forward. With that, I would like to hand the word back to you, Sami.

Thank you, Pasi, and a few commentary about investing for the future and then the sustainability work and also then our outlook for the future. We have been working for making sure that the future is bright for METSO and the acquisitions that we have been closing during the period, Swiss Tower Mills in Switzerland, a very important acquisition for mineral segment and will ensure our position in the energy efficient grinding going forward. Screening business that we acquired is located in China, offers a technological advantage for the large mining screens and successfully completed the full process. And smaller but important TL solution acquisition was happening in Europe, in Finland. It's a recycling technology for the mill liners and this emphasizes our commitment to take care from the raw material all the way until the waste of the products and the value chain. Likewise, during the Q2, we were able to close the divestment process for the Ferro's business. SMS Group from Germany is the new owner, and we are, as we speak, working with the closing procedures. So, of course, very important, especially from the perspective that the management time can be then focused for the continued businesses. Other investments that we did during this period, they are the service center in the Western Canada to strengthen our aftermarket position in the very important mining region. And then Romania in Europe acquisition to acquire facilities for our new screen manufacturing center located in a very good location from logistic point of view also to serve the high demand Central East Asia countries in the mining perspective. From the sustainability KPIs, we have our Metso Plus offering, We have a target there to increase these sales to grow faster than overall sales. Now the Flattish sales for overall and the Mezzo Plus sales was actually declining by 16. Follows the cycle in terms of lithium projects that they are all in Mezzo Plus offering and those ones have not been under delivery for the first half of this year. Then our own operations, we have the net zero target for 2030 and investments continue to happen for manufacturing to reach this goal and where we are now is that we have reached the level of 70% down from the start of the KPI calculation. In target fully and we have 10 energy saving projects completed during this quarter. Logistics target is minus 20 down from the start of the calculation by end of this year. We are now hitting soon the 10% level and it's very clear that we are most likely not able to reach the target that we set to ourselves. We are developing there, but this is very much depending on our logistic partners in terms of having availability for the green transition lines. And that one has been slower progress from the partners than expected. Then the last one is very important. It is measuring how many of our suppliers are having the same alignment in the targets as we have. Our target has been to reach at the end of this year, the level of 30% of the supplier spent having the same targets as us. Success here is clear. We are already now at the first half of 25 in the number 36.2 and we will continue this work as we we do see this one as very very important competitive advantage in the future when we have full value chain from metro side secured from the sustainability perspective and our view for the market outlook we expect that the market activity in both minerals and aggregates will remain at the current level We are aware of the tariff related turbulences that potentially could affect global economic growth and market activity. And this is the statement for that. And as a reminder, we have announced earlier, we are going to organize a capital markets day this year. The date is October 2nd and the location is Helsinki, Finland, a hotel very much at the airport, making it very convenient for the people to arrive and participate. So welcoming all of you to our capital market day and registration will open very soon at our webpage and invitations.

All right gentlemen, thanks for the presentation and operator, we can now open the Q&A lines.

Next question comes from Michael Harlow from Morgan Stanley.

Please go ahead.

Hello. Thank you very much for the presentation, and thank you for taking questions. The first one would be on the minerals business, if I may. What would be required for margins to reach a range of 17% to 18%? I am thinking about what would be required in terms of large orders and pipeline conversion. And then if I may also ask about the impact of the destocking on your margins. In other words, as you continue to reduce inventory, will this result in a negative impact on your margins or not? Thank you very much.

Thank you for the questions. I can start with the first one. So in the minerals segment to reach the beyond 17 where we have been and go all the way then to the 20. So maybe summarizing this way that the volume is one of the levers to get the leverage out of that one. The second one is very clear that the share of services within the segment needs to be favorable for higher profitability, meaning that the share of services needs to be higher than that. And then I raise also the third element that there is possibilities for self-help inside the company and inside the mineral segment that completing and moving forward with the results of these will be the needed elements to reach the higher profitability levels.

