Q1-Q3 2013 Interim Report - outotec.fi · Flotation Dewatering Services ... (Bateman, Pyromet),...

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Q1-Q3 2013 Interim Report

Pertti KorhonenPresident and CEO

October 30, 2013


Continued uncertainty in global economy and customers’ cash flow optimization has slowed down investments

Significant differences between markets Slight improvement in metal prices and industry sentiment but hesitance to investcontinuesMany currencies have devaluedChina growth concerns easing, positivesigns from AustraliaReasonable tendering activity in copper, aluminum, sulfuric acid and precious metalsAlternative energy investments slow due to regulation uncertaintiesFewer projects and increased competitionProject financing available, but takes time

Oct 30, 2013 Q1-Q3 2013 Interim Report2


Progress of Outotec’s 2013 focus areas


FocusFocus areaarea ProgressProgress in in JanJan--SeptSept StatusStatus

Ensure continuous sales growth through orderintake and services growth as well as earningslogic enhancement

•Services sales +22% year-on-year•Good traction for life cycle solutions with O&M•Delays in large orders , strong prospects funnel

Improve profitability through value based pricing, supply savings and sales mix improvement

•Value pricing and supply savings progressing, share of services growing, some weakerprojects in the portfolio in H1/2013

Continue making acquisitions to strengthen the offering portfolio and accelerate growth

• Good funnel of acquisition prospects

Continue investments in developing and rollingout global platforms to ensure future growth and profitability improvement

•New operating model as of July 1, 2013• Implementation of global platforms progressing


Order intake declined in Q3 due to further delays in closing large orders and weaker service orders


Green anode plant and rodding shop, ETI Alüminyum, TurkeyEUR 15 million

Order intake in Q3 2013 totaled EUR 229.6 (452.4) million, -49% YoY

Asia Pacific 23%EMEA 54%Americas 22%

Service order intake in Q1-Q3 2013 totaled EUR 387.1 (362.8) million, +7% YoY

Order intake in Q1-Q3 2013 totaled EUR 1,086.3 (1,613.2) million, -33% YoY

Modernization of coppersmelter, PASARPhilippinesOver EUR 12 million

Flash smelting technologyto copper smelter upgrade, Rio Tinto, USAEUR 14 million

Technology license, engineering for an aluminarefinery, DUBAL, UAEValue not disclosed

Minerals processingtechnology, Grupo Peñoles, MexicoOver EUR 47 million


Order intake declined as mining companies have cut their capex and opex


EUR million

Order backlog at the end of Q3: EUR 1,512.3(2,155.8) million, servicerepresenting EUR 211.5(260.2) million38 (43) projects with value in excess of EUR 10 million, accounting for 79 (70) % of the backlogRoughly 38 (27)% (or approx. EUR 580 (580) million) of the backlog is estimated to be delivered in 2013

186240

371

235168

493418 384

299

475

260

120 139 106202

111

419350

269357 344

532

803

327425

736

452 471 491

366

230

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

Order backlog at the end of the periodShare of unannounced ordersOrder intake by quarter



EUR million Q1-Q3 2013

Q1-Q3 2012

Change% Q3 2013 Q3 2012

Sales 1,454.4 1,437.6 +1 440.1 502.8

Gross margin, % 20.8 20.3 - 22.5 19.3

Operating profit from business operations 122.4 119.8 +2 44.1 44.7

- one-time items*) +3.9**) -1.3 - +4.1 -0.5

- PPA amortization -9.8 -9.2 - -3.2 -3.2

Operating profit 116.5 109.4 +2 45.0 41.0

FX impact (unrealized, realized) 5.9 -0.2 - 2.6 3.6

Operating profit margin, % 8.0 7.6 - 10.2 8.1

- from business operations, % 8.4 8.3 - 10.0 8.9

Sales in Q3 fell mainly due to declined order intake in 2013,operating profit margin improved mainly due to sales mix

*) One-time costs related to M&A**) Acquisition related costs of EUR 0.3 million and positive impact of EUR 4.2 million related to reduction of earn-out paymentliabilities from EPI and TME Group acquisitions.


