Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
We will arrange a news conference on Metso’s January-March 2013 interim review for the media, investors and analysts, in Helsinki today. The event takes place at Metso Group Head Office, Fabianinkatu 9 A, Helsinki, Finland. A News conference in English will be arranged at 15:00 EEST / Helsinki time (08:00 EDT / New York, 13:00 BST / London, 14:00 CEST / Paris). The news conference can also be followed through a live webcast at www.metso.com/irwebcasts and a conference call, details at the end of this release. Questions are accepted via conference call only.
This is a summary of Metso’s January-March 2013 Interim Review. Complete report is available at www.metso.com/investors.
Figures in brackets, unless otherwise stated, refer to the comparison period, i.e. the same period last year.
Highlights of the first quarter of 2013
Guidance for financial performance during 2013 unchanged
Based on the current economic situation, the market outlook, our order backlog for 2013, and foreign exchange rates remaining similar to those at the end of March, we estimate that our EBITA before non-recurring items in 2013 will be at around 2012 levels and our net sales at the 2012 level or slightly below.
Metso’s President and CEO Matti Kähkönen comments on the first quarter:
The first quarter was two-fold for Metso. Firstly, as expected, demand for new equipment and projects remained similar to that seen in the previous quarter and below that in the first quarter of 2012. Secondly, and even more importantly, Metso’s flexible business model and focus on its services business yielded a good operating result (EBITA) and an improved EBITA margin for the quarter, despite net sales coming in a little slower than in early 2012. The Mining and Construction and Automation segments recorded a strong improvement in their margins, and we expect these segments to perform well going forward. Pulp, Paper and Power, however, was weak, as had been expected. The challenges in this segment are known and we will continue our actions to improve profitability in the business. The results of this work, together with our slightly more optimistic view of the segment’s customer industries, are expected to be seen in better performance later this year.
In March, the Board launched a strategy study to review the possibilities of separating Metso into two independent listed companies. This work is proceeding at a good pace and according to the planned milestones. We are confident that this project will be in the best interests of our customers, personnel, shareholders and other stakeholders.
Metso’s key figures
|
EUR million |
Q1/2013 |
Q1/2012 |
Change % |
2012 |
| Orders received |
1,584 |
1,920 |
-18 |
6,865 |
| Orders received of services business |
873 |
881 |
-1 |
3,264 |
| % of orders received 1) |
57 |
48 |
|
49 |
| Order backlog at end of period |
4,558 |
5,407 |
-16 |
4,515 |
| Net sales |
1,590 |
1,755 |
-9 |
7,504 |
| Net sales of services business |
727 |
721 |
1 |
3,174 |
| % of net sales 1) |
47 |
43 |
|
44 |
| Earnings before interest, tax and amortization (EBITA) and non-recurring items |
131.5 |
141.2 |
-7 |
687.5 |
| % of net sales |
8.3 |
8.0 |
|
9.2 |
| Operating profit |
119.2 |
129.0 |
-8 |
601.7 |
| % of net sales |
7.5 |
7.4 |
|
8.0 |
| Earnings per share, EUR |
0.48 |
0.56 |
-14 |
2.46 |
| Free cash flow |
74 |
116 |
-36 |
257 |
| Return on capital employed (ROCE) before taxes, % |
15.1 |
17.8 |
|
19.6 |
| Equity to assets ratio at end of period, % |
36.9 |
36.3 |
|
40.5 |
| Net gearing at end of period, % |
13.5 |
7.6 |
|
14.2 |
1) Excluding Valmet Automotive
Short-term outlook
Market development
The global economic situation and demand in our customer industries have remained largely unchanged during the early part of the year. Some initial positive signs have been seen in the US and China, which may have a positive impact on the activity of our customer industries in the second half of 2013. Stable capacity utilization levels and the need to increase production efficiency will continue to support demand for our services business.
We expect underlying demand in the mining market to remain at the good level seen during the first quarter of the year. Due to expected high utilization rates at mines, our large installed equipment base, and stronger services presence, we expect demand for our mining services to remain excellent.
Demand for construction equipment is projected to strengthen somewhat in emerging markets, especially China. In developed markets, we anticipate demand to remain at current relatively low levels going forward. Demand for our construction industry services is expected to remain satisfactory.
Demand for our process automation and flow control solutions and services is expected to remain good. Strong demand in the oil and gas industry is expected to offset continuing softness in the pulp and paper industry.
The market for pulp mills is expected to remain satisfactory, with good demand for rebuilds and services. Structural changes in the paper industry are likely to continue and the demand for papermaking lines is expected to remain weak and the outlook for services good. Demand for recovery boilers for the pulping industry is projected to continue stable, whereas shale gas will continue to have a negative impact on market of renewable energy solutions. All in all, we expect the demand for power plants and for related services to remain satisfactory.