Then, Michael, when it comes to your inventory and margins question, no, I mean, we are not selling inventories with discounts to reach the inventory targets that we reached during this quarter nor going forward. So it does not have any meaningful sort of a threat or impact when it comes to margins.

Thank you. That was very helpful.

Next question comes from Chitrita Sinha from JP Morgan. Chitrita Sinha, your line is now unmuted. Please go ahead.

Hello, Sami, Pasi, and Juha. Thank you for taking my questions. I have three, please. So firstly, on the minerals margin, can you please provide more color on the 25 million of adjustment items in the quarter, and more broadly, why the ERP costs were not adjusted for if they were one-off in nature?

Yeah, I can start with that. Thanks for the question and ERP side, if I may provide you a bit more more color on what we've been going through. So to start with ERP project is a multi year activity. You start from, you know, planning, designing, building and now during second quarter we went through a significant go live implementation. Close to 60% of our business went live. Most of that was in the transaction side. So after market side of the or service side of the business and that has been the journey. This is also. the last important step to complete the Mezzo and Autotech merger. And with that, I mean that until now we've been running with legacy Autotech ERP and then legacy Mezzo ERP. And now going forward, we have one Mezzo ERP, which is modern and fit for purpose for coming years and decades to come. Then on your question, I mean, why we are not adjusting it as one of, we consider that implementing ERP is very much part of business companies do it and it would be unfair, it would not be the right thing based on our policy to adjust it away from our disclosed adjusted EBIT. It was not even a discussion for us. Of course, we've been considering that, but it was not a serious option. Then when it comes to the sales mix part of things, that impact was roughly 15 million. The ERP was roughly 10 million. And here, like we have said, it is a combination of services share, which declined during the quarter from our total portfolio, but then also what kind of, especially within services part, what kind of businesses we have within that. And on that one, we consider that based on the order intake that we have had during the first half of the year, we have actually increased our service order book by 160 million, which is all in minerals side. So that gives us a solid foundation to start the second quarter with healthy order book.

Thanks, that was very clear. My second question was actually on the mix headwind, I guess, within service. For the service deliveries to come in H2, will there be a negative mix that we should expect for the services business?

No, that's now temporary for this quarter that we have reported. The background is there in the Q3, Q4 order intake when, as you might remember, we did not receive the upgrades and modernizations and that part was close to zero now in the sales numbers and that Looking at that backlog that has been created now, as Pasi was saying, 160 million higher booking than billing in the first half for the aftermarket and looking at that mix. So this mix that caused Q2 disappointment in the profitability, it's not visible for the second half.

Thank you. And then finally... Sirata, if I may get back to your first question still. You were asking also about the minerals adjustment. And the number that we have for the quarter includes an adjustment item related to our Swiss tower mill acquisition. And there is a background. We owned 15% of the Swiss tower mills already prior to this step that was now completed during the quarter. and we have uh valued up that share as a 15 and that's a 27 million positive item in the quarter and that is visible in minerals as an adjustment item and it's also visible in our face of pnl in other operating income and expense line where you see sort of a 30 plus million uh positive impact but that includes 27 million which is adjustment item and we have considered as one of

Perfect. Thank you. And finally, on the small to midsize equipment orders, which were once again quite solid, can you please provide color on the large orders that maybe you see in the pipeline for InterH2?

The pipeline stays strong. And if I try to give you the color a little bit from the perspective that are those decisions like fading away further in the future. That's not what we feel at the moment. That means that in the second half of this year, the expectation is that some of these ones that we are working very actively with the customers are turning to the orders already and then majority of them will be then the 2026 orders. But they are not like fading. They have same status as before. And the expectation from our side is that release of orders start to come in the second half of this year.

Thank you so much. Next question comes from Edward Hussey from UBS. Please go ahead.

Hello, yeah, thanks for taking my question. I guess just sticking to this theme of the internal mix effect within services, within minerals. So overall, you said a 50 million headwind from mix in total, and I calculate roughly 4 to 5 million from the split between service and equipment. So I guess, could I just confirm, was it roughly a 10 million headwind in the quarter?

