Metso Outotec Corp

Good afternoon, good morning everyone. This is Juha from Metsos Investor Relations and it's my pleasure to welcome you to this conference call where we review our second quarter 26 results. We'll begin with the presentation given by our CEO Sami Takaluoma and CFO Pasi Kyckling, after which we'll be taking your questions. And as a reminder, the length of this call is 60 minutes. and we will be making some forward-looking statements and that's why we have the disclaimer in the presentation deck. But with these short remarks, let's kick off and I'll be handing over to Sami. Please go ahead.

Thank you, Juha. Good afternoon, good morning also from my behalf. The key message today is that the second quarter was a strong quarter for Metsa. Orders, sales, profitability all improved year on year. and our cash generation also strengthened. The strongest momentum was in minerals where customer activity remained healthy across both equipment and aftermarket. First, I will summarize the Q2 performance and the main business drivers. Then I will touch our strategy execution and market outlook. After that, CFO Pasi Kyckling will cover the financials, cash flow, balance sheet and the segments. Finally, we will then move to the Q&A. In this presentation, we will also address several topics that have been active in the sector recently, including the mining demand, aftermarket trends, aggregate development margins, and the gas conversation. Let's start with the Q2 performance. Overall, the quarter confirmed that the customer activity remains healthy, and particularly in the minerals segment. We saw strong order growth, continued aftermarket momentum, higher sales, and improved profitability. Importantly, the order growth in minerals was broad-based and driven by both equipment and aftermarket, not by one single large project. The key figures here summarize the quota quite well. Orders increased by 18%, corresponding 16 in constant currencies. Sales also increased by 6% and 5% of that organically. Adjusted EBITDA, 221 million and the adjusted EBITDA margin improved to 16.6%. Operating cash flow was 206 million and the rolling 12-month cash flow from operations was 915 million euros. corresponding 98% cash conversion rate. The main driver was minerals where both equipment and aftermarket orders grew at the double digit rates. And here on this slide, you can see the longer timeframe showing that the orders increased. Now the book and bill was 1.1. The order backlog was also increased by 13%. being now 3.7 billion, which gives us a good visibility for the future revenues. Sales grew by 6% and aftermarket represented now 57% of the group sales, 54% one year ago. And just the ETP day, as said, margin expanded to 16.6% with both segments improving year on year. I think the important message is also that the cycle is now translating to more clearly into our numbers. In Q1, the discussion we had was partly about the timing and conversion and now in the second quarter, we have seen the strong order growth, improved sales and also the higher margin and healthy cash flow. During the quarter, We have continued to execute our We Go Beyond strategy and to invest in capabilities that support our long-term strategic targets. Customers are a very important part of our strategy and proximity to customers remains as one key factor in the success. We have now expanded our presence in San Juan in Argentina the country that is developing in the future as one of the main mining countries. And we have also had the grand opening in our expanded service center and new training center, the largest in Metso in US, Mesa in Arizona. And we also strengthen our presence and footprint close to the customers in Western Canadian service center opening. and in Finland here we have also made a decision in the second quarter to strengthen further the aggregates technology center in Tampere and the second phase was kicked off during the second quarter. These are not as such isolated investments. They do support the same structural teams that we see across the market. Customers, they want Availability, they want productivity, they need lifecycle support, and they definitely need a fast local service response. We have also strengthened our technology portfolio with launches of the new product, and we have also been focusing for the lithium carbonate process development. These innovations support our role across the minerals downstream processing. And they will help our customers to improve their own productivity, resource efficiency and sustainability. And save the date here in the slide. It's a reminder for all of you that September 10th, we will have a Metso Summit where we will talk through a lot of these innovations in a very professional way. Recommendation is strong to book the date to your calendars and join the event. As it comes to outlook, our market outlook is unchanged. We expect the market activity in both minerals and aggregates to remain at the current level as it has been in the second quarter. It is important to note that our outlook is It describes what is expected for the next six months and it's adjusted for seasonality. And with this, I pass the microphone to CFO Pasi.

