metso 2017 h1 half-year review presentation
TRANSCRIPT
© Metso2
Forward looking statements
It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by ”expects”, ”estimates”, ”forecasts” or similar expressions, are forward looking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by the company.
Such factors include, but are not limited to:
1) general economic conditions, including fluctuations in exchange rates and interest levels which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins
2) the competitive situation, especially significant technological solutions developed by competitors
3) the company’s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement
4) the success of pending and future acquisitions and restructuring.
Half-Year Financial Review 2017
© Metso© Metso
50
150
250
350
450
550
650
750
0
2
4
6
8
10
12
14
Lost time incident frequency (LTIF) Risk observation frequency
3
Safety is a key driver throughout our value chain
Demand from customers: License to operate
PeopleEncourages employee commitment and motivation
ProductivityImproves productivity and lowers qualitycosts
PartnershipImproves stakeholder recognition as a sustainable partner
Half-Year Financial Review 2017
LTIF2.5 *
* Rolling 12 months as of June 30, 2017
© Metso© Metso
Quarterly highlightsMatti KähkönenPresident and CEO
4 Half-Year Financial Review 2017
© Metso Half-Year Financial Review 20175
Q2/2017 in brief
Healthy market activity continued with improvement in mining equipment
Sales are not yet reflecting the growth in orders
Profitability was affected mainly by low sales and mix
Good progress in strategic initiatives
© Metso
433 444 423 441496 480
1.06 1.01 1.02 1.001.17
1.08
0.0
0.4
0.8
1.2
1.6
0
200
400
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Services sales Services orders received Services book-to-bill
56
77 77
64 66 70
9.311.5 12.1
9.4 10.2 10.4
0
5
10
15
20
0
20
40
60
80
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Adjusted EBITA Adjusted EBITA %
%
601671 638 676 648 675
-20-15-10-505101520
0
200
400
600
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Sales Sales growth y-on-y
%
663761
628 672733 749
1.10 1.130.98 0.99
1.13 1.11
0.0
0.4
0.8
1.2
1.6
0
200
400
600
800
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Orders received Book-to-bill
Q2/2017 financial highlights
Profitability slightly disappointing
Services orders grew 8%; positive book-to-bill continued
6
Good order intake without large orders
Sales are not yet reflecting the order growth
-11%-18% -10%-6% +8% +1%
Half-Year Financial Review 2017
Incl. large mining order of MEUR 90
No large mining orders
© Metso Half-Year Financial Review 20177
Short-term market outlook for 2017
Mining45% of sales
80% services *
Aggregates25% of sales
45% services *
Flow Control25% of sales
60% services *
satisfactory good good good good
Equipment Equipment Equipment ServicesServicesServices
Previously: weak
* Based on 12 months rolling sales
good
© Metso Half-Year Financial Review 20178
Current topics in the second quarter
Good progress in growth initiatives− Investments in assembly capacity of Lokotracks in Finland, and in the manufacturing of crusher wear parts in
South Africa totaling EUR 4.5 million− Continued expansion of distribution network in Flow Control and Aggregates
Digital strategy proceeding according to plan− Platform was chosen to create new industry-leading IoT solutions for mining and aggregates customers
New President and CEO and changes in management team− Nico Delvaux will start as the new President and CEO on August 1− Victor Tapia started as President of Minerals Capital on June 1
© Metso© Metso
169 168
136 136
173 174
1.141.01
0.84 0.881.09 1.14
0.0
0.4
0.8
1.2
1.6
0
50
100
150
200
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Orders received Book-to-bill
494
593
492536 560 575
1.091.18
1.03 1.031.14 1.10
0.0
0.4
0.8
1.2
1.6
0
200
400
600
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Orders received Book-to-bill
Orders were healthy in both segmentsOrders increased 12%, adjusting for the big order in the comparison period
Mining supported by customers’ focus on productivity
Aggregates equipment orders increased
Pump orders up in Flow Control
10
Minerals: Productivity focus of customers supports growth in replacement and services orders
Flow Control: Healthy order intake in valves while pumps improved significantly
Half-Year Financial Review 2017
Incl. large mining order of MEUR 90
No large mining orders
© Metso© Metso
37
54 5247
43
55
8.210.8 10.8
9.1 8.910.5
0
5
10
15
20
0
20
40
60
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Adjusted EBITA Adjusted EBITA %
%
453504 477
522 489523
-20-15-10-505101520
0
200
400
600
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Minerals Services sales Minerals Equipment salesSales growth y-on-y
%
Minerals: Aggregates’ improvement offset by miningSales driven by double-digit growth in aggregates equipment; other businesses flat
Mining services margins affected by higher raw material prices and sales mix
-10%-20% -9%-5% +8%
11
+4%
Half-Year Financial Review 2017
© Metso© Metso
1922
2826 25
1612.8 13.2
17.5 16.6 15.6
10.8
0
5
10
15
20
25
0
10
20
30
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Adjusted EBITA Adjusted EBITA %
%
148167 161 155 159 152
-20-15-10-505101520
0
50
100
150
200
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Flow Control Services sales Flow Control Equipment salesSales growth y-on-y
%
Flow Control: H1 performance flat with positive book-to-billSales reflecting H2/16 order intake
Low sales and related under-absorption as well as sales mix impacted profitability
-14%-13% -14%-10% +7%
12
-9%
Half-Year Financial Review 2017
© Metso© Metso
176196
181 184 184 187
29.2 29.2 28.4 27.2 28.4 27.7
0
5
10
15
20
25
30
0
50
100
150
200
250
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Gross profit Gross margin
%
126 130 125 135 126 127
20.919.4 19.6 20.0 19.5 18.8
0
5
10
15
20
25
0
50
100
150
200
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
SGA SGA %
%
Differing trending in Q2 marginsGross margin in the second quarter reflected :
- the mix in both segments,
- raw material pressure in Minerals and
- under-absorption in Flow Control.