Yes, Edward. So from sales mix point of view, it's a 15 million, so 1.5 million headwind. And then the ERP related costs that we discussed, that's roughly a 10 million item.

sorry just trying to split the 15 million between the service equipment mix and the internal service mix so my estimate would be about a 10 million headwinds just within services the internal mix and services is that a fair number to think about

Edward, I think we don't really comment on that. It's a 15 million item overall, and you are using the triangulation points that we offer in the report, which are indeed the share of services. And then maybe also you could look at some of the margins that we have reported in the comparative periods to sort of do the math. But overall, including those two elements within services and then service capital mix, it's a 15 million headwind for us.

Okay, that's helpful, thanks. And I'm sorry, I slightly missed a comment on the Swiss Tower Mill acquisition and the 27 million revaluation effect. Did you say that came through this quarter?

That's correct, because we closed the acquisition early this, it was in April second quarter, and then we indeed revalued our existing 15% stake, which resulted in a 27 million one-off positive credit in the P&L and it has been reported in mineral segment it's visible there and then from P&L point of view it is visible in the other income and expenses where you see slightly larger credit this quarter.

Okay, thank you very much. And then just a final question, just in terms of the sticking to the mix theme, just in terms of the mix between services and equipment in H2. I mean, clearly you've had pretty strong book-to-bill on the service side, but also on the equipment side. I'm just trying to think about the evolution into H2. Is it sort of going to be, is your expectation for it to remain roughly where it is, sorry, was in Q2?

No, I mean, that's, Edward, maybe something where we don't really provide guidance, as you know, but those, you know, book-to-bills that we've been able to create during the H1, they provide a starting point for us to improve on this, you know, for the second half.

Okay, that's very helpful. Thank you very much. Next question comes from Tor Fangman from Bank of America.

Please go ahead.

Hi, thank you. Good afternoon, Sami. Good afternoon, Parthi. Thank you for taking my questions. I would have two questions rather on the aggregate side, starting with you speaking about orders are picking up in Europe, but also at the same time the services demand is low due to low utilization. So maybe how should we square this? utilization is still low but still your customers are coming back to buy new equipment so i'll take the second question afterwards but maybe some light on this thank you yeah thank you very very good question so this aggregate business is very much

especially the equipment business. It's about the confidence for the situation today and especially the short-term future. So customers investing now for the new technology equipment, in Europe, it's coming from the fact that they are preparing for the better season coming in few months time. And these two are kind of not fully in link that at the same time there is not enough job for all the machines. But these customers in question now, they have a strong confidence for their own future and the demand that will be picking up even further in Europe.

Okay, now this makes sense. And then just my second question would be the higher cost in aggregates. So I understood correctly, you have been ramping up the production already, you've been getting back your temporarily laid off workers to the production facilities, which drove up the costs in aggregates. And would you expect this then to turn around from an on the one side revenue, but then also margin level this effect in Q3 already? Or is this something where we will see the revenue bookings a little bit later in the year or next year?

Yeah, typically it takes some time for the machines to be manufactured and then transported and then turned to invoices and revenue. So from that perspective, it will start to normalize and stabilize the situation throughout these months now that we are back to so-called normal way of operating when the people are back in the factories to operate.

Okay, so it's basically within Q3 already a turnaround here in this profitability headwind that we've seen before around about mid Q3.

Okay, thank you. Next question comes from Andreas Koski from BNP Paribas Exane.

Please go ahead.

Thank you. Thank you, and good afternoon. I also wanted to ask about the mix effect, because I can understand that the mix effect can have a negative impact on margins, but I don't really understand how a negative mix effect can have a negative impact on absolute earnings. So are you saying that you experienced invoicing delays in your service business, or did the quarter develop in line with your expectations, even though the books to build was above one?

Thanks Andreas for that question. When you look at our share of service business, we have declined year on year and obviously the decline there translates also to absolute numbers, so that's part of the mix equation here.

