Outotec's Interim Report January-March 2012
(Thomson Reuters ONE) -
OUTOTEC OYJ INTERIM REPORT APRIL 26, 2012 AT 9.00 AM
INTERIM REPORT JANUARY-MARCH 2012
Very strong sales growth and solid order intake continued
Reporting period January-March 2012 in brief (2011):
* Order intake: EUR 425.4 million (EUR 343.7 million), +24%
* Order backlog: EUR 1,991.8 million (EUR 1,444.4 million), +38%
* Sales: EUR 410.4 million (EUR 247.5 million), +66%
* Services sales: EUR 89.5 million (EUR 71.1 million), +26%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 30.6 million (EUR 20.2
million), +52%
* Operating profit: EUR 27.6 million (EUR 19.0 million), +45%
* Net cash flow from operating activities: EUR 9.9 million (EUR 59.8 million)
* Earnings per share: EUR 0.42 (EUR 0.28), +53%
Financial guidance for 2012 reiterated
Based on strong order backlog at the end of 2011, market outlook and customer
tendering activity, management expects that in 2012:
* sales will grow to approximately EUR 1.7-1.9 billion, and
* operating profit margin from business operations will be approximately
9-10% (excluding one-time items and PPA amortizations).
The achievement of the guidance is subject to overall development of world
economy and financial markets, progress in projects in the order backlog,
exchange rates, product mix, timing of new orders, license fee income and
project completions.
President and CEO Pertti Korhonen:
"The overall market activity has continued to be very strong during the first
quarter, providing us with a good start for the year. Our customers are
investing in new technologies and capacity to satisfy the metals demand in the
emerging markets and to meet the growing sustainability requirements. A typical
example of such sustainable investments is the order of a copper smelter gas
cleaning system and a sulfuric acid plant placed by Kansanshi Mining in Zambia.
We had a strong quarter with regard to order intake, sales and operating profit
growth. Strong opening backlog for 2012 and good execution led to very strong
growth in plant, technology and equipment deliveries and sales. Also services
business continued to grow strongly. The strong sales growth demonstrates our
scalable operational model. In line with our acquisition strategy, we further
enhanced our technology portfolio by acquiring Numcore Ltd, a technology company
providing innovative online process control solutions based on 3D-imaging. This
technology will further strengthen Outotec's leadership in providing advanced
flotation and thickener solutions. We will continue to pursue acquisitions
besides our organic growth. Despite the macro-economic uncertainties, our
business outlook for 2012 is solid."
Summary of key figures Q1 Q1 Last 12 Q1-Q4
2012 2011 months 2011
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Sales, EUR million 410.4 247.5 1,548.5 1,385.6
Gross margin, % 21.4 26.6 22.9 24.0
Operating profit from business operations, EUR 30.6 20.2 131.9 121.5
million
Operating profit margin from business 7.5 8.2 8.5 8.8
operations, %
Operating profit, EUR million 27.6 19.0 120.5 111.9
Operating profit margin, % 6.7 7.7 7.8 8.1
Profit before taxes, EUR million 27.7 18.1 123.0 113.3
Net cash from operating activities, EUR million 9.9 59.8 197.2 247.0
Net interest-bearing debt at the end of period, -334.2 -248.7 -334.2 -339.1
EUR million
Gearing at the end of period, % -87.8 -75.9 -87.8 -84.9
Working capital at the end of period, EUR -249.6 -153.0 -249.6 -270.3
million
Return on investment, % 25.1 20.4 27.7 26.4
Return on equity, % 19.8 14.7 24.3 20.9
Order backlog at the end of period, EUR million 1,991.8 1,444.4 1,991.8 1,985.1
Order intake, EUR million 425.4 343.7 2,087.1 2,005.4
Personnel, average for the period 4,020 3,221 3,716 3,516
Earnings per share, EUR 0.42 0.28 1.89 1.75
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INTERIM REPORT JANUARY-MARCH 2012
OPERATING ENVIRONMENT
For the reporting period, the overall market activity was good and customer
negotiation activity remained strong in all Outotec's market areas. The mining
and metals industry investments were supported by a positive long-term outlook
for metals. Copper, gold and aluminum prices continued to be significantly above
the cash costs and also iron ore prices stayed on a good level.
Intensive sales and tendering activities continued in all Outotec's business
areas. Outotec has succeeded well in scaling up its delivery capacity which is
enabling the strong sales growth. Delivery times in certain areas of the
subcontractor network lengthened somewhat but had no material impact on delivery
schedules or negotiations. The competitive landscape remained unchanged however,
varying by country and technology. Industry consolidation continued.
Despite continued macro-economic turbulences, investment financing was available
for companies with strong cash flows and balance sheets. Tightening
environmental regulations were reflected in the growing demand for Outotec's
sustainable technology solutions and in some cases prolonged approval times of
customers' environmental permits, therefore also slowing down sales negotiations
in some larger CAPEX projects.
ORDER INTAKE
Order intake in the reporting period totaled EUR 425.4 million (Q1/2011: EUR
343.7 million), up 24% from the comparison period. Orders included plant,
technology and equipment deliveries as well as services. Orders from EMEA
(Europe including the CIS, Middle East and Africa) represented 50%, Americas
35% and Asia Pacific 14% of the total order intake.
Published orders in the first quarter:
* concentrator technology for a slag treatment plant for Codelco, Chile (value
some EUR 10 million)
* gas cleaning system and a sulfuric acid plant for Kansanshi Mining, Zambia
(value over EUR 80 million)
* copper concentrator technology for Grupo Mexico, Mexico (value nearly EUR
28 million)
* feasibility study for smelter-grade alumina refinery for PT ANTAM (Persero),
Indonesia
ORDER BACKLOG
The order backlog at the end of the reporting period was EUR 1,991.8 million
(March 31, 2011: EUR 1,444.4 million), up 38% from the comparison period. At the
end of the reporting period, Outotec had 37 projects with an order backlog value
in excess of EUR 10 million, accounting for 65% of the total backlog. Based on
the quarter-end project evaluation, management estimates that roughly 60%
(approximately EUR 1,190 million) of the March-end order backlog value will be
delivered in 2012 and the rest in 2013 and beyond. Less than 5% of the projects
in Outotec's current backlog are from mining companies who are developing their
first processing plants.