SG&A costs were stable and as % of sales trending downwards
13 Half-Year Financial Review 2017
© Metso© Metso
480
240 207153
91
174
70
-25 -63
100
-0.3
0.0
0.3
0.6
0.9
1.2
1.5
-100
100
300
500
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Net debt Net debt/EBITDA
124 120129
83
59
103 103
127
5846
0
100
200
300
400
500
0
50
100
150
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR million
Cash flow from operations Cash flow from operations, rolling 12 months
Balance sheet continues to be strongFree cash flow affected mainly by EUR 56 million increase of net working capital
Paid income taxes totaled EUR 37 million
Dividend of EUR 157 million paid in April
Maturity structure of debt was extended- New EUR 300 million bond issued
- EUR 205 million of the 2019 outstanding EUR 400 million bond purchased back
14 Half-Year Financial Review 2017
© Metso© Metso
1,445 1,4111,290 1,268 1,300
1,3991,305 1,320 1,396 1,411
0
500
1,000
1,500
2,000
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
EUR Million
Flow Control backlog Minerals Services backlog Minerals Equipment backlog
Order backlog increasedOur backlog at end of June for 2017 deliveries totaled approximately EUR 1 billion
Deliveries for the remainder of the year higher compared to the end of June 2016- We continue to expect some postponements to planned delivery timetables
Delivery timetableOrder backlog
15 Half-Year Financial Review 2017
Deliveries in 2017
Deliveries after 2017
Deliveries in 2016
Deliveriesafter 2016
0
500
1,000
1,500
Order backlogJune 30, 2016
Order backlogJune 30, 2017
EUR million
© Metso
Key figures
EUR million Q2/2017 Q2/2016 Change % H1/2017 H1/2016 Change % 2016Orders received 749 761 -2 1,482 1,424 4 2,724
without currency effect -3 1
Orders received, services business 480 444 8 976 877 11 1,741
without currency effect 7 8
Sales 675 671 1 1,323 1,272 4 2,586
without currency effect 0 2
Sales, services business 445 439 1 868 848 2 1,703
without currency effect 0 -1
Adjusted EBITA 70.0 77.3 -9 136.5 133.0 3 274.0
% of sales 10.4 11.5 10.3 10.5 10.6
Operating profit 59.8 69.3 -14 119.2 119.7 0 227.1
Earnings per share, EPS, EUR 0.24 0.28 -14 0.47 0.46 2 0.87
Return on capital employed (ROCE), before tax, annualized, % 11.1 11.0 10.4
Free cash flow 4 74 -95 43 136 -68 339
18 Half-Year Financial Review 2017
© Metso
Cash flow and financial position
June 30, 2017 Dec 31, 2016
Return on equity (ROE), annualized, % 10.2 9.0
Return on capital employed (ROCE) before taxes, annualized, % 11.1 10.4
Gearing at the end of the period, % 7.5 -1.8
Cash conversion, % 61 261
Equity to assets ratio at the end of the period, % 45.9 48.0
Debt to capital, % 39.0 35.6
Net debt / EBITDA 0.3 -0.1
Interest cover (EBITDA) 9.0 7.4
Cash assets 629 698
19 Half-Year Financial Review 2017
© Metso
132 121
0
50
100
150
200
South and Central Americaorders
EUR mill ion
148165
0
50
100
150
200
Asia-Pasific orders
EUR mill ion
153 155
0
50
100
150
200
North America orders
EUR mill ion238 234
0
50
100
150
200
250
EMEA orders
EUR mill ion
Orders were EUR 194 million and +19%+ Good activity continued in several regions
+ Equipment orders +36%, services flat
Geographical figures in Q2/2017
Mining
Orders were EUR 342 million and -15%+ Services orders +12% with increase across the
services offering
+ Recovery more visible in the equipmentbusiness
Flow ControlAggregates
Orders were EUR 174 million and +4%+ Orders from oil & gas as well as pulp & paper
customers slightly higher
+ Pumps grew significantly
20
Minerals sales +6%Flow Control sales -2%
North America23% of sales
EMEA35% of sales
Minerals sales flatFlow Control sales -1%
Asia-Pacific24% of sales
Minerals sales +16%Flow Control sales -3%
South and Central America18% of sales
Minerals sales flatFlow Control sales flat
-2% +12% -9%+2%
Half-Year Financial Review 2017