May 8, 2018 Corporate blog

Metso is off to a good start for 2018, with double-digit order growth and a significant improvement in profitability

Tanja Mäkinen
Tanja Mäkinen
IR Specialist
We will continue our robust work in improving operational performance to show good development going forward.
Aggregates producing plant in India.
All businesses showed strong order growth, partly attributable to timing, as some orders shifted from the last quarter of 2017.

Positive development was visible on many fronts during the first quarter. All businesses showed strong order growth, partly attributable to timing, as some orders shifted from the last quarter of 2017, but also because markets in all our customer industries are healthy at the moment. If previously customers were a bit hesitant and in a wait-and-see mood, that is certainly not the case in 2018, which is a positive thing.  Demand was strongest in the aggregates equipment and valves businesses. In mining, the healthy growth continued the same. The recycling business saw higher demand for metal recycling equipment compared to a year ago. Quarterly order intake was up and consisting of day-to-day business and small- and medium-sized projects, be it Flow Control or Minerals.

At the same time, the positive market environment had its impacts on the cost side. We are seeing some cost pressure in the supply chain and working very hard to mitigate it. Our industries are not the only healthy ones, and we use components that are typical for many other industries as well. So, obviously the demand in these industries also impacts us. These are, however, positive problems to have.

Sales growth was supported by faster than expected progress in improving internal operational issues and that had a positive impact on our profitability. Our ability to push some of the quick fixes faster than assumed was a good accomplishment, but by no means are we done yet, as there are still several areas where we can further improve.

In Minerals, profitability was supported by volume and a good mix within services. Flow Control’s profitability performance was also good; the margin was slightly up, both year-on-year and quarter-on-quarter.

One thing that has been discussed lately is our R&D costs, as the number was flat from the previous year. We are prioritizing this field but ramping it up will take some time. Nevertheless, we have been working hard by adding resources, clarifying roadmaps and setting very clear targets for this year. We have outlined a list of specific areas where we want to invest and feel very comfortable with the payback and returns. It would be very disappointing if we were not able to increase the agility and the investment in R&D, and we are hopeful that we will be able to speed up the activity there.

In addition to reporting good numbers, we started the year with good actions that support our profitable growth strategy. Firstly, we announced an expansion investment at our Indian plant. Secondly, after the reporting period, we announced two acquisitions that will be finalized during the coming months. Both acquisitions represent complementary additions to our offering and will strengthen our presence in several markets.

All in all, we had a good start for the year, which was well received also in the financial markets. In discussions both in Finland and in London after the results were published, analysts and shareholders have given us credit for delivering a good quarter. However, like in many sports, you will need four wins to win a series, so three more good quarters are needed to make 2018 a successful year for Metso.