SALES AND FINANCIAL RESULT
Outotec's sales in the reporting period totaled EUR 410.4 million (Q1/2011: EUR
247.5 million), up 66% from the comparison period. Sales growth resulted from a
strong opening order backlog for 2012 and good execution in plant, technology
and equipment deliveries as well as services. Exchange rates did not have
material effect on sales growth.
Sales in the Services business, which is included in the sales figures of the
three reporting segments totaled EUR 89.5 million in the reporting period
(Q1/2011: EUR 71.1 million), up 26% from the comparison period and accounting
for 22% of Outotec's sales (Q1/2011: 29%).
Operating profit from business operations in the reporting period was EUR 30.6
million (Q1/2011: EUR 20.2 million), up 52% from the comparison period and
representing 7.5% of sales (Q1/2011: 8.2%). Unrealized and realized exchange
losses related to currency forward contracts were EUR 0.0 million (Q1/2011: gain
of EUR 3.8 million). Operating profit for the reporting period was EUR 27.6
million (Q1/2011: EUR 19.0 million). The operating profit margin was impacted by
change in the product mix due to fast growing CAPEX business and therefore
lowering the share of Services sales. Furthermore, the share of large projects
in an early stage of completion increased. The total impact of PPA amortizations
in the reporting period was EUR 3.0 million (Q1/2011: EUR 1.2 million). The
increase in the PPA amortizations resulted mainly from the Energy Products of
Idaho and Kiln Services Australia acquisitions in December 2011. In 2012, the
estimated total impact for PPA amortizations from acquisitions is approximately
EUR 12 million. One-time costs in the reporting period were EUR 0.1 million
(Q1/2011: no one-time costs) and they were related to acquisition costs.
Fixed costs in the reporting period were EUR 60.2 million (Q1/2011: EUR 50.8
million). The increase was primarily due to sales volume driven increases in
selling, marketing and administration costs, investments in R&D activities,
personnel additions to support Services growth as well as continued investments
in developing and deploying Outotec's global operational model, including common
business processes and IT systems. Profit before taxes in the reporting period
was EUR 27.7 million (Q1/2011: EUR 18.1 million). It included a net finance
income of EUR 0.2 million (Q1/2011: net finance expense EUR 0.9 million). The
increase from the comparison period was primarily due to higher cash position
and related interest income. Net profit for the reporting period was EUR 19.3
million (Q1/2011: EUR 12.6 million). Taxes totaled EUR 8.4 million (Q1/2011: EUR
5.5 million). Earnings per share were EUR 0.42 (Q1/2011: EUR 0.28).
Outotec's return on equity for the reporting period was 19.8% (Q1/2011: 14.7%),
and the return on investment was 25.1% (Q1/2011: 20.4%).
Sales and Operating Profit by Segment Q1 Q1 Q1-Q4
EUR million 2012 2011 2011
--------------------------------------------------------------------
Sales
Non-ferrous Solutions 260.7 162.0 947.6
Ferrous Solutions 70.0 43.6 221.1
Energy, Light Metals and Environmental Solutions 85.9 46.1 236.1
Unallocated items*) and intra-group sales -6.2 -4.1 -19.2
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Total 410.4 247.5 1,385.6
Operating profit
Non-ferrous Solutions 25.4 18.1 107.7
Ferrous Solutions 5.5 3.2 6.7
Energy, Light Metals and Environmental Solutions 3.8 3.3 23.8
Unallocated**) and intra-group items -7.2 -5.7 -26.3
--------------------------------------------------------------------
Total 27.6 19.0 111.9
*) Unallocated items primarily include invoicing of group management and
administrative services.
**) Unallocated items primarily include group management and administrative
services.
Non-ferrous Solutions
Sales in the Non-ferrous Solutions business area in the reporting period totaled
EUR 260.7 million (Q1/2011: EUR 162.0 million), up 61% from the comparison
period. The increase was due to continued good order intake, good progress in
deliveries from strong opening order backlog and growth in Services sales. The
operating profit from business operations in the reporting period was EUR 26.3
million, 10.1% of sales (Q1/2011: EUR 19.1 million, 11.8% of sales) and
operating profit was EUR 25.4 million, 9.7% of sales (Q1/2011: EUR 18.1 million,
11.1% of sales). The unrealized and realized exchange gains related to currency
forward contracts increased profitability by EUR 0.9 million (Q1/2011: gain of
EUR 3.9 million).
Ferrous Solutions
Sales in the Ferrous Solutions business area for the reporting period totaled
EUR 70.0 million (Q1/2011: EUR 43.6 million), up 61% from the comparison period.
The increase was due to the execution of long-term projects from the backlog and
growth in Services sales. Operating profit from business operations was EUR 5.5
million, 7.8% of sales (Q1/2011: EUR 3.2 million, 7.5% of sales) and operating
profit was EUR 5.5 million, 7.8% of sales (Q1/2011: EUR 3.2 million, 7.5% of
sales).
Energy, Light Metals and Environmental Solutions
Sales in the Energy, Light Metals and Environmental Solutions business area in
the reporting period totaled EUR 85.9 million (Q1/2011: EUR 46.1 million), up
87% from the comparison period. The increase was due to the good progress in the
execution of long-term projects from the backlog. Operating profit from business
operations for the reporting period was EUR 6.0 million, 6.9% of sales (Q1/2011:
EUR 3.5 million, 7.6% of sales) and operating profit was EUR 3.8 million, 4.5%
of sales (Q1/2011: EUR 3.3 million, 7.3% of sales). The unrealized and realized
exchange losses related to currency forward contracts decreased profitability by
EUR 0.5 million (Q1/2011: gain of EUR 0.1 million). The lower operating profit
margin in the reporting period is reflecting the progress of large projects in
an early stage of completion when profit recognition is low. In the comparison
period, successful project completions and related release of provisions were
realized.