So did it develop in line with your expectations or did the service part of the business not come in line with your expectations in Q2?

Well, obviously, you know, we are not satisfied with decline there. We look to grow, especially that part of our business. And I guess we have not really communicated what our expectations were. So maybe I'm a bit hesitant to communicate whether it developed in line or not. But I mean, the fact is that it declined and that's not satisfactory.

Andreas, if I may continue. Andreas, I will continue as I already said in my presentation part. So in that sense, it did represent our expectation that at the end of 2024, we did not receive the orders in the services for the upgrades and modernizations. And typically they have that lead time of six to nine months to be delivered. So they were missing from this Q2 invoicing and sales.

And on that, so are you now saying that the services revenue will grow faster than equipment in the coming quarters and that the mix within services will normalize in Q3 and onwards and that we will not see this kind of effect also in Q3 and Q4?

Yes, as said, we have been booking a good amount of services orders now in the first half of the year and they will be turned as a revenue in the second half. And from that perspective, that backlog looks normal as Metso backlog has been in the previous quarters outside of this Q2.

Understood, thank you. And then on the balance sheet, inventory to sales, is now at 38 percent. You have been able to reduce the inventory level to 1.8 billion, but how to think about the inventory to sales evolution over the coming 12 to 24 months? Will you be able to lower that ratio even further?

Thanks, Andreas. A good and valid question. If I start from a broader working capital point of view, we do see potential to release gas from there, and that includes also inventories. I mean, now we are happy that we have reached the target that we set a year ago to reduce inventories. But I mean, this is a continuous focus area and we continue to work with with all the three main components of working capital including including inventories but then because we are a bit hesitant to sort of quantify quantify how much and so forth but but we do see potential and and um and then we'll report going going forward that how we how we perform there understood thank you very much

Next question comes from Christian Hinderaker from Goldman Sachs. Please go ahead.

Yes, good afternoon, everyone. I want to start with that inventory point, if I may. Obviously, 38% of sales today and an improvement year on year, which is positive. But if I look back to 2019 and sort of the five-year period prior to that, you know, you had an average level at 28% of your revenue. I appreciate there's been a lot of portfolio changes, McCloskey, Uditech, the sale of the two metals assets, and a number of other changes more recently. I guess just objectively, how should we think about that inventory to sales ratio as we grow your respective minerals and aggregate businesses? In other words, is the 38% today consistent across the segments? Is there any particular sub-segment mix dynamic we need to think about? I'm just curious about mix contribution given all the changes in the portfolio.

Thank you. Excellent question. I tried to answer to that. So this 1.8 billion level that we have now reached, thanks to this normalization program that we run, that was a level that we calculated with the business leaders that we are not going to jeopardize any capability to serve the customers, meaning that receiving new orders and sales from that perspective. Then second viewpoint, you referred to 2019. I personally remember very well beginning of 2021, when our inventory levels were down to 1.2, 1.3 billion, a little bit lower sales volumes at that time, most likely, yes. But that level was critically too low from the aftermarket service capability point of view. And now where we are, we are happy that we have been successfully completed this program and now starts the next phase to really look the inventory from the perspective that how does the good look like and further working with that it does help that we have a new ERP system giving us much more capabilities to understand and see the transparency and that's that's where we are at the moment. So sorry cannot give you exact the numbers from the from the share of the sales point of view, but stays in the management agenda.

Hey Christian, I would like to complement it a bit because I mean it's not just you know one type of a business that we manage, but we have at least sort of a four main type of businesses from from inventory point of view that we need to manage and the first one is. our minerals capital business where customers typically prepay us and then we operate throughout the delivery with positive cash so that customers have always paid us more than what we tie into inventories and other components. Then the second part is aggregates capital where we have own manufacturing, own assembly, totally different business from inventory point of view. And there, of course, a lot of components come also from external, but we do most of the manufacturing. Then third component is our service business where we have own manufacturing. So again, own manufacturing and inventories related to that and then supply chain from our own manufacturing facilities to watch customers. And then the fourth area is our services business where we use third party manufacturing. And there again, the dynamics are different. We have different kind of products. Some of them we stock, some of them we manufacture only against the order, et cetera. So this is just to provide you a bit of a color of the dynamics that we are managing when talking about the inventory. And this is just sort of a main categorization. Then underneath there is different kind of dynamics in all those four categories. But this is just to provide you a bit of a color that what inventory means for us. It's not just one lump, but at least four sort of main and different business dynamics that we need to manage.

