Metso Outotec sets out new strategy and financial targets

Metso Outotec has published its new strategy focusing on growth and improving profitability. The Finnish company says the aggregates and minerals sectors are at the core of its strategy, and it has also decided to divest its recycling business.
Crushing Static & Mobile / October 29, 2020
By Liam McLoughlin
Metso Outotec's key business areas are aggregates, minerals processing and certain areas of metals refining
Metso Outotec's key business areas are aggregates, minerals processing and certain areas of metals refining

The company, created through the combination of Metso Minerals and Outotec in June this year, has defined its purpose as “enabling sustainable modern life.”
 
Metso Outotec adds that its strong foundation for implementing its strategy and achieving its goals is based on four main factors: its comprehensive product and service offering as well as process expertise throughout the customers’ value chain; its extensive installed base and a strong brand; a strong aftermarket presence and know-how close to customers; and industry-leading, sustainability-focused technology, research and product development expertise.  
 
The key customer segments for Metso Outotec are aggregates, minerals processing, and certain areas of metals refining. It says its target markets offer attractive growth prospects and have significant potential for further growth and development of the aftermarket business. "Several recognised global megatrends, like urbanisation, infrastructure projects, electrification of societies, and climate change mitigation, will support market growth," the company comments.

Metso Outotec’s primary target in the selected segments is to develop its product and service business by leveraging its process expertise. In order to reduce business risks and to improve profitability, it says extensive project deliveries will be limited when they include other than the company’s own technology and expertise.

The company adds that its strategy will be implemented through four priorities: integration and financial performance; customer centricity; sustainability; and performance culture.

“Metso Outotec’s new strategy is coherent and clear, and it will help us to become an industry-leading company in customer satisfaction, sustainability and financial performance,” says Metso Outotec president and CEO Pekka Vauramo.

“The aggregates and minerals industries have clear roles at the core of our strategy. Global megatrends are driving their development, and we are well positioned to offer products, solutions and services that satisfy customer demands. In the Metals business, we will initiate a restructuring and turnaround programme to improve financial performance and ensure more granular management of the various businesses and resources. This work will lead us to scope our offering and resources in a more efficient way."
 
As a result of the strategy work, Metso Outotec has decided to divest its recycling business, which sells products and services for metal and waste recycling. Its sales in 2019 were €156m, and it reported an adjusted EBITA margin of approximately 6%. The business has around 300 employees and its main locations are Horsens, Denmark; Düsseldorf, Germany; and San Antonio, Texas.

“We have made a strategic decision to exit the recycling business. We have concluded that even though the circular economy and other market drivers offer attractive opportunities for developing the recycling business, it has limited synergies with the core of the new Metso Outotec, and therefore we will not be the best owner to fully leverage its opportunities. This being the case, we have started preparations to divest the business. I am confident that we will reach a solution that is good for Metso Outotec as well as for the Recycling business and its personnel,” Pekka Vauramo says.     
 
As part of the strategy work, Metso Outotec’s board of directors has approved seceral financial targets, including: achieving an adjusted EBITA (earnings before interest, taxes and amortisation) margin of more than 15% over the cycle; maintaining an ‘investment-grade’ credit rating; dividend pay-out of at least 50% of earnings per share; and progress in sustainability in alignment with the 1.5 °C commitment.
 
“The financial targets underline our intention to improve the company’s profitability and drive sustainable solutions in our industry," said Vauramo. "The most significant factors in this development are the benefits related to integration and synergies, the businesses’ own profitability improvement actions, increasing market shares, and developing our business portfolio. At the same time, we will strengthen the company’s balance sheet by using cash from operations to reduce indebtedness. For shareholders, Metso Outotec’s ambition is to be a good payer of dividends."
 
Metso Outotec aims to be a sustainability leader in its industry. The company says it is committed to the 1.5 °C journey, with targets that are validated by the Science Based Targets initiative. This will be implemented through a focus on sustainable offerings and innovations and by being a responsible and trusted partner.

The company has set targets to reduce the emissions of its own operations by 50% by 2030, compared to the 2019 baseline, and to reduce the emissions of logistics by 20% by 2025. It is also targeting that 30% of the supplier spend by the end of 2025 is with partners who have set a CO2 target.

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