Interim Report Q1/2022

Segment information for 2021 has been restated to reflect the segment structure changes that were announced in January 2022. Restated information, which was published on April 6, 2022, had a minor impact on all three reporting segments, while the Group’s total figures were unchanged.

Figures in brackets refer to the corresponding period in 2021, unless otherwise stated.

First-quarter 2022 in brief

  • Strong market activity continued across all businesses
  • Orders received increased 29% to EUR 1,424 million (EUR 1,102 million)
  • Sales grew 26% to EUR 1,164 million (EUR 925 million)
  • Adjusted EBITA increased to EUR 157 million, or 13.5% of sales (EUR 115 million, or 12.4%)
  • Operating profit increased to EUR 139 million, or 12.0% of sales (EUR 91 million, or 9.8%)
  • Cash flow from operations was EUR 74 million (EUR 165 million)
  • Increased uncertainty caused by Russia's military offensive against Ukraine

President and CEO Pekka Vauramo:

Our performance during the first quarter was good, despite the uncertainty caused by Russia's military offensive against Ukraine and the ensuing overall volatility in the market environment.

Since Russia started its military offensive, our priority has been the safety and well-being of our personnel. We announced a temporary suspension of deliveries to Russia as of late February and we have not taken new orders for deliveries to Russia. However, we continue to have a backlog to Russian customers and, while fully complying with the applicable sanctions regimes, we will wind down these contracts in a controlled way considering our stakeholders.

Our markets elsewhere continue to be very strong. If anything, the demand for minerals has increased and we expect that the market will enable us to compensate for Russian orders. The market activity during the quarter was reflected in the 29% growth in our order intake. Orders increased in all three segments, in both the equipment and services businesses. The strong market activity is driven by high commodity prices and production rates in the minerals and metals markets, as well as the healthy demand for aggregates equipment and services in North America in particular.

Our quarterly sales increased 26% as a result of higher equipment deliveries from the backlog and double-digit growth in the services business. Thanks to higher sales as well as realized integration synergies and other improvement actions, our adjusted EBITA increased 37% to EUR 157 million and our adjusted EBITA margin to 13.5%. While we saw cost increases from raw materials, components, freights and energy during the quarter, we were able to better mitigate those pressures compared to the second half of 2021, and those actions will continue going forward. 

We have also made good progress towards reaching our sustainability targets related to reducing our own emissions and continue to help our customers improve their performance with our Planet Positive portfolio. We launched several new Planet Positive products during the quarter, such as Metso Outotec Geminex™, a digital twin that is designed to optimize customer processes by combining data from both internal and external sources to enable, for example, a reduced carbon footprint and more efficient use of resources.

After the reporting period in April, we announced a project to develop a new, complete range of electrically driven track-mounted Lokotrack® crushers and screens. This easy-to-use range of equipment that will provide customers with lower operational costs and the possibility to use renewable energy sources. These products, along with our existing Planet Positive portfolio, showcase our strong commitment to contribute to the 1.5-degree climate target. Also in April, we announced the acquisition of Tesab Engineering, which offers mostly mobile crushing equipment for aggregates applications. Tesab is a good fit for us, complementing our current offering in the mobile crushing and screening markets. We continue efforts with other potential acquisitions.

Russia business update

Metso Outotec condemns Russia’s military offensive against Ukraine and is deeply saddened by the humanitarian crisis it has caused. The offensive is having an impact on Metso Outotec's business and operations. Metso Outotec’s Russia business mainly consisted of large capital equipment deliveries to various mining and metals customers. As of March 31, 2022, Metso Outotec had an order backlog of EUR 479 million to Russia, of which some EUR 315 million was expected to be recognized as sales in 2022 and the rest in later years. In early March, the company temporarily ceased its project deliveries to Russia and is not taking new orders for deliveries to Russia. The company has no production assets or property, plant, and equipment in Russia and only marginal physical assets. The Russian business is accounted for unchanged, on a going concern basis in this interim report.

As a result of the military offensive, the European Union, the United States and other countries have announced severe sanctions against Russia. Metso Outotec did not recognize any revenue during the first quarter from sanctioned customers or contracts. Of the original sales plan for the remainder of 2022, sales to customers currently sanctioned amount to approximately EUR 100 million. In addition to sanctions, restrictions on, for example, logistics and export controls can be expected to further limit deliveries into Russia. Having reviewed the ongoing projects, the company is working to wind down its existing contracts and deliveries with its non-sanctioned Russian customers during the coming months. Thereafter, the company does not expect any revenue from the remaining order backlog. The extent to which winding down through final deliveries or termination agreements is possible depends on further escalation of the conflict, sanctions and export control restrictions, as well as the availability of banking and logistics. The value of operative assets (receivables and inventory) related to Russian customers accounted for approximately EUR 100 million at the end of March. These assets may be at risk if winding down in a controlled way is not possible.

Capital equipment deliveries to Russia are contracted in euros and include prepayments, which are typically secured with an advanced payment guarantee from a Western bank, and payments against deliveries during the course of the project are secured by letters of credit. At the end of March, Metso Outotec had EUR 269 million of advance payment guarantees tied to deliveries to Russian customers that are accounted for under contingent liabilities. The company is working with its customers and banks on the terms of these guarantees and their fair values in compliance with applicable sanctions regimes to limit cash outflow.

The company terminated its ruble hedging during the quarter, as the currency became untradeable in practice. As a result, a one-off cost of EUR 11 million was recorded in its financing costs.

The company continues to closely monitor the situation and seeks to find solutions for its stakeholders in this unprecedented and challenging situation.

Market outlook

According to its disclosure policy, Metso Outotec’s market outlook describes the expected sequential development of market activity during the following six-month period using three categories: improve, remain at the current level, or decline.

Metso Outotec expects the market activity to remain at the current strong level.

Key figures

EUR million

Q1/2022

Q1/2021

Change %

2021

Orders received

1,424

1,102

29

5,421

Orders received by services business

712

573

24

2,393

% of orders received

50

52

44

Order backlog

3,823

2,569

49

3,536

Sales

1,164

925

26

4,236

Sales by services business

551

494

11

2,126

% of sales

47

53

50

Adjusted EBITA

157

115

37

547

% of sales

13.5

12.4

12.9

Operating profit

139

91

53

425

% of sales

12.0

9.8

10.0

Earnings per share, continuing operations, EUR

0.11

0.08

32

0.35

Cash flow from operations

74

165

-55

608

Gearing, %

18.6

31.7

20.9

Personnel at end of period

15,746

15,773

0

15,630

Audiocast and conference call details

President and CEO Pekka Vauramo and CFO Eeva Sipilä will present the results in an audiocast and a conference call for analysts and investors on the same day at 12:30 p.m. EEST.  

The audiocast can be followedat https://metso-outotec.videosync.fi/2022-q1

A recording and a transcript will be available on this webpage after the event has finished.  
  
Conference call participants are requested to dial in five minutes before the event on:  
United States: +1 631 913 1422  
other countries: +44 333 300 0804  

The confirmation code for joining the conference call is 74781284#

Further information, please contact: 
 
Juha Rouhiainen, Vice President, Investor Relations, Metso Outotec Corporation, tel. +358 20 484 3253, email: juha.rouhiainen(a)mogroup.com