Development of Outotec’s sales and operating profit frombusiness operations (last twelve months)

5 %

6 %

7 %

8 %

9 %

10 %Operating Profit %, LTM*

0

500

1 000

1 500

2 000

2 500Sales LTM


*) from business operations excl. one-time items and PPA amortizations

EUR million

Oct 30, 20137


Minerals Processing

Comprehensive offering for processing of virtually all ore typesSustainable solutions from pre-feasibility studies to complete plants and life cycle services.More than a century of experience and strong R&D capabilities for continuous creation of world-leading technologies in-house.

Oct 30, 20138

Solutions for Peers and competitorsConcentratorsComminution

FlotationDewatering

ServicesOperation & maintenance

Andritz, BGRIMM, CITIC, FLSmidth,Krupp Polysius, Metso, PERI, Tenova (Delkor),

Thermo Fisher, WesTech,Xstrata Technology



Minerals Processing

Oct 30, 20139

EUR millionQ1-Q3

2013Q1-Q3

2012Change

%Q3

2013Q3

2012 2012

Sales 611.1 637.8 -4 172.8 226.8 926.0

Operating profit from business operations *) 59.6 73.5 -19 20.2 31.5 127.6

Operating profit margin from business operations, % 9.7 11.5 - 11.7 13.9 13.8

0 %2 %4 %6 %8 %10 %12 %14 %16 %18 %20 %

050

100150200250300350

Sales

Operating profit, %*)

*) excl. one time items and PPA

*)The unrealized and realized exchange gains related to currency forward contracts increased profitability by EUR 3.6 (0.0) million in Q1-Q3 2013.

Sales and operating profit*) development Highlights in Q1-Q3Strong service sales, lower sales from capexProfitability impacted by lower overall sales and service product mix (higher share of expert service vs proprietary spares)Significant minerals processing technology orders from Grupo Peñoles (EUR 47 million)



Metals, Energy & Water

Oct 30, 201310

Sustainable solutions for metals processing, renewable energy production and industrial water treatment

Metals: Extensive range of solutions for processing virtually all types of ores and concentrates to refined metals

Energy: Innovative solutions for biomass, coal, sludge, agricultural and industrial by-products as well as oil shale and phosphorus recycling from sewage sludge ashes

Water: Our solutions produce water that meets environmental discharge standards, maximize water recycling, and reduce water and energy consumption

Solutions for Peers and competitors

Non-ferrous metalsFerrous metals and ferroalloys

Light metalsRenewable & conventional energy

Industrial water treatmentServices

Operation & maintenance

Alcan, Alstom, Andritz, Brochot, BSIET,Danieli, Downer, FLSmidth, Foster Wheeler,

GEA, Jacobs (Aker), Kobelco, MECS, Mesco, Metso, Midrex, Siemens, SMS Meer,SMS Siemag, Solios, Stultz, Tenova(Bateman, Pyromet), Veolia Water,

Xstrata Technology



Metals, Energy & Water

Oct 30, 201311

EUR millionQ1-Q3

2013Q1-Q3

2012Change

%Q3

2013Q3

2012 2012

Sales 842.7 800.6 +5 266.6 276.2 1,161.2

Operating profit from business operations *) 73.6 54.7 +35 27.9 13.4 75.2

Operating profit margin from business operations, % 8.7 6.8 - 10.5 4.8 6.5

0 %

2 %

4 %

6 %

8 %

10 %

12 %

050

100150200250300350400

Sales

Operating profit, %*)

*) excl. one time items and PPA

*)The unrealized and realized exchange gains related to currency forward contracts increased profitability by EUR 2.3 (-0.3) million in Q1-Q3 2013.