BALANCE SHEET, FINANCING AND CASH FLOW
The consolidated balance sheet total was EUR 1,436.4 million at the end of the
reporting period (March 31, 2011: EUR 1,140.2 million).The equity to
shareholders of the parent company was EUR 379.4 million (March 31, 2011: EUR
326.6 million), representing EUR 8.33 (March 31, 2011: EUR 7.20) per share.
The net cash flow from operating activities in the reporting period was EUR 9.9
million (Q1/2011: EUR 59.8 million). The reporting period's cash flow was
impacted by increase in working capital mainly due to timing of the advance
payments compared to the year-end 2011. Gearing for the reporting period was
-87.8% (March 31, 2011: -75.9%).
Outotec's working capital amounted to EUR -249.6 million at the end of the
reporting period (March 31, 2011: EUR -153.0 million). The advance and milestone
payments at the end of the reporting period were EUR 391.8 million (March
31, 2011: EUR 244.1 million), representing an increase of 61% from the
comparison period which reflects the strong order intake in 2011.
At the end of the reporting period, Outotec's cash and cash equivalents totaled
EUR 395.3 million (March 31, 2011: EUR 318.2 million). The company invests its
excess cash in short-term money market instruments such as bank deposits and
corporate commercial certificates of deposit.
Outotec's financing structure continued to strengthen and liquidity was good.
Net interest-bearing debt at the end of the reporting period was EUR -334.2
million (March 31, 2011: EUR -248.7 million). Outotec's equity-to-assets ratio
was 36.4% (March 31, 2011: 36.6%). The company's capital expenditure in the
reporting period was EUR 14.0 million (Q1/2011: EUR 3.5 million) including
acquisitions as well as investments in IT-systems, R&D related equipment and
intellectual property rights.
At the end of the reporting period, guarantees for commercial commitments,
including advance payment guarantees issued by the parent and other Group
companies were EUR 507.0 million (March 31, 2011: EUR 318.5 million).
CORPORATE STRUCTURE
On March 12, Outotec acquired all shares in Numcore Ltd. Numcore is a technology
company developing and marketing innovative online process control solutions
based on 3D-imaging. With a strong focus on R&D, the company has designed high-
tech instruments for process optimization in minerals processing, food and pulp
and paper industries. The acquisition supports Outotec's growth strategy and
strengthens Outotec's competitive edge in providing advanced technology
solutions. The acquisition will not have any significant short-term impact on
Outotec's sales. The acquisition price was not disclosed.
In 2012, the estimated total impact for PPA amortizations from acquisitions is
approximately EUR 12 million.
RESEARCH AND TECHNOLOGY DEVELOPMENT
In the reporting period, Outotec's research and technology development expenses
totaled EUR 9.1 million (Q1/2011: EUR 7.5 million), increase of 21% from the
comparison period and representing 2.2% of sales (Q1/2011: 3.0%). Outotec filed
12 new priority applications (Q1/2011: 6), and 55 new national patents were
granted (Q1/2011: 68).
Outotec launched the world's largest pressure filter the Outotec® Larox PF 180
in March. The PF 180 series filters are now 50% larger than the previous model.
PERSONNEL
At the end of the reporting period, Outotec had a total of 4,123 employees
(March 31, 2011: 3,274). Primarily personnel was recruited for project
implementation and service business. In addition, acquisitions completed in
December 2011 increased personnel from the comparison period. Outotec had on
average 4,020 employees (Q1/2011: 3,221). The average number of personnel grew
by 799 over the comparison period, which supports overall business growth
objectives. Temporary personnel accounted for approximately 11.3% (Q1/2011:
7.5%) of the total number of employees.
Distribution of Personnel by Area March 31, March 31, change Dec 31,
2012 2011 % 2011
--------------------------------------------------------------------
EMEA (including CIS) 2,422 1,998 21.2 2,327
Americas 1,093 802 36.3 972
Asia Pacific 608 474 28.3 584
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Total 4,123 3,274 25.9 3,883
At the end of the reporting period, the company had, in addition to its own
personnel, 729 (March 31, 2011: 349) full-time equivalent, contracted
professionals working in project execution. The number of contracted workers at
any given time changes with the active project mix and project commissioning,
local legislation and regulations as well as seasonal fluctuations.
In the reporting period, salaries and other employee benefits totaled EUR 80.1
million (Q1/2011: EUR 62.6 million). The increase from the comparison period was
due to personnel additions, wage inflation and wage increases.
CHANGES IN TOP MANAGEMENT
In January, Outotec announced the appointment of Minna Aila, Senior Vice
President, Communications and Corporate Responsibility as of March 1, 2012.
Outotec Executive Board at the end of the period:
Pertti Korhonen, President and CEO
Jari Rosendal, President, Non-ferrous Solutions business area
Pekka Erkkilä, President, Ferrous Solutions business area
Peter Weber, President, Energy, Light Metals and Environmental Solutions
business area
Kalle Härkki, President, Services business area
Robin Lindahl, Executive Vice President - Market Operations
Michael Frei, Senior Vice President - Supply
Kari Knuutila, Chief Technology Officer
Tapio Niskanen, Senior Vice President - Business Infrastructure
Mikko Puolakka, Chief Financial Officer
Ari Jokilaakso, Senior Vice President - Human Capital
Mika Saariaho, Chief Strategy Officer
Minna Aila, Senior Vice President - Communications and Corporate Responsibility
SHARE-BASED INCENTIVE PROGRAMS AND EXECUTIVE BOARD SHARE OWNERSHIP PLAN
Share-based Incentive Program 2010-2012
Outotec's board of directors decided on April 23, 2010 to adopt a share-based
incentive program for the company's key personnel. The program incorporates
three earning periods: calendar years 2010, 2011 and 2012. The board of
directors determines the amount of the maximum reward for each individual, the
earning criteria and the targets established for them separately on an annual
basis. The maximum value of the rewards for the entire program equals
approximately 1,000,000 shares, including a cash payment which equals income
taxes.