Thank you, really appreciate that Kalle. So just in simple terms, if Minerals OE large orders accelerate, we should expect that to be favorable or else equal to the inventory position.

That's correct, because we run it with customer repayments and then us working with sort of a cash positive situation, if you will, throughout the delivery.

Great, thank you. My second one then is on the ERP upgrade. I appreciate these are complex projects and obviously it relates to a big proportion of your business. I just wonder, you mentioned 60% of the revenue now covered and that this was phase three. Is there a fourth phase? How do we think about the remaining 40% and should we be accommodating any similar sort of project effects in the second half. Yeah, anything you can help with any future guidance, that would be useful.

Sure, sure, Kristian. So, I mean, 60% was the scope where we went live now. We have actually gone live with 20% already earlier, late last year. And that was primarily the legacy Autotech part of the business. So we have, give or take, 20% still to go live. And that go live will happen towards end of this year. while it obviously requires dedication and focus and diligent execution, 80% of the business life now gives us also confidence that we are able to run this remaining piece in a successful way and then start harvesting gradually all the opportunities that a modern tool brings for us.

Understood. And maybe, sorry, just a third one that came to mind. You're upgrading your ton pair facilities in aggregates. Is there any near-term cost effect that was an issue in aggregates for this quarter related to that?

No, not really, Christian. I mean, that's a construction project. Basically, I mean, on the site we have that the buildings start to look like buildings and we gradually start to work with, you know, all the assemblies inside the buildings. And this project is on schedule and on budget and it has no cost implications for second quarter or we don't expect expect those also prior we start then ramping up the facility in due course.

Thank you. Next question comes from William Mackey from Kepler Shoebrew. Please go ahead.

Good morning, Sami, Pasi. Thanks for the time. Two question areas, really. The first one, going back to minerals, I'd just like to understand on a number of occasions you mentioned that within the service business, the margin declined due to the type of service that you were executing. And so my question is perhaps more qualitatively, can you describe how the business mix shifted either geographically or by the type of activity within service that caused the dilution? And I hear the positive growth in the order growth in service that you've described. But when we look forward, how do you see the mix of the various types of businesses that were dilutive in Q2 evolving in Q3 and Q4? That's the first question.

Yeah, thank you. So a little bit opening up that within the aftermarket so services, we have a different type of products, some of them are very high captivity products and that typically reflects higher margins and highest margins, I would like to say, and then there are. more commodity type of products which are having less margin and some of them are then linked together as well that the package is including both. So now in the second quarter the mix within the services was more towards temporary now for the lower profitability. I said already earlier in the response that looking at the existing backlog and the realization of the backlog going forward, that looks like normal what we have been delivering in the services Q1 and before that.

I mean, building on that, have you seen in the first half of the year any interesting evolution on a geographic basis given your global operations?

A certain evolution happens, but not in a significant nature. So we have a strong minerals segment, for example. We have strong areas where we are very much present and continue to get good amount of aftermarket services business like South America and so forth. So no significant change in the geographical shift.

Thank you very much. And then, I mean, in an earlier question, you were asked about the margin trajectory for minerals and described a number of levers. I just want to touch on the last lever, which was self-help and cost-saving measures. I mean, when we think about the ERP program, the costs of loading up front are a simplification process that must provide drop through in benefits as you go into late 25, 26. But as you stand today with the time you've had at the driving seat, what are the sort of scope and range of other self-help measures that you see going into the next 12, 24 months?

