Interim Review Q1/2020
Metso’s Interim Review 2020 was published on Thursday, May 7, 2020.
Metso’s President and CEO Pekka Vauramo and CFO Eeva Sipilä will present the results in an audiocast and a conference call for analysts and investors today at 1:00 p.m. EEST.
Conference call participants are requested to dial in five minutes before the event on:
United States: +1 631 913 1422
other countries: +44 333 300 08 04
The confirmation code for joining the conference call is 40876239#.
First-quarter 2020 in brief
- Orders received increased 5% to EUR 1,065 million (1,013 million)
- Sales were unchanged year-on-year at EUR 832 million (836 million)
- Adjusted EBITA was EUR 91 million, or 10.9% of sales (105 million, or 12.6%)
- Operating profit was EUR 73 million, or 8.8% of sales (100 million, or 11.9%)
- Earnings per share were EUR 0.35 (0.43)
- Free cash flow was EUR 78 million (38 million)
- Annual General Meeting was postponed due to the Covid-19-related restrictions
- Metso’s partial demerger and the transaction to create Metso Outotec and Neles continue to progress according to plan. The closing is currently expected to take place on June 30, 2020, subject to regulatory approvals
IFRS figures for January-March 2020
- Sales from continuing operations totaled EUR 137 million (155 million)
- Operating profit from continuing operations was EUR 15 million (22 million)
- Profit from discontinued operations was EUR 59 million (48 million)
- Earnings per share, continuing operations, were EUR 0.07 (0.11)
- Earnings per share, discontinued operations, were EUR 0.39 (0.32)
- Earnings per share, Metso total, were EUR 0.46 (0.43)
Covid-19 market update
The measures taken to prevent the spreading of Covid-19 started to have a material impact on Metso’s businesses and financial performance only towards the end of the first quarter. In February, the businesses and operations in China were affected but this impact was offset later, thanks to a fast ramp-up in March. Quarterly orders from China were higher year-on-year, while the drop in sales will take longer to catch up.
From mid-March, Metso has seen the biggest Covid-19 related impact in its aggregates equipment business, where customers and distributors have significantly reduced their investments. The mining equipment business, however, has continued in line with expectations. The importance of the mining operations for many countries has been visible in the continued healthy demand for spare and wear parts. Restrictions relating to travel and workforce mobility have had an impact on mining services by limiting service work carried out at customers’ mines.
In Neles’ businesses, volatile oil prices have had an impact on the market activity, whereas the pulp and paper market has developed as expected. Neles services business has also been hit by in the restricted access to customers’ sites, which has led to postponements of maintenance shutdowns.
Lockdowns were introduced in mid-March in several countries; the lockdown in India has had the biggest impact on Metso. As of mid-April, operations in India and South Africa have been permitted to ramp up, while lockdowns in Peru and Mexico continue.
According to its disclosure policy, Metso’s market outlook describes the expected sequential development of market activity during the following six-month period using three categories: improve, remain at the current level, or decline.
Due to the unpredictability of the Covid-19 situation, Metso will not, for the time being, estimate the development of its market activity for the six months ahead. Metso expects that market activity will continue to be affected by Covid-19 throughout the second quarter.
Previous outlook, published on February 6 and cancelled on March 31
Market activity in both segments, Flow Control and Minerals, is expected to remain at the current level in both the equipment and services business.
President and CEO Pekka Vauramo:
We had a positive start to the year, but as the Covid-19 situation started to escalate, our focus turned to the safety and well-being of our personnel, customers and business partners. During these challenging times, we have been ensuring the continuity of Metso’s and its customers’ operations by leveraging the flexibility of our global presence and supply chain. Our earlier investments in digital and IT platforms have enabled us to introduce real-time information sharing and dialogue with our customers and partners, while facilitating fast internal decision-making.
The impact of Covid-19 on our financial performance was still relatively limited during the first quarter. In February, our operations in China were impacted by lockdowns, which had some impact on our sales and result during the month. The operations in China were restarted successfully and have been running at the normal capacity since early March.
More material implications have resulted from the containment measures that have been quickly enforced around the world since mid-March. The aggregates equipment business has seen the most rapid decline in demand, whereas the mining equipment market has been stable. The services business has been affected by the restrictions relating to travel and workforce mobility that have prevented our experts from carrying out service at customer sites. Our own operations have been affected by lockdowns imposed by authorities in some countries.
We have been actively controlling our costs and preserving our cash flow and financial position. In preparation for the upcoming demerger, we have had strong cost control in place since the second half of 2019. Since the escalation of the Covid-19 situation, we have imposed cuts on discretionary spend across the organization. In addition, we have introduced temporary savings affecting our personnel, such as the reduction of worktime or compensation, and the Metso Executive Team also agreed to lower their own compensation, all effective from April. Metso’s financial position continues to be good and we have further increased our funding facilities available to help us navigate through this challenging situation.
Despite these exceptional circumstances, we have made good progress in the Metso Outotec and Neles transaction. There are some approvals from competition authorities still pending, but we are working to obtain them so that we could close the transaction in line with the previously disclosed estimate of June 30, 2020.