As a listed company, Thursday, July 21st, the day Metso’s second-quarter results were published, was one of the most important days of the year for the company. Four times a year the stock markets and financial media turn their attention to the company’s financial performance, and a particular target of interest is management’s views about the future development of customer industries and Metso’s performance. From the end of the second quarter until just prior to publication of the interim review on Thursday at 9 a.m. Finnish time, Metso’s financial department, management and the IR team had worked on the publication intensively. Even though the report and the related materials are compiled according to established processes, there is a sense the intensity in the air as the publication time nears. The final touches and the right characterizations are added the evening before and even on the morning of publishing day. After publication, the day is spent in monitoring market reactions and answering further questions presented by analysts and investors.
So, how did the quarter go? Generally speaking, we did quite well even though the market situation continued to be challenging. The order intake was higher than net sales and earnings (adjusted EBITA) were better than expected, so the markets reacted positively, giving a boost to the share price. After the results were published, several comments were made in the markets about the worst is now seemingly behind in the mining industry and signs of stabilization would start showing in Metso’s figures. We were perhaps a bit more cautious in our comments and settled for saying that while the mining markets and mining equipment and services had stabilized over the past quarters, it is too early to announce a significant recovery in demand in the near future.
A conference call for analysts and investors was held after the interim review was published. Typically, more than 50 participants take part in these conference calls. The main focus of the questions presented was specifically on the mining market outlook, the activities of mining customers, and Metso management projections on when a turnaround will take place. While these questions can’t really be answered in much more detail than what was provided in the interim review, the global megatrends and the recovery of metal prices in recent months, among other things, give reason to believe that there eventually will be an improvement. The Flow Control comments mainly focused on reiterating what was already noted earlier in spring about the North American oil and gas markets – the softening started towards the end of last year and is not expected to make a quick recovery. There has been more stability in the development of other market areas and industry sectors in Flow Control, but they haven’t brought the growth that would have offset the negative impact of the North American oil and gas sector.
Metso’s ability to keep its earnings (adjusted EBITA) at a moderate level in these market conditions received well-deserved attention and praise from the markets. Improving the flexibility of the operating models and the organizations has had a positive impact on the bottom line, particularly in the Minerals segment. The markets widely hold the view that Metso’s earnings power is good as long as customer industries offer opportunities to grow net sales. When this will happen is, in fact, the million-euro question, but it’s a question no one can answer with any certainty. As we wait, we have to settle for listening to educated guesses.