Earning period 2010
The reward paid to 68 individuals was determined by reaching the targets set by
the board of directors for cost savings, order intake and earnings per share.
The total reward for the 2010 earning period was EUR 9.6 million with 138,144
shares allocated and EUR 6.1 million paid in cash to cover income taxes.
Earning period 2011
The board of directors approved (March 1, 2011) 94 individuals for the program's
2011 earning period and set targets for order intake, earnings per share and
sales growth. The reward is paid in shares and as cash payment, with the shares
(133,234 shares) allocated to the key personnel in the spring of 2012. The
person must hold the earned shares for at least two years after the end of the
earning period.
Earning period 2012
The board of directors approved (March 28, 2012) 148 individuals for the
program's 2012 earning period and set targets for order intake, earnings per
share and sales growth. The maximum total reward for 2012 earning period,
depending on achievement of set targets, is 194,875 allocated Outotec shares and
cash to cover income taxes.
Executive Board share ownership plan
In 2010, Outotec's board of directors determined a new share ownership plan
directed to the members of the Outotec executive board. Outotec has consolidated
Outotec Management Oy into the Group's balance sheet. At the end of the
reporting period (and on April 26, 2012) Outotec Management Oy held 203,434, or
0.44% of Outotec shares which have been accounted as treasury shares in
Outotec's balance sheet.
RESOLUTIONS OF THE 2012 ANNUAL GENERAL MEETING
Outotec Oyj's Annual General Meeting was held on March 23, 2012, in Helsinki,
Finland.
Financial Statements
The Annual General Meeting approved the parent company and the consolidated
Financial Statements, and discharged the members of the Board of Directors and
the President and CEO from liability for the financial year 2011.
Dividend
The Annual General Meeting decided that a dividend of EUR 0.85 per share be paid
for the financial year ended on December 31, 2011. The dividend was paid on
April 11, 2012.
The Board of Directors and auditors
The Annual General Meeting determined the number of the Board members, including
Chairman and Vice Chairman, to be seven (7). Ms. Eija Ailasmaa, Mr. Carl-Gustaf
Bergström, Mr. Tapani Järvinen, Mr. Karri Kaitue, Mr. Hannu Linnoinen, and Mr.
Timo Ritakallio were re-elected as members of the Board of Directors and Mr.
Chaim (Poju) Zabludowicz was elected as new Board member for the term expiring
at the end of the next Annual General Meeting.
The Annual General Meeting elected Mr. Carl-Gustaf Bergström as the Chairman of
the Board of Directors.
The Annual General Meeting confirmed the annual remunerations to the Board
members as follows: EUR 72,000 for the Chairman of the Board of Directors and
EUR 36,000 for the other members of the Board of Directors each, and an
additional EUR 12,000 for both the Vice Chairman of the Board, and the Chairman
of the Audit Committee. They also decided that the members of the Board each be
paid EUR 600 for attendance at each board and committee meeting as well as be
reimbursed for direct costs stemming from board work.
Of the annual remuneration, 60% would be paid in cash and 40% in the form of
Outotec Oyj shares, which would be acquired to the members from the stock
exchange, within one week of the AGM 2012 date, in amounts corresponding to EUR
28,800 for the Chairman, EUR 19,200 for the Vice Chairman and Chairman of the
Audit Committee each, and EUR 14,400 for each of the other members. The part of
the annual fee payable in cash corresponds to the approximate sum necessary for
the payment of the income taxes on the remunerations and would be paid no later
than April 30, 2012. The annual fees shall encompass the full term of office of
the Board of Directors.
Public Accountants PricewaterhouseCoopers Oy was elected as the company's
auditor.
Board's authorizations
The Annual General Meeting authorized the Board of Directors to resolve the
repurchasing of the company's own shares as follows:
* The company may repurchase the maximum number of 4,578,037 shares using free
equity and deviating from the shareholders' pre-emptive rights to the
shares, provided that the number of own shares held by the company will not
exceed ten (10) percent of all shares of the company.
* The shares are to be repurchased in public trading at the NASDAQ OMX
Helsinki at the price established in the trading at the time of
acquisition.
* The authorization shall be in force until the next Annual General Meeting.
The Annual General Meeting authorized the Board of Directors to resolve the
issuance of shares and other special rights entitling to shares as follows:
* The authorization includes the right to issue new shares, distribute own
shares held by the company, and the right to issue special rights referred
to in Chapter 10, Section 1 of the Companies Act.
* The total number of new shares to be issued and own shares held by the
company to be distributed under the authorization may not exceed 4,578,037
shares. The Board of Directors may deviate from the shareholders' pre-
emptive subscription rights.
* The Board of Directors is entitled to decide on the terms of the share
issue.
* The authorizations shall be in force until the next Annual General Meeting.
The Annual General Meeting further authorized the Board of Directors to donate
an aggregate amount of 100,000 euro to non-profit purposes or to universities.
Authorization shall be in force until December 31, 2012.
The board has not executed these authorizations as of April 26, 2012.
Nomination Board
The Annual General Meeting decided to establish a Nomination Board. Its duties
consist of Board of Directors members successor candidate search, preparation
and presentation of member candidates, and Board of Directors' remuneration
matters. The Nomination Board consists of the three largest shareholders, the
Chairman and Vice Chairman of the Board of Directors.
Board's assembly meeting
In its assembly meeting the Board of Directors elected Mr. Karri Kaitue as the
Vice Chairman of the Board of Directors. In addition, they also elected, Mr.
Timo Ritakallio, Mr. Chaim (Poju) Zabludowicz and Mr. Hannu Linnoinen as members
of the Audit Committee. Mr. Linnoinen acts as the Chairman of the Audit
Committee. Mr. Tapani Järvinen, Mr. Karri Kaitue, Ms. Eija Ailasmaa and Mr.