Sales and operating profit*) development Highlights in Q1-Q3Significant delays in large ordersProfitability improved by higher salesand project mixNew technology addition to aluminumvalue chain (cooperation with Hatch)Several copper smelter upgrades wonand in implementation



Service order intake dropped in Q3 due to decline in shut down and upgrade services, sales growth continued

Q1-Q3 highlights• Service orders EUR 387.1 (362.8) million, +7%• Service sales EUR 355.2 (291.9) million, +22%• Less shutdown, upgrade service and capex

spares orders, high Q3/2012 comparison pointdue to a large shutdown order

Focus going forward is on• Further penetrating to installed base• Leveraging O&M and shutdown services offering• Enhancing global footprint and offering through

M&A


Services

0

10

20

30

40

020406080

100120140160180200

Sales

Share of Outotec's sales, %

%

55 81141 149

283344

476355

0

200

400

600

800

1 000

2006 2007 2008 2009 2010 2011 2012 Q1-Q3 2013

Services salesEUR million

050

100150200250300

Services order backlog

EUR million

EUR million


-90-60-30

0306090

120150

Net cash flow from operatingactivities, quarterly

-400

-300

-200

-100

0

Net interest-bearing debt

Strong financing structure and good liquidity, cash flow impacted by low order intake and delays in timing of some milestone payments


-300

-200

-100

0

Working capital


ROI and ROE on solid level


010203040506070

ROI%, quarterly

0

10

20

30

40

50

ROE%, quarterly



Increase from acquisitions: 53 YoY, 41 fromDecember-endTemporary personnel: 8 (8) % FTE contracted people: some 585 (800)

57%26%

17%EMEA

Americas

Asia Pacific 1 831 1 802 1 7972 144

2 674

3 128 3 130

3 883

4 8054 978

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1-Q3 2013

Personnel at the end of the periodPersonnel by region at the end of the period

Personnel increased slightly due to acquisitions and selected recruitments to services and project delivery


Events after reporting periodOct 18, 2013, Outotec to further strengthen its position as a leader in dewatering solutions by establishing a Dewatering Technology Center in Lappeenranta, Finland.

Oct 17, 2013, Outotec lowers its financial guidance regarding sales and operating profit margin for 2013.

Oct 17, 2013, Outotec starts an efficiency improvement program targeting up to EUR 50 million annualized savings in operational costs.

Oct 8, 2013, Outotec recognized in the Nordic Carbon Disclosure Leadership Index (CDLI) for the fifth consecutive year with regard to the quality of climate change data it has submitted.



EUR 50 million savings program to secureprofitability in uncertain market conditions

Efficiency improvement program targeting up to EUR 50 million annualized savings

The majority of the savings will materialize in 2014

The estimated one-time costs from the program max EUR 30 million

Employee cooperation negotiations started globally

Personnel reduction need max 500 (by mid 2014) through redundancies, retirements, discontinuing fixed-term agreements. Temporary lay-offs if needed.

Other actions include for example consolidation of locations and reduction in external services



Despite the lower total capex, market continues to provide opportunities for Outotec


Mining companies are seeking ways to reduce investment risks and maximize free cash flow.

Large project prospects exist in certainmarkets.

Demand for services is expected to remain solid due to the need to optimize operations.

Opportunity to grow services by further penetrating to the installed base with new service solutions.

Project financing continues to be available for solid projects, financing takes time.

Need for biomass and waste-to-energy solutions to produce energy while solving a local waste problem.

Lower Capex market with some growth pockets

Service growthopportunities, somepricing pressures

Changing customer demands offer opportunities for Outotecto provide:• predictable investment

cost and schedule• guaranteed

performance• license to operate


Financial guidance for 2013 lowered on Oct 17, 2013 (previous guidance)Outotec’s sales guidance has been lowered due to several reasons. The continued macroeconomic uncertainty has slowed down customers' capex investments. Some projects have progressed slower than expected due to delays in customer payments. In addition, a EUR 30 million order was cancelled in September. The lower sales volume is the main reason for lowering the operating profit margin guidance.

Outotec expects that in 2013:• Sales will be approximately EUR 1.9-2.1 (2.1-2.3) billion, and• Operating profit margin from business operations*) be

approximately 8.5-9.5 (9.5-10.5) %

*) excluding one-time items and PPA amortizations

In 2013, PPA amortizations from completed acquisitions is estimated to be approximately EUR 13 million.



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