Metso Corporation, stock exchange release on May 7, 2020, at 09:00 a.m. EEST
This is a summary of Metso's Interim Review for January 1 - March 31, 2020. This summary includes only comparable figures for the reporting period and full-year 2019. For further information related to differences between the IFRS and comparable financial information, please refer to the complete Interim Review, which is attached to this release and is also available at www.metso.com/latestreports.
Figures in brackets refer to the corresponding period in 2019, unless otherwise stated.
First-quarter 2020 in brief
|EUR million||Q1/2020||Q1/2019||Change %||2019|
|Orders received by services business||535||518||3||2,061|
|% of orders received||50||51||56|
|Order backlog at the end of period||1,764||1,855||-5||1,688|
|Sales by services business||468||462||1||1,967|
|% of sales||56||55||54|
|Adjusted EBITA *)||91||105||-13||474|
|% of sales||10.9||12.6||13.0|
|% of sales||8.8||11.9||11.5|
|Earnings per share, EUR||0.35||0.43||-19||1.94|
|Free cash flow||78||38||105||39|
|Return on capital employed (ROCE) before taxes, %, annualized||12.6||18.9||18.7|
|Equity to assets ratio, %||41.2||46.6||42.1|
|Net gearing, %||48.6||15.1||52.7|
|Personnel at end of period||15,584||13,447||16||15,821|
*) Adjustment items amounted to EUR 11 million in Q1/2020, EUR 2 million in Q1/2019 and EUR 36 million in 2019. Reconciliation of EBITA and operating profit is presented in Note 9: Segment information.
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.
Audiocast and conference call details
Metso's President and CEO Pekka Vauramo and CFO Eeva Sipilä will present the financial results in an audiocast and a conference call for analysts and investors today at 1:00 p.m. EET. The audiocast can be followed at www.metso.com/latestreports.
A recording and a transcript will be available at the same webpage after the event has finished.
Conference call participants are requested to dial in five minutes before the event on:
United States: +1 631 913 1422
other countries: +44 (0) 333 300 0804
The confirmation code for joining the conference call is 40876239#.
Further information, please contact:
Juha Rouhiainen, Vice President, Investor Relations, Metso Corporation, tel. +358 20 484 3253
VP, Investor Relations
Nasdaq Helsinki Ltd
Metso is a world-leading industrial company offering equipment and services for the sustainable processing and flow of natural resources in the mining, aggregates, recycling and process industries. With our unique knowledge and innovative solutions, we help our customers improve their operational efficiency, reduce risks and increase profitability. Metso is listed on the Nasdaq Helsinki in Finland and had sales of about EUR 3.6 billion in 2019. Metso employs over 15,000 people in more than 50 countries.