Just in August and September, we have met with over 50 investors in the US, London and Helsinki, ranging from value investors to hedge funds, and from Finnish pension funds to some of the biggest institutions in the world. However, the things discussed in the meetings revolve around pretty much the same themes, no matter who is asking. Below are the top five Q&A from Q3 investor meetings.
Q1: How has mining customers’ conversations about their CAPEX spending plans changed during past 6 to 12 months and what portion of the CAPEX is greenfield?
A1: We upgraded our mining equipment six-month outlook in July, based on an improved quotation pipeline. Since our outlook describes market activity, we must of course work hard to take our share of the available orders. However, spending is, in our opinion, trending up with activity concentrating largely on productivity-related brownfield projects, but a few greenfield opportunities are emerging as well.
Q2: What is the current situation with price pressure, considering both your own contract base as well as increases in raw material prices?
A2: Managing fluctuations in raw material prices is a continuous process. For now, we are seeing normal fluctuations that are also more manageable contract-wise, compared to, e.g., the notable peak in the rubber price in early 2017. Also, our terms and conditions are now in better shape than a year ago, as we successfully carried out corrective actions in late 2017 and early 2018.
Q3: In Minerals, the sales mix is changing towards more equipment; how can you improve profitability going forward? Is there potential for price increases and/or more operational excellence in your services?
A3: Mix changing is actually a positive thing for us as it means that our installed base is growing. However, we must make sure that our services business then takes advantage of this. As our strategy is to sell value to customers, in the long run we want to win with technology and customer relationships over price. Various self-help opportunities in areas such as operational excellence and supply chain are in place to support our margins.
Q4: How is the R&D ramp up in 2018 going and what are your biggest near-term priorities?
A4: Activity has picked up, which was seen in Q2 numbers already. Following this, 2018 will see higher R&D spending than 2017. However, the R&D ramp up is a process and we are not looking for quick fixes, but long-term sustainable growth. For this reason, we are prioritizing the development of our offering to further strengthen our competitiveness in both equipment and services.
Q5: After a relatively quiet M&A period, you have now published three deals in 10 months. What has changed in your M&A thinking?
A5: We have renewed our process so that instead of a centralized M&A function, business areas are responsible for seeking interesting opportunities and proceeding with them. All seven business areas have identified interesting add-on M&A targets to provide growth. This adds speed and agility as there can be multiple simultaneous processes on going. We want to find opportunities that complement our offering and/or expand our market area, and the trend you can see from our already published M&A is that these targets are more small or medium-sized rather than large in scale. We have a balance sheet to proceed with the ones that we find suitable regardless of the business area in question.