OUTOTEC OYJ INTERIM REPORT OCTOBER 30, 2014 AT 9.00 AM
INTERIM REPORT JANUARY-SEPTEMBER 2014
Challenging market conditions continued, sales guidance range narrowed
January-September 2014 (comparison period in 2013):
- Order intake1): EUR 855.5 (1,086.3) million, -21%, in comparable currencies -15%
- Service order intake1): EUR 395.9 (387.1) million, 2%, in comparable currencies 12%
- Order backlog: EUR 1,217.3 (1,512.3) million, -20%
- Sales: EUR 999.4 (1,454.4) million, -31%, in comparable currencies -27%
- Service sales: EUR 352.9 (355.2) million, -1%, in comparable currencies 7%
- Operating profit from business operations2): EUR 30.5 (122.4) million, -75%
- Earnings per share: EUR 0.00 (0.44)
July-September 2014 (comparison period in 2013)
- Order intake1): EUR 265.6 (229.6) million, 16%, in comparable currencies 16%
- Service order intake1): EUR 114.9 (115.1) million, -0%, in comparable currencies -0%
- Sales: EUR 320.3 (440.1) million, -27%, in comparable currencies -26%
- Service sales: EUR 127.0 (116.8) million, 9%, in comparable currencies 12%
- Operating profit from business operations2): EUR 14.2 (44.1) million, -68%
- Earnings per share: EUR -0.02 (0.17)
Financial guidance 2014 for operating profit reiterated, sales guidance range narrowed
Based on the current market outlook, customer tendering activity and assessment of order backlog, the management expects that in 2014:
- Sales will be approximately EUR 1.4-1.5 (previously 1.4-1.6) billion, and
- Operating profit from business operations2) will be approximately 4-6%.
1) The change in the service reporting principles increased January-September 2014 order intake by approximately EUR 38 million (Q3 2014 approximately EUR 3 million).
2) Excluding one-time items and purchase price allocations (PPA) amortizations
|Summary of key figures||Q3||Q3||Q1-Q3||Q1-Q3||Last 12||Q1-Q4|
|Sales, EUR million||320.3||440.1||999.4||1,454.4||1,456.6||1,911.5|
|Gross margin, %||23.4||22.5||20.7||20.8||20.6||20.7|
|Operating profit from business operations, EUR million||14.2||44.1||30.5||122.4||70.9||162.9|
|Operating profit from business operations, %||4.4||10.0||3.0||8.4||4.9||8.5|
|Operating profit, EUR million||-0.3||45.0||8.1||116.5||33.5||141.9|
|Operating profit margin, %||-0.1||10.2||0.8||8.0||2.3||7.4|
|Profit before taxes, EUR million||-3.1||43.1||1.4||110.9||22.7||132.2|
|Net cash from operating activities, EUR million||-25.3||-61.1||-18.0||-39.5||-20.5||-42.1|
|Net interest-bearing debt at the end of period, EUR million||9.0||-112.4||9.0||-112.4||9.0||-87.1|
|Gearing at the end of period, %||2.0||-23.5||2.0||-23.5||2.0||-18.2|
|Working capital at the end of period, EUR million||6.7||-45.4||6.7||-45.4||6.7||-14.0|
|Return on investment, %, LTM||5.1||34.6||5.1||34.6||5.1||25.7|
|Return on equity, %, LTM||2.9||29.1||2.9||29.1||2.9||19.4|
|Order backlog at the end of period, EUR million||1,217.3||1,512.3||1,217.3||1,512.3||1,217.3||1,371.7|
|Order intake, EUR million||265.6||229.6||855.5||1,086.3||1,281.6||1,512.4|
|Personnel, average for the period||4,911||4,984||4,868||4,929||4,882||4,927|
|Earnings per share, EUR||-0.02||0.17||0.00||0.44||0.07||0.51|
President and CEO Pertti Korhonen:
The challenging market conditions continued in the third quarter and the sentiment in the mining and metals industry was subdued. Uncertainties in the global economy, weak metal prices performance, as well as mining and metals companies' pursuit for minimizing Capex and Opex costs kept investments on a low level and put pressures on the service market. Business activity slowed down in Russia due to the economic sanctions and in Africa due to Ebola epidemic. Due to the weak market, the competition was intensive, keeping pressure on prices. The EPCM equipment sales channel continued to be very slow, reflecting the low overall level of new investments in the mining and metals industry. However, good opportunities do exist for Outotec's process and plant solutions and services in specific market pockets by customer, country, or metal.