Carl-Gustaf Bergström will act as members of the Human Capital Committee with
Mr. Bergström as the Chairman of the Committee.
SHARES AND SHARE CAPITAL
Outotec's shares are listed on the NASDAQ OMX Helsinki (OTE1V). At the end of
the reporting period, Outotec's share capital was EUR 17,186,442.52 consisting
of 45,780,373 shares. Each share entitles its holder to one vote at the
company's general shareholder meetings.
TRADING, MARKET CAPITALIZATION AND SHAREHOLDERS
In the reporting period, the volume-weighted average price for a share in the
company was EUR 41.27; the highest quotation for a share was EUR 46.67 and the
lowest EUR 35.81. The trading of Outotec shares in the reporting period exceeded
21 million shares, with a total value of over EUR 903 million. At the end of the
reporting period, Outotec's market capitalization was EUR 1,741 million and the
last quotation for a share was EUR 38.03. At the end of the reporting period,
the company did not hold any treasury shares for trading purposes.
Outotec has an agreement with a third-party service provider concerning
administration and hedging of the share-based incentive program for key
personnel. These shares are accounted as treasury shares in Outotec's
consolidated balance sheet. At the end of the reporting period, the amount of
these treasury shares was 194,390. There have been no purchases of Outotec
shares based on this agreement in the reporting period.
Outotec has consolidated Outotec Management Oy into the Group's balance sheet.
At the end of the reporting period, Outotec Management Oy held 203,434 or 0.44%
(April 26, 2012: 203,434) Outotec shares which have been accounted as treasury
shares in Outotec's balance sheet.
At the end of the reporting period, Outotec had 13,921 shareholders. Shares held
in 17 nominee registers accounted for 54.1% and Finnish households held 10.0% of
all Outotec shares.
Changes in share holdings
On March 6, 2012 holding of Solidium Oy in shares of Outotec Oyj exceeded 5% and
was 2,314,000 shares representing 5.05% of the shares and votes (March
31, 2012: 2,524,000 shares, 5.51%).
On March 1, 2012 group holdings of Goldman Sachs Group, Inc. in shares of
Outotec Oyj exceeded 5% and were 2,458,638 shares (5.37% of the shares and
votes) and fell below 5% on March 2, 2012 and were 191,499 shares (0.42% of the
shares and votes).
EVENTS AFTER THE REPORTING PERIOD
On April 18, 2012 holdings of BlackRock, Inc. - voting right held by BlackRock
Investment Management (UK) Limited - in shares of Outotec Oyj exceeded 5% and
were 2,311,857 shares (5.05% of the shares and votes).
On April 18, 2012, Outotec announced that it was selected by Gol-E-Gohar Mining
& Industrial Co. to design and provide technology for an iron ore pelletizing
plant located in the Kerman province of Iran. The plant's annual capacity is
approximately five million tonnes iron ore pellets. Outotec's scope of delivery
includes technology for a traveling grate pelletizing plant, engineering, key
process equipment and advisory services. A local contractor will be responsible
for civil works and local supply. The value of equivalent deliveries for
comparable plant sizes is approximately EUR 80-85 million. Approximately EUR 25
million will be booked in Outotec's order intake during the second quarter of
2012. Prior to finalizing the deal, Outotec has applied for all the relevant
export approvals from export control authorities and has received all of the
necessary permits to ensure that the envisaged technology delivery does not
collide with the existing embargo regulations.
On April 5, 2012 Outotec got exclusive rights from Swiss Tower Mills Minerals
Ltd to sell the Tower Mills (STM) grinding technology, which will be marketed as
Outotec® High Intensity Grinding Mills (Outotec® HIGmill). Outotec® HIGmill
brings a new option to the market enabling Outotec to compete for the position
of market leader in fine and ultra-fine grinding.
On April 3, 2012, Outotec published its sustainability report 2011, which is the
company's second report based on Global Reporting Initiative (GRI) guidelines.
The report conforms to Application Level B+ and is third-party assured by Ecobio
Ltd. The report describes Outotec's approach to sustainability, performance and
achievements in 2011 as well as future targets and is an update of the 2010
report.
SHORT-TERM RISKS AND UNCERTAINTIES
Risks related to the global operating environment
Outotec's global business operations are subject to various political, economic
and social conditions. Turbulence in financial and banking markets and the
potential escalation of sovereign debt crisis may have a severe negative impact
on the outlook of the global economy. Conditions may rapidly change and create
delays and changes in order placement and execution as well as in the
availability and conditions of project financing for mining companies. Political
unrest may cause delays or even prevent project execution.
Risks related to Outotec's business
As part of its overall project delivery, Outotec often gives performance
guarantees and takes liabilities for the warranty period defects. Projects in
Outotec's order backlog may contain risks related to delivery, quality,
functionality or costs. According to standard practice, all unfinished projects
are regularly evaluated and provisions for performance guarantees and warranty
period guarantees are updated. Based on the risk reviews done the first quarter
of 2012, there were no material changes in total project risk provisions. Sales
negotiations especially in large projects may advance more slowly due to scope,
permitting and complexity of financing packages. Outotec may operate in
politically unstable countries where potential economic sanctions may have an
adverse effect on Outotec's business operations. In such cases, Outotec aims to
mitigate project contract risks through advance and milestone payments as well
as gradual booking of orders in backlog according to actual project progress.
Furthermore, global competitive landscape may change and intensify due to
industry consolidation.
Global economic uncertainty may reduce the demand for Outotec's products and
services. Outotec's gross margin fluctuates according to product mix and timing.
Particularly orders which include license fees may have a major impact on the
gross margin. Changes in labor costs, especially when operating in high
inflationary countries, as well as changes in raw materials and subcontracting
prices and component availability can also affect Outotec's profitability.
Outotec hedges these risks mostly contractually.
