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 third quarter 26 results which were published a few hours ago. Results will be presented by President and CEO Sami Takaluoma and CFO Pasi Kyckling and after the presentation we'll have Q&A. We have scheduled 60 minutes for this call and as a final reminder we'll be making some forward-looking statements and that's why we have the disclaimer in our presentation deck. With these remarks I'll be handing over to Sami, please go ahead.

Thank you Juha and good afternoon to everybody online. Very happy to present our key figures from the third quarter A very strong position in the market and the activity from the customers resulted our orders received to go above 1.6 billion growth in 24% in the constant currencies. Sales was developing according to the plan and 1.4 billion close and the growth of 1% in the constant currencies. and then the drop through to margins 230 million in a period resulting 16.8 percent margin. Operating cash flow was 136 million and in the rolling 12 month we are now in the 786 million. Cash conversion was 85 percent for the 12 month period. So this strong order growth and solid profitability was as mentioned 28%, 24% in the constant currencies. Book to bill relation was 1.18% in the period compared to 0.95% a year ago. Minerals equipment orders were strong 79% growth and we continue to deliver strong orders in the aftermarket. Now the 11% growth for this quarter. Backlog has increased 20% and is currently now 3.9 billion. This supports very nicely the future sales and margin generation. Sales as mentioned 3% up, aftermarket sales 10% growth in the sales and now in this period it represented 57% of the group sales number. Adjusted EBITDA grew by 4%, the 230 million and the margin was 16.8 notch up from the year before numbers. In the period we did a good amount of activity for the future success as well. Regarding the service capacity, we made a decision for the new service center in the mining region Belo Horizonte in Brazil. Build up is next year and then starting from the beginning of 28 to serve the customers. Regarding the technology and developing our offering, a few very important product launches. The Sampo cell flotation, coarse particle flotation, it's groundbreaking innovation and continue to develop our mobile equipment fleet in the aggregate side with the two new products LT400RS and LT200HPX. which has been taken very positively in the marketplace. Three AI enabled mining digital solutions to improve the production performance and safety at the customer sites were launched during the period and then the low emission DRI smelting technology which is our flagship you can say first commercial scale order was received now in the third quarter. Regarding the M&A, so acquisition side, we closed an acquisition for the hose and progressive cavity pumps that was closing the technological gap in our pump offering and then after the period but announced now recently was the bronze alloy component manufacturer ItalBronze and that's again a very Strategic acquisition in terms of securing very important component for our crushing technology both in aggregate and in minerals markets. Regarding the outlook, we expect the market activity in both minerals and aggregates to remain at the current level for the next six month period. And I handle now to to go through our financials.

Thank you Sami and good day everyone also from my side. Let me start with orders and sales bridges. Our orders increased by 350 million euros or 28% year on year resulting to 1 billion and 614 millions. The largest contribution came from minerals equipment adding 258 million. Minerals aftermarket contributed other 44 million euros while aggregate also provided a positive contribution from equipment. Currencies had a positive impact of 42 million euros. Overall aftermarket orders increased by 9%. Then looking at sales, our group sales increased by 45 million to 1 billion 373 millions. Largest positive contribution came from minerals aftermarket, while minerals equipment sales were below the comparison period. Sequentially, however, minerals equipment increased sales by 57 million euros or 17%. In that comparison, the comparison point is second quarter this year. So we are also seeing a good progress in mineral equipment deliveries and revenue. Aftermarket sales overall increased by 10%. Overall third quarter revenue was spot on with our plans and expectations when we entered the quarter in early July this year. I'll come back to the timing of equipment deliveries when we look at minerals segment more in detail. Let's then turn to our profitability. Adjusted EBITDA increased by 8 million to 230 million euros and the margin improved slightly to 16.8%. Higher volumes contributed positively with 15 million euros year-on-year. Cross-margin had a 15 million euro negative impact, while SG&A had 5 million euro negative impact. Both cross-margin and SG&A were affected by the adjustment items and excluding the adjustments developed year-on-year in a more stable way. Earnings per share from continuing operations were 15 euro cents. Overall profitability remained solid at group level and in both of our reporting segments. Let's then look at cash flow. Cash flow from operations was 136 million in this quarter. The main year-on-year difference was working capital which had a negative impact of 140 million euros. The negative impact in working capital reflects higher customer activity and the growing order backlog that we have. On a rolling 12-month basis operating cash flow was 786 million euros and the cash conversion 85%. So while working capital increased as the business is growing, cash generation remains healthy over the longer term. Sequentially the increase in working capital is split between inventory and payables. Then if we move on and look at our balance sheet, overall the balance sheet remains strong. Our net debt at the end of the period was 1 billion and 175 million euros and net debt to EBITDA was 1.3 times comfortably below our one and a half times target. At the end of the quarter we had 445 million of cash and then significant undrawn committed credit facilities. Average interest rate for the period was 3.6%. The balance sheet continues to give us good capacity to execute our strategy and to invest in profitable growth including both organic and inorganic investments. Let's then look at our segments and start from aggregates. Orders increased by 4% to 292 million euros. That represents 2% organic growth in constant currencies. Orders increased both in North America and Europe with a stronger growth in Europe coming from the Nordic countries. Orders in rest of the world declined somewhat. Sales increased by 5% to 324 million euros. Very importantly profitability continued to improve and our adjusted EBITDA increased to 53 million euros and at the margin improved 80 basis points to 16.4%. This was supported by higher sales combined with solid operational execution This was another quarter of steady progress in aggregates with order growth both in Europe and North America and further profitability improvement. Then let's look at minerals. Customer activity overall remained healthy across both equipment and aftermarket. Orders increased by 34% to 1,323,000,000 euros or 31% organic growth in constant currencies. Equipment orders increased by 79% The quarter also included a 90 million copper related order but importantly the growth was very broad based across our product offering with the strongest growth in grinding and crushing and then the other growth was also broad based when it comes to geographical point of view. Small and medium sized orders also remained at strong level. Aftermarket orders increased by 11%. This overall resulted to book to bill in minerals to 1.26 and the order backlog increased by 21% or approximately 580 million to 3 billion and 372 million euros. This backlog gives us a solid starting point for the coming quarters. Then looking at the sales, mineral sales increased by 3% to 1 billion and 49 million euros and it was stable organically. Aftermarket sales increased 11% and it represents 64% of our mineral sales in the third quarter. Equipment sales increased by 57 million or 17% sequentially from second quarter this year, so we are seeing good progress in deliveries in sequential comparison. The year-on-year comparison in minerals equipment is mainly about timing. A year ago, some larger orders progressed faster through customers' investment schedules, while some customer investments are currently progressing more gradually. Further, our order intake second and third quarter last year for equipment was slower. These factors affect the timing of deliveries and the sales recognition now in the third quarter this year. Looking over a longer period of time, equipment orders have historically translated into sales over several quarters and around a year can be used as a broad reference point. However, there is no mechanical conversion period as the precise timing of each project depends on progress by customer investments. And just to remind everyone that for projects we apply the percentage of completion accounting. With strong equipment order intake and higher backlog, we have a solid foundation for future deliveries and growth. Then looking at our third quarter profitability, the adjusted EBITDA increased to 189 million euros and the margin was 18%. The aftermarket share supported profitability. At the same time, aftermarket margins were temporarily affected by a surge in our freight costs following the crisis in the Middle East. We have implemented aftermarket price increases to address this temporary pressure. Overall, minerals delivered very strong and broad-based order growth, good sequential progress in equipment deliveries and a significantly higher backlog and solid profitability. With that, I would like to hand back to you Sami to summarize.