Excellent question. And I'm more than happy to share that more in detail. Second of October, that is. Excuse me. It's part of our strategic work, and I personally enjoy being in charge of the company that has been able to identify throughout the work themselves these potential self-help pockets. They are not maybe like one silver bullet. They are more like understanding that they do exist and then having a good plan to go after them. But I'm more than happy to open up this much more than when we have the capital market day.

Okay, maybe a supplementary follow-on then, please. With regard to the mineral structure, you've successfully divested the ferrous business, but you've retained a number of other activities, smelting comes to mind. To what extent are those also dilutive within the margin that we've seen in the first half in minerals? And is that something we should factor in when thinking about the rest of the year and next year?

They are not diluting. So we have decided to develop further these businesses in Metso, and that typically comes in line with our strategic targets being then profitability or growth or both. So from that perspective, we are very, very happy of having these businesses and continue to do good business with these technologies.

Thank you very much. Thanks a lot. Next question comes from Antti Kansanen from SEB. Please go ahead.

Hi, guys. It's Antti from SEB. Just one question remaining from me, and it's relating to the aggregate profitability on the very near term. I mean, you mentioned that you have now kind of recalled the temporary rate of workers in Europe, which has resulted in higher costs, but very rarely your top line kind of increases anymore from the Q2 level on the second half. So I'm just thinking that is this kind of a new normalized profitability that we should expect going forward as Europe is kind of coming back and kind of the strong margins that or even stronger margins that we saw a couple of years back were mainly related on a mix with North America being on a high level and Europe on a very poor level.

Yeah, thank you. And you are right with the seasonality within the aggregate business. On the other hand, having people working and manufacturing the ready products for the customers, if we look the two year period when the profitability has been staying quite stable. So there has been those elements as well. So North America is very important success factor for Metso to deliver good numbers in the aggregate segment. That is a fact. The Europe is equally important from the volume perspective. So Q3 typically is the most challenging quarter for the aggregate regarding the seasonality. So you were right in that one.

Yeah, because I wanted to come back on something that you said on kind of the sentiment and the confidence around the European clients that they're preparing for a better season coming in a few months' time. But this is still very much like a summer business in Europe, right? So in terms of your, let's say, equipment orders and deliveries, in Europe in general there's still the normal seasonality that we should expect for this year?

It's a difficult one to really give any strong opinion because there is also the backlog of non-investment quite a long time in the European side. So what is the impact of that? What we see at the moment, of course, now we are in the summer months, it's that the European pickup that started to happen at the very end of the Q1 seems to be staying there. So the activity level from the customer side is requesting for quotations and seriously considering of buying the equipment seems to be quite strong at the moment in the European.

All right, thank you very much. That's all from me. Next question comes from Vas Panavari from Barclays.

Please go ahead.

Yes, hello. It's Vlad from Barclays. Appreciate you taking my question. Let me ask on the cost side first. You mentioned this ERP implementation cost. Can you let us know what those costs actually are? Are they costs? Payments for external contractors, other payments to people, what are those costs? Then second question, there was a quite significant sequential increase in non-current provisions of about 20 million. Did it impact the P&L in any way? And what was this increase related to? And maybe lastly on costs, is this 33 million of other costs, will we be able to help us break them down on what those actually were?

Sorry, Vlad, can you repeat the third question? I did not get that one.

Yeah, the third one, absolutely. So it was related to the other cost line in the P&L of 30 plus million euros this quarter. Would you be able to break down those lines and tell us what those 30 million plus included in terms of cost?

Yes, thanks Vlad. And let me start from the last one. So, you know, 27 million out of that is the Swiss Tower Mill 15% ownership stake reevaluation, non-cash gain that we recorded during the quarter and then the rest in that line is FX. Then your first question, when it comes to ERP type costs, this is a mixed bag, but a lot of that is externals. When we run this kind of a project, we have a lot of internal dedication, but then also external support to get everything prepared, get it done, get it implemented and go live in a successful way. So we have had a fair bit of third parties helping with us. And then it's also some sort of internal related costs. We have had a good amount of colleagues co-locating for extended amount of periods to support the go-live and so forth. So it's this kind of items. what we saw in this extra ERP related costs. And then you had a question on non-current provisions. So unfortunately, I'm not able to answer that, but let us check and I'll come back to you with an answer on that.

