January-June 2011 Interim report
(Thomson Reuters ONE) -
OUTOTEC OYJ INTERIM REPORT JULY 29, 2011 AT 12.00 PM
INTERIM REPORT JANUARY-JUNE 2011
Record-high order intake and backlog, strong sales growth
January-June 2011 in brief (2010):
* Order intake: EUR 875.7 million (EUR 769.1 million), +14%
* Order backlog: EUR 1,664.1 million (EUR 1,310.1 million), +27%
* Sales: EUR 536.0 million (EUR 410.8 million), +30%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 32.3 million (EUR 14.9
million), +117%
* Net cash flow from operating activities: EUR 105.7 million (EUR 42.0
million), +152%
* Earnings per share: EUR 0.45 (EUR -0.07)
April-June 2011 in brief (2010):
* Order intake: EUR 532.1 million (EUR 349.7 million), +52%
* Sales: EUR 288.4 million (EUR 223.8 million), +29%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 12.1 million (EUR 11.3
million), +7%
* Net cash flow from operating activities: EUR 45.9 million (EUR 34.6
million), +33%
Financial guidance for 2011 reiterated.
President and CEO Pertti Korhonen:
"The positive market sentiment continued throughout the first half of 2011
supported by the long-term metals demand projections and historically high metal
prices. The activity was especially high in gold, base metals, aluminum and iron
industries. I am very pleased with our record-high order intake in the second
quarter, which has led to an all-time high order backlog at the end of the
reporting period. New orders in the second quarter include the design and
turnkey delivery of the world's largest iron ore pelletizing plant for Samarco
Mineração in Brazil. Services sales continued to grow strongly and was 30%
higher than in the comparison period. Our operating profit more than doubled
from the first half of 2010. The quarterly fluctuation of the operating profit
was due to normal revenue and profit recognition timing patterns inherent in the
project deliveries, and unrealized and realized foreign exchange gains and
losses. Our cash flow was good thanks to the advance payments and the company's
financial position has remained solid, putting us in a good position to further
expand our technology base and business through acquisitions. Despite the
turbulences of the financial markets in Europe and USA, Outotec's market outlook
has remained good - as substantiated by the several large orders we have
announced in July - and due to the fact that approximately two-thirds of
Outotec's sales comes from emerging markets. In order to fulfill the strong
demand for Outotec's solutions and services, and to meet our growth aspirations,
we continued to recruit new professionals."
Summary of key figures Q2 Q2 Q1-Q2 Q1-Q2 Last 12 Q1-Q4
2011 2010 2011 2010 months 2010
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Sales, EUR million 288.4 223.8 536.0 410.8 1,094.7 969.6
Gross margin, % 20.9 25.5 23.5 25.0 25.3 26.2
Operating profit from business
operations, EUR million 12.1 11.3 32.3 14.9 92.1 74.7
Operating profit from business
operations, % 4.2 5.1 6.0 3.6 8.4 7.7
Operating profit, EUR million 10.9 5.5 29.8 -4.6 76.1 41.6
Operating profit margin, % 3.8 2.4 5.6 -1.1 6.9 4.3
Profit before taxes, EUR million 11.2 5.7 29.2 -4.6 71.0 37.1
Net cash from operating
activities, EUR million 45.9 34.6 105.7 42.0 151.2 87.5
Net interest-bearing debt at the
end of period, EUR million -250.6 -166.8 -250.6 -166.8 -250.6 -200.9
Gearing at the end of period, % -74.6 -51.8 -74.6 -51.8 -74.6 -56.2
Working capital at the end of
period, EUR million -196.5 -107.8 -196.5 -107.8 -196.5 -113.5
Return on investment, % 12.0 5.6 16.6 -2.9 20.6 9.2
Return on equity, % 9.4 5.1 11.8 -2.0 15.3 7.6
Order backlog at the end of
period, EUR million 1,664.1 1,310.1 1,664.1 1,310.1 1,664.1 1,393.1
Order intake, EUR million 532.1 349.7 875.7 769.1 1,501.3 1,394.7
Personnel, average for the
period 3,428 3,171 3,325 3,168 3,229 3,151
Earnings per share, EUR 0.17 0.09 0.45 -0.07 1.11 0.59
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INTERIM REPORT JANUARY-JUNE 2011
OPERATING ENVIRONMENT
The overall market activity remained high in the reporting period. The mining
and metals industry's investments were supported by the positive long-term
outlook for metals demand and historically very high metals prices. Production
capacity utilization rates continued to be good increasing the demand for spare
parts and services. Markets in South America, Australia and India were
particularly strong, but activity also picked up in Russia and the Middle East.
