OUTOTEC OYJ FINANCIAL STATEMENTS REVIEW FEBRUARY 6, 2015 AT 9.00 AM
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2014
Challenging Capex market, growth in service sales
January-December 2014 in brief (2013 comparison period):
- Order intake1): EUR 1,177.9 (1,512.4) million, -22%, in comparable currencies -18%
- Service order intake1): EUR 555.0 (552.5) million, 0%, in comparable currencies 7%
- Order backlog: EUR 1,138.0 (1,371.7) million, -17%
- Sales: EUR 1,402.6 (1,911.5) million, -27%, in comparable currencies -23%
- Service sales: EUR 519.0 (505.9) million, 3%, in comparable currencies 9%
- Operating profit from business operations2): EUR 56.0 (162.9) million, -66%
- Earnings per share: EUR 0.00 (0.51)
- Dividend proposal EUR 0.10
October-December 2014 in brief (2013 comparison period)
- Order intake1): EUR 322.4 (426.1) million, -24%, in comparable currencies -24%
- Service order intake1): EUR 159.1 (165.4) million, -4%, in comparable currencies -4%
- Sales: EUR 403.2 (457.2) million, -12%, in comparable currencies -11%
- Service sales: EUR 166.1 (150.7) million, 10%, in comparable currencies 13%
- Operating profit from business operations2): EUR 25.5 (40.5) million, -37%
- Earnings per share: EUR 0.00 (0.07)
1) The change of service order intake reporting principles as of January 1, 2014 increased the total order intake in 2014 by approximately EUR 42.3 million (Q4 2014: approximately EUR 3.9 million). With comparable currencies the increase for 2014 was EUR 47.9 million.
2) Excluding one-time items and purchase price allocations (PPA) amortizations
Financial guidance for 2015
Based on the 2014 year-end backlog and current operating environment, the management estimates that in 2015:
- Sales will be approximately EUR 1.2-1.4 billion, and
- EBITA (excluding one-time items) will be approximately 5-7%.
|Summary of key figures||Q4||Q4||Q1-Q4||Q1-Q4|
|Order intake, EUR million||322.4||426.1||1,177.9||1,512.4|
|Service order intake, EUR million||159.1||165.4||555.0||552.5|
|Share of service in order intake, %||49.4||38.8||47.1||36.5|
|Order backlog at the end of period, EUR million||1,138.0||1,371.7||1,138.0||1,371.7|
|Sales, EUR million||403.2||457.2||1,402.6||1,911.5|
|Service sales, EUR million||166.1||150.7||519.0||505.9|
|Share of service in sales, %||41.2||33.0||37.0||26.5|
|Gross margin, %||21.7||20.5||21.0||20.7|
|Operating profit from business operations, EUR million||25.5||40.5||56.0||162.9|
|Operating profit from business operations, %||6.3||8.9||4.0||8.5|
|Operating profit, EUR million||2.3||25.4||10.4||141.9|
|Operating profit, %||0.6||5.6||0.7||7.4|
|Profit before taxes, EUR million||-1.1||21.4||0.2||132.2|
|Net cash from operating activities, EUR million||37.9||-2.5||19.9||-42.1|
|Net interest-bearing debt at the end of period, EUR million||-5.8||-87.1||-5.8||-87.1|
|Gearing at the end of period, %||-1.3||-18.2||-1.3||-18.2|
|Working capital at the end of period, EUR million||-28.2||-14.0||-28.2||-14.0|
|Return on investment, %, LTM||1.7||25.7||1.7||25.7|
|Return on equity, %, LTM||0.0||19.4||0.0||19.4|
|Personnel, average for the period||4,776||4,921||4,845||4,927|
|Earnings per share, EUR||0.00||0.07||0.00||0.51|
|Dividend per share, EUR||-||-||0.101)||0.20|
1) Board of Directors' proposal for the AGM
President and CEO Pertti Korhonen:
"Continued uncertainties in the global economy, geopolitical conflicts, China's lower growth projections and sharp decline in metal and energy prices pressed the markets in 2014. Mining and metals companies focused on maximizing their free cash flow by minimizing investments and operating costs. We estimate that our addressable Capex market reduced by some 30% in 2014. The modest investments were focused on brownfield projects, and greenfield investments were rare. As there were few large investment projects, the equipment sales to EPCM contractors was very low, resulting to reduced level of our unannounced orders. The market for services leveled off as customers sought to cut their operating costs. The demand for various environmental and water treatment solutions remained solid, but due to the collapse of fossil energy prices the market for sustainable energy solutions was very weak.