Absolutely. Thanks very much. If I can do a quick two follow-ups. One is on the mix going into the second half. I remember you were quite successful in booking a couple of big projects in Central Asia in the second half of last year, which I thought would start contributing meaningfully to revenue in the second half of this year. Will those contributions be margin neutral, margin accretive, margin dilutive? And then my final question is on working capital dynamics. Obviously, great job in terms of reducing inventory in line with what you targeted and promised. Working capital as a whole still was some sort of a headwind to cash flow in the first half. How do you expect working capital as a whole to develop for the rest of the year?

Maybe I start from the working capital question. We discussed this already in the call. Indeed, we are happy to achieve what we promised to deliver earlier. And then work continues. you are right that even in second quarter we tied some tens of millions further cash into working capital and obviously that's a trend that we want to change and when we are addressing this we are addressing inventories which we have discussed in length but then also accounts receivables and accounts payables that are the two other main working capital components and we will report back during the coming quarters how the work progress is. Then, Vlad, you had also a question on some of the orders that we received during second half of last year. So indeed, from delivery time point of view, they start to impact revenues during second half of this year. But I mean, we are not really commenting case by case what are the margins on those. So, I mean, you should not expect any significant deviations from those, but we can't really give project level guidance on margins.

Gentlemen, that's super clear. Thank you so much. Next question comes from Michael Dopple from Nordia. Please go ahead.

Thank you. Good afternoon. So just on the aggregates business, we talked a bit about Europe. It seems that things are improving in Europe. What about the U.S. market? I think, you know, listening to you guys, you know, one month ago or so, one, two months, you sounded fairly upbeat on this business, both with the European market. improving and the US actually sentiment remaining quite strong despite the fact that we have tariff discussions in inventory distributors coming down in the US as well so you know based on that one could even assume that you would have seen a better outlook for aggregates into the second half just wondering if you could talk a bit about the US market here if anything has changed here in the past few weeks yeah thank you for the question so the US market

had this dynamics that clearly it was important for market to get confirmation that who will be the president. And after that one, the pickup started in the US market in the beginning of this year, creating the normalization of the market conditions, I would call it like that. And that has been continuing. Tariff discussion is not coming through in the discussion with the US based customers. But obviously, we as a company do acknowledge that if the result of tariff decisions are something that will significantly increase the pricing, including the surcharges that we are using, that will slow down most likely the demand in the US market in that kind of situation.

Okay. And on the service part of this business, and you talked about utilization rates and the weak order intake in the second quarter here. How do you think about that in the second half? I mean, do you expect that to clearly improve from a growth perspective? Or how do you think about the aggregates after market business?

Typically, the Northern Hemisphere, these months right now are the very active months when a lot of work is conducted by the customers, and typically that is increasing the demand of the spares and wares.

Okay, thank you very much.

Next question comes from Davoud Farrell from Jefferies. Please go ahead.

Hi. Thanks very much for squeezing my question in. Just a very quick one. It's obviously been a very disruptive period from your customers, given what's going on in the US and tariffs, et cetera. I was wondering if you could give us a sense of how the order intake shaped up through the quarter. Did you exit the period, i.e. June, on a positive trajectory? Any color you could give on that would be greatly appreciated. Thanks.

For the order intake during the quarter, so the months were more or less progressing as the estimates were for us. So we didn't see any kind of impact from that one coming in the order intake.

Okay, that's clear. Thank you.

All right, we have gone through all of your questions. Thanks for those. Thanks for participating in the call. We wrap up here. And like Sami said, next event for us would be the Capital Markets Day on October 2nd. And after that, you know, third quarter results, October 23rd. But in terms of CMB, more information coming soon. At this time, we thank you for this call and enjoy the summer. Bye-bye.