Outotec follows the percentage of completion method for the project revenue
recognition. Based on the projects' time schedules the Management estimates the
revenues to be recognized from the order backlog for the calendar year.
Therefore, deviations in project time schedules may have an impact on the
company's financial projections.
Availability of skilled personnel is important for the growth of Outotec's
business. Especially in some fast growing market areas and challenging project
environments personnel resourcing may be challenging. The business growth which
is in line with Outotec's strategy, results in permanent increase in personnel
increasing the company's fixed cost base and decreasing cost structure
adjustability.
The nature of international project business, different interpretations of
international and local tax rules and regulations may cause additional direct or
indirect taxes for Outotec thus reducing the company's net result.
Acquisitions are an integral part of Outotec's growth strategy. There is a risk
that the estimated synergy benefits will not materialize as planned. Goodwill
may be generated through acquisitions. The company conducts goodwill impairment
tests annually.
Outotec is involved in a few arbitral and court proceedings. Management expects
that these cases and their outcomes will have no material effect on Outotec's
financial result.
Financial risks
There is a risk that customers and suppliers may experience financial
difficulties and a lack of financing may result in project and payment delays or
bankruptcies, which can also result in losses for Outotec. These risks are
reduced by advance and milestone payments as well as letters of credit or other
trade finance instruments. In the reporting period, there were no material
credit losses related to payments by Outotec's counter-parties and at the end of
March 2012, all receivables were reviewed and credit loss provisions were
updated.
Outotec's business model is primarily based on customer advance and milestone
payments and on-demand guarantees issued by Outotec's relationship banks.
Changes in advance payments received due to changes in business volume or
industry's business practices may have an impact on the company's liquidity.
Exposure to on-demand guarantees has remained normal. Cash held by the company
is primarily invested in short-term bank deposits and in Finnish corporate
short-term certificates of deposit. More than half of Outotec's total cash flow
is denominated in euros. The rest is divided among various currencies, including
the Australian dollar, US dollar, Brazilian real, Canadian dollar, and South
African rand. The weight of any given currency in new projects can substantially
fluctuate, but most cash-flow-related risks are hedged in the short- and long-
term. In the short-term, currency fluctuations may create volatility in the
operating profit. The forecasted and probable cash flows are selectively hedged
and are always subject to separate decisions and risk analysis. Natural hedging
is used as widely as possible and the remaining open foreign exchange exposures
related to committed cash flows are fully hedged using primarily forward
agreements. The cost of hedging is taken into account in project pricing.
MARKET OUTLOOK
The long-term outlook for metals demand is expected to remain good and support
further investments. Current production capacity and ongoing investments in new
capacity are not sufficient to fulfill the metals demand for the emerging market
infrastructure development and growing middle class. In addition, industry-
specific trends such as declining ore grades, scarcity of water, higher energy
prices, global relocation of production and stricter environmental regulations
increase the need for modern technology. According to the large mining
companies' announcements, their CAPEX spending in 2012 will remain on a high
level. Outotec expects that the demand in all market areas continues to be
robust. Many countries are also developing new export regulations to increase
their value capture from their natural resources. Service business in general is
driven by industry's capacity utilization rates. Furthermore, in certain areas,
customers are requesting more and more "operate and maintain" -type services and
want to increase the outsourcing of their operations.
Management expects that the financial resources from the market will continue to
be available for good projects and for companies with strong cash flows and
balance sheets. Export financing agencies are also actively involved.
In the Non-ferrous Solutions business area demand for copper, gold, silver and
platinum group metals projects is expected to continue active. The strong
activity is expected to continue in the whole technology value chain and in
several markets such as Southeast Asia, Sub-Saharan Africa, the CIS, South-
America and the Middle East. The Services business is expected to continue to
grow strongly driven by customers' high capacity utilization rates. There are no
material changes expected to the business area's competitive landscape.
Competition for new projects remains tight but varies based on market and
offering. The business area's deliveries include technology and service
solutions ranging from spare parts to equipment as well as entire plant
solutions.
In the Ferrous Solutions business area, the solid demand for iron ore and
ferroalloy technologies is expected to continue. Good potential for new orders
is seen especially in iron ore beneficiation and agglomeration technologies in
India and Brazil, as well as in ilmenite technologies in the Middle East. In
addition, the depletion of lump ore deposits is driving sinter and pellet plant
investments in India. Due to the energy efficiency of Outotec's technology, the
strong demand for ferrochrome technologies is expected to continue. Deliveries
in the Ferrous Solutions business area are primarily large, turnkey projects and
fluctuations in sales and profit recognition based on the timing and completion
level of a particular project are inherent in this type of business.
The Energy, Light Metals and Environmental Solutions business area continues to
see solid demand in alternative energy, aluminum and sulfuric acid technologies.
There continues to be a high demand for aluminum technologies in the Middle
East. Sulfuric acid technologies are needed to replace old and inefficient
capacity and in metals productions - especially in capturing sulfur dioxide at
copper and nickel smelters - as well as in fertilizer industry. The demand is
also increasing in alternative energy-based solutions such as oil sands, oil
shale, biomass and waste-to-energy technologies. In addition, the global market
for industrial water treatment solutions looks promising. Deliveries in the
Energy, Light Metals and Environmental Solutions business area are primarily
large, turnkey projects and fluctuations in sales and profit recognition based
on the timing and completion level of a particular project are inherent in this
type of business.
The Services business growth is mainly driven by further penetration to
Outotec's large installed base, new CAPEX orders and customers' capacity
utilization rates. Modernizations, which require relatively short downtime, are
made to optimize metals recovery and reduce operating costs. Spare and wear
parts are needed as capacity utilization rates are high. In addition to
traditional service offerings, more and more interest is seen for "operate and
maintain" -type services due to lack of skilled workforce and increasingly
challenging raw materials.