In terms of metals, the strongest activity was seen in copper, gold and iron
projects; however, zinc and aluminum projects also advanced. The market for
sulfuric acid technology remained good as well due to investment activity in
copper projects and high production levels. In some technology areas, the
workload for internal experts was high due to intensive sales and proposal
activity. In addition, there were some signs that delivery times in some areas
of the subcontractor network started to lengthen, yet remaining well below the
levels of the last up-cycle. In addition to minerals and metals processing
solutions, there was strong customer activity around alternative energy,
industrial water treatment and environmental solution projects.
The financial market has remained functional despite global turbulence.
Furthermore, financial institutions have been willing to provide funding in
emerging and developing markets. In addition, high metals prices coupled with
the ensuing strong cash flows, have been supporting Outotec's customers in
financing of new projects.
Interest in sustainable solutions continues to gain momentum as the legislation
to restrict the use of inefficient plants and processes intensifies. The
sustainability trend is positive for Outotec, since the company delivers
advanced technology solutions allowing customers to minimize their life time
costs for processes as well as their environmental impacts while maximizing the
recovery of valuable materials.
ORDER INTAKE
Order intake in the reporting period amounted to EUR 875.7 million (Q1-Q2/2010:
EUR 769.1 million) including plant deliveries, technology and equipment
deliveries as well as services. In the reporting period, orders from EMEA
(Europe including CIS, Middle East and Africa) represented roughly 40%, Americas
40% and Asia Pacific 20% of the total order intake. The orders received in the
second quarter of 2011 totaled EUR 532.1 million, which is 52% higher than in
the comparison period (Q2/2010: EUR 349.7 million).
Major new orders in the second quarter:
* gold recovery technology for Petropavlovsk Group's JSC Pokrovskiy Mine,
Russia (value not disclosed);
* copper flash smelting technology for National Iranian Copper Industries
Company, Iran (EUR 61 million); and
* iron ore pelletizing plant for Samarco Mineração, Brazil (EUR 200 million).
Major new orders in the first quarter:
* copper flash smelting furnace and related services together with SNC-Lavalin
for RTB Bor, Serbia (EUR 60 million);
* oil shale preparation plant for Eesti Energia, Estonia (EUR 20 million);
* effluent treatment plant for Codelco, Chile (EUR 18 million); and
* key process technologies and services for a copper/gold concentrator for
Sandfire Resources, Australia (EUR 15 million).
ORDER BACKLOG
The order backlog at the end of the reporting period was record-high and totaled
EUR 1,664.1 million, which is 27% higher than at the end of the comparison
period (June 30, 2010: EUR 1,310.1 million).
At the end of the reporting period, Outotec had 26 projects with an order
backlog value in excess of EUR 10 million, accounting for 64% of the total
backlog. Management estimates that roughly 42% (approximately EUR 700 million)
of the June-end backlog value will be delivered in 2011 and the rest in 2012 and
beyond. At the end of the reporting period the order backlog included roughly
EUR 20 million (June 30, 2010: EUR 60 million) in suspended projects.
SALES AND FINANCIAL RESULT
Sales in the reporting period totaled EUR 536.0 million (Q1-Q2/2010: EUR 410.8
million), a 30% increase from the comparison period. Currencies did not have any
material effect on sales growth which resulted from a strong opening backlog for
2011 and good progress in project deliveries especially in the Non-ferrous
Solutions business area. Also the Ferrous Solutions business area returned to a
growth track. Sales for the second quarter totaled EUR 288.4 million (Q2/2010:
EUR 223.8 million).
Sales in the Services business, which is included in the sales figures for the
three reporting segments, totaled EUR 146.7 million in the reporting period (Q1-
Q2/2010: EUR 112.5 million), up 30% from the comparison period and accounting
for 27% of Outotec's sales (Q1-Q2/2010: 27%). The sales volume for the Services
business in the second quarter totaled EUR 75.6 million (Q2/2010: EUR 62.0
million).
Operating profit from business operations for the reporting period was EUR 32.3
million (Q1-Q2/2010: EUR 14.9 million), representing 6.0% of sales (Q1-Q2/2010:
3.6%). The increase resulted from a higher sales volume especially in the Non-
ferrous Solutions business area. In addition, unrealized and realized exchange
gains related to currency forward contracts increased profitability by EUR 4.8
million (Q1-Q2/2010: EUR -1.4 million). PPA amortizations for the reporting
period were EUR 2.4 million (Q1-Q2/2010: EUR 5.6 million). Operating profit for
the reporting period was EUR 29.8 million (Q1-Q2/2010: EUR -4.6 million).