Considering the tough market environment, we were able to close a reasonably good amount of deals in the third quarter, which shows that our focus on process and plant solutions is bearing fruit. There were no cancellations of orders and the margins in new orders were on a healthy level. Our total sales were down from last year due to the Capex business' low opening order backlog for 2014, and the delayed order intake at the beginning of the year, as well as slowness in project implementation in Russia and some other markets. Our services sales increased by 7% with comparable currencies during the reporting period and represented 35% of our total sales.
Our profitability in the third quarter improved sequentially from the second quarter due to improved profitability in the Metals, Energy & Water business, continued relatively good profitability of Minerals Processing business, higher service sales, and successful reduction of fixed operating costs.
Our EUR 50 million efficiency improvement program announced in October 2013 has now been brought to completion and we have achieved the targeted savings. As a result of successful execution of this program, plus other additional cost savings actions, our fixed operating costs were reduced by EUR 59 million as compared to the corresponding period.
Our balance sheet remained solid but our working capital was impacted somewhat by the declining order backlog and subsequent reduction in the advance payments.
Our sales funnel remains solid with a good level of prospects in various development phases. The timing of new orders continues to be the biggest source of uncertainty in order intake.
We want to be prepared for the possibly continuing market slowness and possible new impacts of geopolitical uncertainties in Russia and some other markets. Therefore, we will take further actions to enhance our profitability.
CHANGE IN REPORTING OF SERVICE CONTRACTS FROM JANUARY 1, 2014
In order to improve the transparency of Outotec's service business, the long-term service contracts, which have a production-based, volume-dependent variable portion are recognized in the order intake with the estimated sales value of the next 12 months. The fixed value contracts are recognized as full value when the order becomes effective. According to old principles, the current calendar year's portion of the long-term service contract was booked once per year into the order intake. The change in the service reporting principles increased January-September 2014 order intake by approximately EUR 38 million (Q3 2014: approximately EUR 3 million).
This text is a summary of Outotec's January-September Interim Report. The full report is available as an attachment to this report.
Pertti Korhonen, President and CEO
tel. +358 20 529 211
Mikko Puolakka, CFO
tel. +358 20 529 2002
Rita Uotila, Vice President - Investor Relations
tel. +358 20 529 2003, mobile +358 400 954 141
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Date: Thursday, October 30, 2014
Time: 2.00 p.m. (Finnish time)
Venue: Bank, Unioninkatu 20, Helsinki
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FINANCIAL REPORTING SCHEDULE FOR 2015
- Financial Statements Review 2014 will be published on February 6, 2015
- January-March 2015 Interim Report will be published on April 27, 2015
- January-June 2015 Interim Report will be published on July 30, 2015
- January-September 2015 Interim Report will be published on October 29, 2015
The Financial Statements for 2014 will be published in week 9 at the latest. The Annual General Meeting 2015 is planned for March 30, 2015.
CAPITAL MARKETS DAY 2014
Outotec's CMD 2014 will be held on December 4, 2014 at Outotec headquarters Espoo, Finland. Further information is available on the Company's website www.outotec.com/investors.
NASDAQ OMX Helsinki Ltd
Outotec provides leading technologies and services for the Sustainable use of Earth's natural resources. As the global leader in minerals and metals processing technology, we have developed many breakthrough technologies over the decades for our customers in metals and mining industry. We also provide innovative solutions for industrial water treatment, the utilization of alternative energy sources and the chemical industry. With a global network of sales and service centers, research facilities and some 4,900 experts, Outotec generated annual sales of approximately EUR 1.9 billion in 2013. Outotec shares are listed on NASDAQ OMX Helsinki.
|Outotec's January-September 2014 Interim Report||Download|