In certain markets such as Australia and Chile, there is a lack of industry
expert resources. In addition, there are signs of lengthening delivery times in
certain areas of the subcontractor network, yet still remaining well below the
levels of the last up-cycle. Outotec's global supply network includes thousands
of partners and because of its scalability, it allows for a flexible delivery
capacity and relatively fast adoption to changes in the demand.
FINANCIAL GUIDANCE FOR 2012
Outotec's financial guidance for 2012 is reiterated. Based on strong order
backlog at the end of 2011, market outlook and customer tendering activity,
management expects that in 2012:
* sales will grow to approximately EUR 1.7-1.9 billion, and
* operating profit margin from business operations will be approximately 9 -
10% (excluding one-time items and PPA amortizations).
The achievement of the guidance is subject to overall development of world
economy and financial markets, progress in projects in the order backlog,
exchange rates, product mix, timing of new orders, license fee income and
project completions.
Espoo, April 26, 2012
Outotec Oyj
Board of Directors
For further information, please contact:
Outotec Oyj
Pertti Korhonen, President and CEO
tel. +358 20 529 211
Mikko Puolakka, CFO
tel. +358 20 529 2002
Rita Uotila, Vice President - Investor Relations
tel. +358 20 529 2003, mobile +358 400 954141
Format for e-mail addresses: firstname.lastname(at)outotec.com
FINANCIAL REPORTING SCHEDULE IN 2012
* Interim Report for January-June 2012: Friday, July 27, 2012
* Interim Report for January-September 2012: Thursday, October 25, 2012
INTERIM REPORT JANUARY-MARCH 2012 BRIEFING
Date: Thursday, April 26, 2012
Time: 2.00 pm (Finnish time)
Venue: Hotel Scandic Simonkenttä, Simonkatu 9, Helsinki
JOINING VIA WEBCAST
You may follow the briefing via a live webcast at www.outotec.com. The webcast
will be recorded and published on Outotec's website for on-demand viewing.
JOINING VIA TELECONFERENCE
You may also join the briefing by telephone. To register as a participant for
the teleconference and Q&A session, please dial 5 to 10 minutes before the
beginning of the event:
FI/UK: +44 20 7031 0088
US/CANADA: +1 877 491 0064
Password: 915226
In addition, an instant replay service of the conference call will be available
for three days until April 29, 2012 midnight using the following numbers:
FI/UK: +44 20 7031 4064
US: +1 888 365 0240
Access code: 915226
The contact information is gathered for registration purposes only and is not
used for commercial purposes.
INTERIM FINANCIAL STATEMENTS (unaudited)
Consolidated Statement of Comprehensive Income Q1 Q1 Q1-Q4
EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Sales 410.4 247.5 1,385.6
Cost of sales -322.6 -181.8 -1,053.1
--------------------------------------------------------------------------------
Gross profit 87.8 65.8 332.5
Other income 0.1 4.2 3.9
Selling and marketing expenses -23.7 -19.8 -86.4
Administrative expenses -27.5 -23.5 -97.7
Research and development expenses -9.1 -7.5 -33.5
Other expenses -0.2 -0.2 -6.7
Share of results of associated companies -0.1 -0.0 -0.0
--------------------------------------------------------------------------------
Operating profit 27.6 19.0 111.9
Finance income and expenses
Interest income and expenses 1.9 1.1 6.0
Market price gains and losses 0.3 -0.4 -0.3
Other finance income and expenses -2.0 -1.6 -4.4
--------------------------------------------------------------------------------
Net finance income 0.2 -0.9 1.4
Profit before income taxes 27.7 18.1 113.3
Income tax expenses -8.4 -5.5 -34.0
--------------------------------------------------------------------------------
Profit for the period 19.3 12.6 79.3
--------------------------------------------------------------------------------
Other comprehensive income
Exchange differences on translating foreign operations -1.2 -9.7 -3.9
Cash flow hedges 1.7 -0.0 -4.3
Income tax relating to cash flow hedges -0.5 0.0 1.3
Available for sale financial assets 0.1 0.2 -0.2
--------------------------------------------------------------------------------
Other comprehensive income for the period -0.0 -9.5 -7.2
Total comprehensive income for the period 19.3 3.1 72.1
--------------------------------------------------------------------------------
Profit for the period attributable to:
Equity holders of the parent company 19.3 12.6 79.3
Non-controlling interest - - -
Total comprehensive income for the period attributable
to:
Equity holders of the parent company 19.3 3.1 72.1
Non-controlling interest - - -
Earnings per share for profit attributable to the equity
holders of the parent company:
Basic earnings per share, EUR 0.42 0.28 1.75
Diluted earnings per share, EUR 0.42 0.28 1.75
All figures in the tables have been rounded and consequently the sum of
individual figures may deviate from the sum presented. Key figures have been
calculated using exact figures.
Condensed Consolidated Statement of Financial March 31, March 31, December 31,
Position
EUR million 2012 2011 2011
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 291.6 220.4 286.8
Property, plant and equipment 63.4 51.6 62.5
Deferred tax asset 50.4 39.1 47.3
Non-current financial assets
Interest-bearing 2.5 2.7 2.4
Non interest-bearing 2.7 2.1 2.5
--------------------------------------------------------------------------------
Total non-current assets 410.6 315.9 401.5
Current assets
Inventories *) 158.4 126.4 148.6
Current financial assets
Interest-bearing 1.7 0.5 0.7
Non interest-bearing 470.4 379.3 468.1
Cash and cash equivalents 395.3 318.2 402.5
--------------------------------------------------------------------------------
Total current assets 1,025.8 824.3 1,019.9
TOTAL ASSETS 1,436.4 1,140.2 1,421.4
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of 379.4 326.6 398.4
the parent company
Non-controlling interest 1.2 1.0 1.1
--------------------------------------------------------------------------------
Total equity 380.6 327.6 399.5
Non-current liabilities
Interest-bearing 48.2 55.1 47.6
Non interest-bearing 100.2 100.4 107.0
--------------------------------------------------------------------------------
Total non-current liabilities 148.3 155.4 154.6
Current liabilities
Interest-bearing 17.1 17.5 18.9
Non interest-bearing
Advances received **) 391.8 244.1 399.0
Other non interest-bearing liabilites 498.6 395.6 449.4
--------------------------------------------------------------------------------
Total current liabilities 907.5 657.1 867.3
Total liabilities 1,055.8 812.6 1,021.9
TOTAL EQUITY AND LIABILITIES 1,436.4 1,140.2 1,421.4
--------------------------------------------------------------------------------
*) Of which advances paid for inventories amounted to EUR 27.9 million on March
31, 2012 (March 31, 2011: EUR 33.7 million, December 31, 2011: EUR 43.5
million).
