Half-Year Report H1/2022

Segment information for 2021 has been restated to reflect the segment structure changes that were announced in January 2022.

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

Second-quarter 2022 in brief

  • Strong market activity for mining equipment and services in particular
  • Orders received increased 18% to EUR 1,610 million (EUR 1,360 million)
  • Sales grew 28% to EUR 1,295 million (EUR 1,010 million)
  • Adjusted EBITA increased to EUR 155 million, or 12.0% of sales (EUR 131 million, or 12.9%); volatility in currencies negatively impacted adjusted EBITA by around EUR 34 million (0 million)
  • Operating profit was EUR -13 million, or -1.0% of sales (EUR 97 million, or 9.6%), due to EUR 150 million non-recurring charge related to the wind-down of business in Russia
  • Cash flow from operations was EUR 15 million (EUR 107 million), affected by increase in net working capital

January–June 2022 in brief

  • Orders received increased 23% to EUR 3,034 million (EUR 2,462 million)
  • Sales grew 27% to EUR 2,459 million (EUR 1,935 million)
  • Adjusted EBITA increased to EUR 312 million, or 12.7% of sales (EUR 245 million, or 12.7%)
  • Operating profit was EUR 127 million, or 5.1% of sales (EUR 188 million, or 9.7%), including EUR 150 million non-recurring charge related to the wind-down of the business in Russia
  • Earnings per share were EUR 0.08 (EUR 0.15)
  • Cash flow from operations was EUR 89 million (EUR 272 million)

 

President and CEO Pekka Vauramo:

We delivered a strong order intake and healthy underlying results in the second quarter. The quarter included some unusual elements, mainly related to the wind-down of our business in Russia and high volatility in the currency market, which had an impact on both our volumes and results.

Our orders increased 11% year-on-year in constant currencies, thanks to the strong activity and demand in the mining markets as well as our strong position and Planet Positive product offering. Orders received in the Minerals segment grew 40% in constant currencies, with strong growth in both equipment and services orders. Orders in the Aggregates segment were flat year-on-year, despite softening of the European markets, and the Metals segment reported somewhat low order intake due to the timing of customers investments.

Our sales growth of 21% in constant currencies was supported by the backlog built during the previous quarters, and both equipment and services reported double-digit growth rates. 

Our underlying performance was healthy, although still somewhat under pressure due to high raw material, component, logistics and energy costs. This pressure is most visible in our consumables business, where the mitigation actions continue. Unusually high volatility in the currency market had a EUR 34 million negative impact on adjusted EBITA, due to the strengthening of the US dollar and the weakening of currencies in some key mining countries. 

We continued to make good progress in sustainability during the quarter. We completed a number of actions that will result in emission reductions of our own operations. Our Planet Positive product portfolio was expanded with several launches of new products, for example, for real-time monitoring of crushers and screens and sustainable tailings management. We received a significant order for a comminution circuit flowsheet developed for a new concentrator plant, which represents the most sustainable technology currently available and features a combination of HRC™e high-pressure grinding rolls (HPGR) and Vertimill® grinding mills that help to achieve the best energy-efficiency with the lowest operating and life cycle costs. In addition, we took an important step in linking our overall strategy implementation to financing by publishing a Sustainability-Linked Finance Framework, which specifies several performance indicators measuring our own, our suppliers' and our customers' emission reductions as an input to our future financing instruments.

Looking ahead, we see strong activity continuing in the mining markets during the second half of the year despite the metal prices recently trending down from very high levels. Following the expected softening of the overall economy due to inflation and the continuing war in Europe, we are slightly cautious regarding the activity in the aggregates market in Europe in particular. While volatility is likely to continue in the global economy and in our key markets, I'm confident that we are well-placed to continue delivering on our strategy, including the review of the Metals segment, as part of the continuous development of our portfolio. 

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 continues to have an impact on Metso Outotec's business and operations. The company continued to wind down its business operations and customer contracts in Russia during the second quarter, in line with the disclosure in its January-March 2022 interim report. The possibilities to wind down through final deliveries or termination agreements have been limited, due to the continuation of the conflict, sanctions and export control restrictions, as well as the availability of banking services and logistics.

At the end of March 2022, Metso Outotec had an order backlog of EUR 479 million to Russia. Around EUR 315 million was originally expected to be recognized as sales in 2022; approximately EUR 215 million of it was to non-sanctioned customers at the end of March.

Metso Outotec made deliveries worth EUR 67 million to non-sanctioned Russian customers during the second quarter. In early July, the company decided to make a provision totaling EUR 150 million, including wind-down and restructuring costs, which is expected to cover the remaining exposure in Russia. The provision was booked as a non-recurring adjustment in the company’s second-quarter financials, and therefore had no impact on adjusted EBITA. The negative impact of the wind down in the Group’s order backlog at the end of June is approximately EUR 380 million. Metso Outotec has not recognized any revenue from sanctioned customers or contracts and is not taking new orders for deliveries to Russia.

Metso Outotec will continue to monitor the situation closely, as further changes are expected in the sanctions and export control restrictions, as well as in the availability of banking facilities and logistics.

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 overall market activity to remain at the current level with the mining market remaining strong and aggregates market declining slightly.

Key figures

EUR million

Q2/2022

Q2/2021

Change %

Q1-Q2/2022

Q1-Q2/2021

Change %

2021

Orders received

1,610

1,360

18

3,034

2,462

23

5,421

Orders received by services business

752

594

27

1,464

1,167

25

2,393

% of orders received

47

44

48

47

44

Order backlog

 

 

 

3,756

2,876

31

3,536

Sales

1,295

1,010

28

2,459

1,935

27

4,236

Sales by services business

616

527

17

1,167

1,021

14

2,126

% of sales

48

52

47

53

50

Adjusted EBITA

155

131

19

312

245

27

547

% of sales

12.0

12.9

12.7

12.7

12.9

Operating profit*

-13

97

-113

127

188

-33

425

% of sales

-1.0

9.6

5.1

9.7

10.0

Earnings per share, continuing operations, EUR

-0.02

0.07

 

0.08

0.15

 

0.35

Cash flow from operations

15

107

-86

89

272

-67

608

Gearing, %

28.5

33.5

28.5

33.5

20.9

Personnel at end of period

 

 

 

15,992

15,681

2

15,630

 

*EUR 150 million non-recurring charge related to Russia has been booked in Group Head Office and other.

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 July, 22, 2022 at 1:00 p.m. EEST.  

The audiocast can be followedat https://metso-outotec.videosync.fi/2022-q2-results/

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 61963879#

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