Operating profit from business operations in the second quarter of 2011 was EUR
12.1 million (Q2/2010: EUR 11.3 million), representing 4.2% of sales (Q2/2010:
5.1%). The margin was affected by timing of the project executions including
fewer project completions during the reporting period as well as higher fixed
costs related to long term growth targets.
Fixed costs for the reporting period were EUR 101.0 million (Q1-Q2/2010: EUR
92.3 million). The increase was primarily due to investments in developing and
deploying Outotec's global operational model, personnel increases supporting the
growth especially related to the development of its service and supply
organizations, fixed costs of acquired companies, business development projects
and costs of the share-based incentive program. Profit before taxes for the
reporting period was EUR 29.2 million (Q1-Q2/2010: EUR -4.6 million). It
included net finance expense of EUR 0.6 million (Q1-Q2/2010: net finance income
EUR 0.0 million). The net finance expense increased due to changes in financial
instruments' market valuation and interest and fees related to the new financing
facilities. Net profit for the reporting period was EUR 20.4 million (Q1-
Q2/2010: EUR -3.2 million). Taxes totaled EUR 8.8 million (Q1-Q2/2010: EUR 1.4
million positive). Earnings per share were EUR 0.45 (Q1-Q2/2010: EUR -0.07).
Earnings per share in the comparison period of 2010 was impacted by the one-time
costs related to the cost savings program.
Outotec's return on equity for the reporting period was 11.8% (Q1-Q2/2010:
-2.0%), and return on investment was 16.6% (Q1-Q2/2010: -2.9%).
Sales and Operating Profit by Segment Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2011 2010 2011 2010 2010
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Sales
Non-ferrous Solutions 191.4 141.3 353.4 254.8 623.3
Ferrous Solutions 42.6 32.9 86.3 52.9 131.5
Energy, Light Metals and Environmental Solutions 57.7 52.6 103.8 107.2 222.8
Unallocated items*) and intra-group sales -3.4 -3.0 -7.5 -4.0 -8.0
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Total 288.4 223.8 536.0 410.8 969.6
Operating profit
Non-ferrous Solutions 12.6 4.8 30.7 -10.6 26.1
Ferrous Solutions -1.9 1.4 1.3 -1.1 11.3
Energy, Light Metals and Environmental Solutions 5.2 1.9 8.6 11.9 26.8
Unallocated**) and intra-group items -5.0 -2.6 -10.7 -4.8 -22.6
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Total 10.9 5.5 29.8 -4.6 41.6
*) 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
increased 39% over the comparison period and totaled EUR 353.4 million (Q1-
Q2/2010: EUR 254.8 million). The increase in sales was due to a strong starting
order backlog for the year, continued strong order intake, growth of service
business sales and good progress in deliveries during the reporting period.
Operating profit from business operations was EUR 32.8 million (Q1-Q2/2010: EUR
5.9 million) and operating profit was EUR 30.7 million (Q1-Q2/2010: EUR -10.6
million). The unrealized and realized exchange gains related to currency forward
contracts increased profitability by EUR 4.2 million (Q1-Q2/2010: unrealized and
realized loss of EUR 3.4 million). The operating profit increase was due to the
higher sales and solid project execution.
Ferrous Solutions
Sales in the Ferrous Solutions business area in the reporting period totaled EUR
86.3 million (Q1-Q2/2010: EUR 52.9 million). The 63% increase in sales compared
to 2010 was due to the execution of long-term projects from the backlog. The
operating profit from business operations was EUR 1.3 million (Q1-Q2/2010: EUR
0.1 million) and operating profit was EUR 1.3 million (Q1-Q2/2010: EUR -1.1
million). The operating profit was impacted by higher expenses related to the
sales and offering work in large turnkey projects, such as the Samarco Mineração
project in Brazil announced in June.
Energy, Light Metals and Environmental Solutions
Sales in the Energy, Light Metals and Environmental Solutions business area in
the reporting period totaled EUR 103.8 million (Q1-Q2/2010: EUR 107.2 million).
