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.