Despite the tough market environment, we were able to close several modernization deals in the fourth quarter. Our full year order intake declined some 20% as a result of the very weak Capex market. There were no order cancellations, and the margins in new orders were healthy. Our sales contracted from 2013 due to a low opening order backlog for 2014 and a weak order intake in the plant and equipment businesses. I am pleased that in the challenging market environment our service sales increased 9% from 2013 in comparable currencies and represented 37% of sales.
Our profitability in 2014 was weak due to lower sales and execution issues in some large customer projects. The profitability improved sequentially in the third and fourth quarters due to increased share of services in sales, project completions and improved execution, and reduced fixed operating costs. The Minerals Processing business area continued to deliver good profitability from business operations despite lower sales. The Metals, Energy & Water business area returned to profitability during the second half of the year due to improved project execution and growth of the service business. As a result of cost saving actions, our fixed operating costs were reduced by EUR 65 million from the comparison period. In addition, our cash flow improved significantly, supported by the stabilizing working capital. Our balance sheet remained solid.
All in all, I am pleased about our organization's capability to counteract the contraction of sales stemming from the extremely difficult market. As a result of all actions taken, we were able to deliver 4% profit from business operations and slightly positive net profit despite 27% lower sales and significant one time restructuring costs.
The market outlook for 2015 is highly uncertain due to volatile metal prices, continued global macroeconomic uncertainty and geopolitical instability. Investments in the mining and metals sector are estimated to be somewhat lower than in 2014. Outotec's market is, however, heterogenous and there is demand for sustainable solutions in specific markets and segments. Our sales funnel is solid with good prospects in several geographies and we expect that investments in base metals, sulfuric acid, and alumina will gradually start to revitalize to compensate for reducing capacity. We expect that investments in the iron ore value chain will continue on a low level. We see good demand for environmental solutions including industrial water treatment due to continuously tightening regulation. The short-term outlook for alternative and waste-to-energy solutions is weak due to low fossil energy prices and uncertainties in subsidy regulation. The timing of new orders continues to be the biggest source of uncertainty in our order intake, especially if the metals prices continue on a deflationary trend.
Despite the challenging market outlook, our number one goal in 2015 is to improve profitability. The planned cost savings under the ongoing EUR 45 million program aim at counterbalancing inflation and lower sales, as well as improving profitability. Furthermore, in order to reduce our exposure to mining and metals Capex market volatility, we will continue to grow our service business in line with our long-term targets, and continue to further strengthen our business portfolio through acquisitions."
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 of service order intake reporting principles as of January 1, 2014 increased the total order intake in 2014 by approximately EUR 42.3 million (Q4 2014: approximately EUR 3.9 million). With comparable currencies the increase for 2014 was EUR 47.9 million. Excluding the reporting principle change and calculating with comparable rates, the full year service order intake declined by 1%.
This text is a summary of Outotec's January-December 2014 Financial Statements. 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
Format for e-mail addresses: firstname.lastname@example.org
Date: Friday, February 6, 2015
Time: 2.00 p.m. (Finnish time)
Venue: Bank, Unioninkatu 20, Helsinki
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FINANCIAL REPORTING SCHEDULE IN 2015
- Annual General Meeting 2015 will be held on March 30, 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.
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 4,600 experts, Outotec generated annual sales of approximately EUR 1.4 billion in 2014. Outotec shares are listed on Nasdaq Helsinki.
|Outotec's Financial Statements Review 2014||Download|