**) Gross advances received before percentage of completion revenue recognition
amounted to EUR 1.536,4 million on March 31, 2012 (March 31, 2011: EUR 1.089,1
million, December 31, 2011: EUR 1,462.3 million).
Condensed Consolidated Statement of Cash Flows Q1 Q1 Q1-Q4
EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 19.3 12.6 79.3
Adjustments for
Depreciation and amortization 7.4 4.7 19.4
Other adjustments 8.6 5.6 28.6
Decrease in working capital -19.7 42.4 134.4
Interest received 2.5 1.5 8.0
Interest paid -0.3 -0.1 -2.0
Income tax paid -7.9 -6.9 -20.8
--------------------------------------------------------------------------------
Net cash from operating activities 9.9 59.8 247.0
Purchases of assets -8.5 -3.4 -34.4
Acquisition of subsidiaries and business operations, net of -4.8 - -34.5
cash
Acquisition of shares in associated companies - - -0.1
Proceeds from disposal of subsidiaries - - 0.0
Proceeds from sale of assets 0.0 0.5 1.4
Change in other investing activities -0.0 -0.0 -0.1
--------------------------------------------------------------------------------
Net cash used in investing activities -13.3 -3.0 -67.7
Cash flow before financing activities -3.4 56.8 179.3
Repayments of non-current debt -1.4 -1.8 -11.5
Decrease in current debt -1.7 -8.7 -4.9
Increase in current debt 0.1 0.5 0.0
Related party net investment to Outotec Oyj shares *) -0.2 - -0.2
Dividends paid - - -34.3
Change in other financing activities -0.8 -0.0 0.4
--------------------------------------------------------------------------------
Net cash used in financing activities -3.9 -10.0 -50.6
Net change in cash and cash equivalents -7.3 46.8 128.8
Cash and cash equivalents at the beginning of the period 402.5 280.3 280.3
Foreign exchange rate effect on cash and cash equivalents 0.1 -8.9 -6.6
Net change in cash and cash equivalents -7.3 46.8 128.8
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 395.3 318.2 402.5
--------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
203,434 (December 31, 2011: 199,747) Outotec shares which have been accounted as
treasury shares in Outotec's consolidated statement of financial position.
Consolidated Statement of Changes in Equity
A = Share capital
B = Share premium fund
C = Other reserves
D = Fair value reserves
E = Treasury shares
F = Reserve for invested non-restricted equity
G = Cumulative translation differences
H = Retained earnings
I = Non-controlling interest
J = Total equity
Consolidated Statement of Changes in Equity
-------------------------------------------------
Attributable to the equity holders of the
parent company
-------------------------------------------------
EUR million A B C D E F G H I J
--------------------------------------------------------------------------------
Equity on January
1, 2011 17.2 20.2 0.4 2.1 -9.7 87.7 29.0 210.0 1.0 357.7
--------------------------------------------------------------------------------
Dividends - - - - - - - -34.3 - -34.3
Management incentive
plan for Outotec
Executive Board *) - - - - - - - - 0.0 0.0
Share-based
compensation - - - - - - - 0.9 - 0.9
Total comprehensive
income for the period - - - 0.2 - - -9.7 12.6 - 3.1
Other changes - - 0.0 - - - - 0.2 - 0.2
--------------------------------------------------------------------------------
Equity on March
31, 2011 17.2 20.2 0.4 2.2 -9.7 87.7 19.3 189.3 1.0 327.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity on January
1, 2012 17.2 20.2 0.4 -1.2 -7.5 87.7 25.1 256.5 1.1 399.5
--------------------------------------------------------------------------------
Dividends - - - - - - - -38.9 - -38.9
Management incentive
plan for Outotec
Executive Board *) - - - - -0.2 - - - 0.1 -0.1
Share-based
compensation - - - - - - - 0.8 - 0.8
Total comprehensive
income for the period - - - 1.2 - - -1.2 19.3 - 19.3
Other changes - - - - - - - - - -
--------------------------------------------------------------------------------
Equity on March
31, 2012 17.2 20.2 0.4 0.0 -7.7 87.7 23.9 237.7 1.2 380.6
--------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
203,434 (December 31, 2011: 199,747) Outotec shares which have been accounted as
treasury shares in Outotec's consolidated statement of financial position.
Key figures Q1 Q1 Last 12 Q1-Q4
2012 2011 months 2011
--------------------------------------------------------------------------------
Sales, EUR million 410.4 247.5 1,548.5 1,385.6
Gross margin, % 21.4 26.6 22.9 24.0
Operating profit, EUR million 27.6 19.0 120.5 111.9
Operating profit margin, % 6.7 7.7 7.8 8.1
Profit before taxes, EUR million 27.7 18.1 123.0 113.3
Profit before taxes in relation to sales, % 6.8 7.3 7.9 8.2
Net cash from operating activities, EUR million 9.9 59.8 197.2 247.0
Net interest-bearing debt at the end of period, -334.2 -248.7 -334.2 -339.1
EUR million
Gearing at
Unternehmensinformation / Kurzprofil:
Datum: 26.04.2012 - 08:02 Uhr
Sprache: Deutsch
News-ID 139458
Anzahl Zeichen: 65623
contact information:
Town:
Espoo
Kategorie:
Business News
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"Outotec's Interim Report January-March 2012"
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