Metso CEO Discusses Q3 2010 Results – Earnings Call Transcript
Metso Oyj (
)
Q3 2010 Earnings Call Transcript
October 28, 2010 10:00 am ET
Executives
Johanna Henttonen – VP, IR
Jorma Eloranta – Chairman, President & CEO
Olli Vaartimo – EVP & CFO
Analysts
Erkki Vesola – Swedbank
Tomi Railo – SEB Enskilda
Tom Skogman – Handelsbanken
Jan Kaijala – Nordea Markets
Ben Maslen – Merrill Lynch
Guillermo Peigneux – Morgan Stanley
Fredric Stahl – UBS
Sasu Ristimaki – Carnegie
Antti Suttelin – Danske Market Equities
Timo Pirskanen – Deutsche Bank
Sanna Kaje – FIM
Andre Kukhnin – Credit Suisse
Presentation
Johanna Henttonen
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Good afternoon, ladies and gentlemen, and welcome to Metso Corporation’s news conference and webcast on our third quarter 2010 financial results. My name is Johanna Henttonen; I am heading Metso’s Investor Relations. Today, we will start with the presentation by our CEO and President, Jorma Eloranta, and after that continue with the Q&A session where also our CFO, Olli Vaartimo will be present.
But before we start, I would like to remind you that certain information we will be discussing today is forward-looking, and thus include uncertainties that may cause our actual results to differ from our current expectations. But please, Jorma, the floor is yours.
Jorma Eloranta
Thank you, Johanna, and good afternoon to everybody. This third quarter results and performance was the key things for me. Firstly, quarter-on-quarter, the operational performance has improved during this year. Secondly, I make a point of the services business which has been very strong and growth has been positive, and thirdly good free cash flow. But let’s take a more careful look to the actual numbers.
So, in the third quarter, as we all know, the gradual recovery of the demand continued in most of our customer industries, especially in emerging markets, and I think it is fair to say that our performance was solid during the third quarter and the whole year. Our order intake during this third quarter was healthy, 1.4 billion Euros, and it was a bit lower than the strong second quarter, which included two large pulp mill orders. However, the order intake level is largely in line with our expectations. Our net sales in the third quarter were about 1.3 billion Euros, up by 11% from the comparison period.
We have ramped up our delivery capability to push through 1.6 billion Euros of net sales during the last quarter. When these materialize successfully, we will reach our guided net sales level of 5.5 billion Euros for the full year. EBITA before non-recurring items was 129 million Euros and margin 9.7%, still satisfactory, very slightly below what we called good.
Non-recurring items were 10.5 million Euros negative in the third quarter. These non-recurring items relate more to capacity adjustment measures which we have taken to adjust our cost to demand and to improve our structural competitiveness. So, if we now take a more look to the trends, this picture here illustrates our net sales and profitability development since 2008. Two trends in my opinion are emerging. Firstly, our net sales volume are slowly picking up and secondly under our underlining EBITA margins are on improving trend after being 7.5% in the first quarter, 9.1% in the second and now 9.7% in the third quarter. Our gross profit margin have also improved.
This graph shows also the very strong margins in the third quarter last year, the pickup, then our SG&A were then at the exceptionally low level due to strict savings method, temporary layoffs, and extended holiday period without pay. In the third quarter last year, we also completed some projects successfully which led to release in contingencies and there were also some currencies which impacted to this situation. This year, we have started to invest in growth again and our earnings have been somewhat negatively affected as the SG&As have been up reflecting the increased market activity, which one can see in the order intake.
This is very typical when cycle is turning up in Metso and our kind of companies. Naturally, we at Metso will continue tight cost control and are also aiming for good balance between growth and cost discipline. If we now take a look to the third quarter development by segment, it is in this picture, first, we have here Mining and Construction Technology, MCT where the intake continues to grow and was 643 million Euros. This was actually seventh consecutive growth quarter in order since low point at the end of 2008.
Net sales in the third quarter were 563 million Euros and EBITA margin before non-recurring items for third quarter was very good, 13.3%. The underlying operational profitability during the first nine months has been improving steadily because of higher capacity utilization rates and price levels. Then our EET, Energy and Environmental Technology, order intake that was up by 36% and amounted to 341 million Euros. Net sales were 312 million Euros, down by 11%. EBITA margin before non-recurring items for third quarter was good, 10.2%. During the first nine months, negative volume leverage on profitability was partly offset by clearly improved project execution in large delivery projects and in that regard, I want to especially mention and I am pleased with the performance improvement in our power business.
For our Paper and Fiber Technology, PFT, order intake was during the third quarter, 470 million Euros and net sales were up 24% and were 443 million Euros. EBITA margin before non-recurring items for the third quarter was 7.2%. During the first nine months, the underlying operational profitability has improved clearly as a result of better financial performance in the services business, and strong net sales growth in the paper business.
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