Metso Outotec increases sales in Q1 but highlights increased uncertainty due to Ukraine crisis

Metso Outotec grew its sales by 26% to €1,164 million in Q1 2022 while increasing its received orders by 29% to €1,424 million in the same period. Further good news for the Finnish quarrying and mining plant giant came via operating profits rising in the quarter to €139 million. The company's Adjusted EBITA rose to €157 million, or 13.5% of sales.
Screening Static & Mobile / April 21, 2022
By Guy Woodford
Metso president & CEO Pekka Vauramo welcomed the company's good Q1 2022 trading but highlighted the market uncertainty caused by Russia's military offensive against Ukraine

Despite the good trading results, the company notes increased market uncertainty caused by Russia's military offensive against Ukraine.

Metso Outotec president and CEO Pekka Vauramo said: "Our performance during the first quarter was good, despite the uncertainty caused by Russia's military offensive against Ukraine and the ensuing overall volatility in the market environment.

"Since Russia started its military offensive, our priority has been the safety and well-being of our personnel. We announced a temporary suspension of deliveries to Russia as of late February and we have not taken new orders for deliveries to Russia. However, we continue to have a backlog to Russian customers, and while fully complying with the applicable sanction regimes, we will wind down these contracts in a controlled way considering our stakeholders.

Metso Outotec has been developing its new Lokotrack electric range since 2020Metso Outotec has been developing the new Lokotrack electric range since 2020
Metso Outotec has been developing its new Lokotrack electric range since 2020

"Our markets elsewhere continue to be very strong. If anything, the demand for minerals has increased, and we expect that the market will enable us to compensate for Russian orders. The market activity during the quarter was reflected in the 29% growth in our order intake. Orders increased in all three segments, in both the equipment and services businesses. The strong market activity is driven by high commodity prices and production rates in the minerals and metals markets, as well as the healthy demand for aggregates equipment and services in North America in particular."

Vauramo said Metso Outotec's 26% quarterly sales increase resulted from higher equipment deliveries from the backlog and double-digit growth in the company's services business. "While we saw cost increases from raw materials, components, freights and energy during the quarter, we were able to better mitigate those pressures compared to the second half of 2021, and those actions will continue going forward."

Metso Outotec is also said by Vauramo to have made good progress towards reaching its sustainability targets related to reducing its emissions while continuing to help its customers improve their performance with the manufacturer's Planet Positive portfolio. "We launched several new Planet Positive products during the quarter, such as Metso Outotec Geminex, a digital twin that is designed to optimise customer processes by combining data from both internal and external sources to enable, for example, a reduced carbon footprint and more efficient use of resources."

After the reporting period in April, Metso Outotec announced a project to develop a new, complete range of electrically driven track-mounted Lokotrack crushers and screens. The easy-to-use range of equipment will provide customers with lower operational costs and the possibility to use renewable energy sources. "These products, along with our existing Planet Positive portfolio, showcase our strong commitment to contribute to the 1.5-degree climate target," said Vauramo. "Also, in April, we announced the acquisition of Tesab Engineering, which offers mostly mobile crushing equipment for aggregates applications. Tesab is a good fit for us, complementing our current offering in the mobile crushing and screening markets. We continue efforts with other potential acquisitions."

Expanding on its Russia business trading, a statement released with the company's Q1 2022 performance figures stated that Metso Outotec "condemns Russia's military offensive against Ukraine and is deeply saddened by the humanitarian crisis it has caused."

Metso Outotec achieved a 26% year-on-year sales rise in Q1 2022
Metso Outotec achieved a 26% year-on-year sales rise in Q1 2022

The statement continued: "The offensive is having an impact on Metso Outotec's business and operations. Metso Outotec's Russia business mainly consisted of large capital equipment deliveries to various mining and metals customers. As of March 31, 2022, Metso Outotec had an order backlog of €479 million to Russia, of which some €315 million was expected to be recognised as sales in 2022 and the rest in later years. In early March, the company temporarily ceased its project deliveries to Russia and is not taking new orders for deliveries to Russia. The company has no production assets or property, plant, and equipment in Russia and only marginal physical assets. The Russian business is accounted for unchanged, on a going concern basis in this interim report.

"As a result of the military offensive, the European Union, the United States and other countries have announced severe sanctions against Russia. Metso Outotec did not recognise any revenue during the first quarter from sanctioned customers or contracts. Of the original sales plan for the remainder of 2022, sales to customers currently sanctioned amount to approximately €100 million. In addition to sanctions, restrictions on, for example, logistics and export controls can be expected to further limit deliveries into Russia."

Metso Outotec said that having reviewed its ongoing projects, the company is working to wind down its existing contracts and deliveries with its non-sanctioned Russian customers during the coming months. Thereafter, the company does not expect any revenue from the remaining order backlog. The company said the extent to which winding down through final deliveries or termination agreements is possible depends on further escalation of the conflict, sanctions and export control restrictions, and the availability of banking and logistics. The value of operative assets (receivables and inventory) related to Russian customers is said by Metso Outotec to have accounted for approximately €100 million at the end of March. The company said these assets might be at risk if winding down in a controlled way is impossible.

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