Thank you Sami and good day everyone from my side. I will now go through the financials to more in detail. Let's start with orders and revenues. The order bridge shows clearly where the order growth came from. The strongest contribution was from minerals equipment, followed by minerals aftermarket. Aggregates order intake was stable. Overall group orders increased 18% to 1,462,000,000. In minerals, equipment orders increased by 50%, driven specifically by grinding and crushing solutions. North America performed strongly from market area point of view. The increase was driven by a broad flow of small and medium-sized orders up to 20 million across commodities and geographies. Aftermarket orders increased by 13%, reflecting healthy activity across our instant base. In the sales bridge, minerals aftermarket was the main positive driver of sales growth. The minerals equipment sales were lower year on year due to timing of customer projects. Mix improvement in minerals supported profitability as aftermarket share increased by 17% and represented 68% of segment sales. Aggregate sales increased 7% driven by equipment. Overall our order backlog increased 13% year on year or more than 400 million euros. Let's then move to our result bridge. As a state EBITDA increased from 183 million to 221 million, reflecting as a state EBITDA margin of 16.6%. The improvement was driven by higher volumes and improved cross margin partly offered by higher selling general administrative expenses and other items. The mix was supportive for the EBITDA development. Cross-margin improved by almost 200 basis points to 33.3, and it reflects combination of volume growth, favorable mix, and specifically the increase in minerals after market share, and overall solid operational execution. Both aggregates and minerals improved adjusted EBITDA margins year over year. EPS from continuing operations increased to 15 cents Operating profit was 185 million compared to 178 million a year ago with operating margin of 13.9%. I'd like to also remind all of us that year ago we had a positive larger one of 27 million from the revaluation of STM shares in our second quarter results. Let's then move forward and look at our cash flow generation. On rolling 12-month basis, Thank you very much. corresponding to gas conversion rate of 98%. As said earlier, we increased our order backlog year on year by 400 million and the book to bill during the second quarter was 1.1 and that is also reflecting our working capital needs. Let's then move and look at our balance sheet. Our balance sheet continues to be strong, net EBITDA at the end of second quarter was 1.3 times and that's below of the ceiling of 1.5 times that we have set as a target. Gas and gas equivalents at the end of the quarter were 383 million and we have 700 million revolving credit facility fully undrawn. During the quarter we exercised the first option to extend the RCF by one year and it is now maturing in 2031. We also maintain an investment grade credit profile and have the BAA2 rating from Moolies with positive outlook. Overall, our balance sheet continues to be strong and it gives us flexibility to execute our strategy. We can continue to invest in our service capability, technology, local presence and selective growth initiatives while at the same time maintaining disciplined capital allocation. Let's then look at our segments and start with aggregates. The aggregates orders were 333 million during the quarter, wholly stable year over year, corresponding to 1% organic gold in constant currencies. In aggregates, demand remained very strong in North America, while Europe was somewhat softer. In Europe, the Iran war and increased diesel costs specifically impacted negatively the aggregate demand. Equipment orders declined by 1%, while aftermarket orders increased by 6%. From sales point of view, we reported 8% organic growth in constant currencies. Equipment sales increased 12% and aftermarket sales declined 4%. The aftermarket comparison here is affected by the calculation chains we implemented in the beginning of the year and under that certain products were reclassified from aftermarket to equipment. The impact in second quarter was 8 million in orders and 9 million in sales. Profitability in aggregates improved clearly adjusted EBITDA increased by 11 million to 56 million and the margin improved more than 200 basis points to 16.3 supported by higher volumes, strong execution and overall cost discipline. Let's then look at our minerals segment and minerals delivered a strong quarter. Orders increased to 1 billion, 129 million Corresponding 21% organic growth. Equipment orders increased by 50%, driven particularly by crossing and grinding solutions, and aftermarket orders increased 13%. And this reflects healthy activity across the installed base in spares and wares, as well as in upgrades and modernizations. Book to bill was 1.14 and the backlog increased year-over-year 13% to more than 3.1 billion. Sales increased to 992 million, representing 4% organic growth. The sales growth was aftermarket-led, with aftermarket sales increasing 14% and representing 68% of mineral segment sales. FSDB also increased. and came in with 182 million representing 18.3% margin. Here also more close to 200 basis points improvement year over year. Higher volumes, improved mix and strong execution overall supported the profitability. With that, I'd like to hand back to you Sami for a summary.