The decline in sales was mainly due to the timing of revenue recognition of
long-term projects. Operating profit from business operations was EUR 8.9
million (Q1-Q2/2010: EUR 13.0 million) and operating profit was EUR 8.6 million
(Q1-Q2/2010: EUR 11.9 million). The comparison period's operating profit was
improved by the release of project provisions related to successful project
completions. The unrealized and realized exchange gains related to currency
forward contracts increased profitability by EUR 0.7 million (Q1-Q2/2010:
unrealized and realized gain of EUR 1.5 million).
BALANCE SHEET, FINANCING AND CASH FLOW
The consolidated balance sheet total was EUR 1,195.6 million at the end of the
reporting period (June 30, 2010: EUR 918.2 million).The equity to shareholders
of the parent company was EUR 335.1 million (June 30, 2010: EUR 321.3 million),
representing EUR 7.38 (June 30, 2010: EUR 7.08) per share.
The net cash flow from operating activities in the reporting period was strong
at EUR 105.7 million (Q1-Q2/2010: EUR 42.0 million). The net cash flow from
operating activities increased because of advance payments. Gearing improved
further from comparison period and was -74.6% (June 30, 2010: -51.8%).
Outotec's working capital amounted to EUR -196.5 million at the end of the
reporting period (June 30, 2010: EUR -107.8 million). Working capital developed
positively due to advance payments related to projects under execution and new
orders received.
At the end of the reporting period, Outotec's cash and cash equivalents totaled
EUR 313.5 million (June 30, 2010: EUR 220.9 million). The cash and cash
equivalents was also affected by the dividend payment of EUR 34.3 million (EUR
0.75 per share) in April 2011 (April 2010: EUR 32.0 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 remained strong and liquidity was good. Net
interest-bearing debt at the end of the reporting period was EUR -250.6 million
(June 30, 2010: EUR -166.8 million). The advance payments received at the end of
the reporting period totaled EUR 289.2 million (June 30, 2010: EUR 166.5
million), representing an increase of 74% from the comparison period. Outotec's
equity-to-assets ratio was 37.1% (June 30, 2010: 42.9%). The company's capital
expenditure in the reporting period was EUR 14.8 million (Q1-Q2/2010: EUR 80.7
million). Capital expenditure included investments mainly in developing and
deploying Outotec's global operational model, machinery 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 377.6 million (June 30, 2010: EUR 335.7 million).
RESEARCH AND TECHNOLOGY DEVELOPMENT
In the reporting period, Outotec's research and technology development expenses
totaled EUR 15.2 million (Q1-Q2/2010: EUR 13.7 million), representing 2.8% of
sales (Q1-Q2/2010: 3.3%). Outotec filed 18 new priority applications (Q1-
Q2/2010: 32), and 131 new national patents were granted (Q1-Q2/2010: 81).
In April, Outotec acquired the vertical pressure filter (VPF) technology and its
intellectual property rights from Australian Process Technology Pty Ltd, a
filters supplier for the alumina refining industry. The acquisition did not
include personnel transfer. The purchase price has not been disclosed.
In February, Outotec acquired the technologies, trademarks and patents for ASH
DEC Umwelt AG. This Austrian-based company has developed a process to extract
recycled phosphorus fertilizer from ash which is also a by-product of
incinerated biomass/sludge. The ASH DEC process complements Outotec's existing
biomass incineration solutions based on fluidized bed technology. The
acquisition price has not been disclosed.
SUSTAINABILITY
In June Outotec published its first sustainability report, which defines
company's approach to sustainability and discloses its performance in 2010 as
well as providing future targets. The report conforms to Application Level B+ of
the Global Reporting Initiative, as confirmed in a check by the GRI and is
third-party assured by Ecobio Ltd. The report is available at
www.outotec.com/sustainability.
PERSONNEL
At the end of the reporting period, Outotec had a total of 3,496 employees (June
30, 2010: 3,199). Outotec had on average 3,325 employees (Q1-Q2/2010: 3,168).
The average number of personnel increased by 157 over the comparison period,
which supports overall business growth objectives. Temporary personnel accounted
for approximately 10% (2010: 8%) of the total number of employees.
Distribution of Personnel by Region June 30, June 30, change Dec 31,
2011 2010 % 2010
--------------------------------------------------------------------
EMEA (including CIS) 2,164 2,016 7.3 1,945
Americas 837 748 11.9 759
Asia Pacific 495 435 13.7 426
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Total 3,496 3,199 9.3 3,130
At the end of the reporting period, the company had, in addition to its own
personnel, approximately 430 (June 30, 2010: 250) 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 133.2
million (Q1-Q2/2010: EUR 106.8 million). The increase from the comparison period
was due to wage inflation, bonuses and share-based incentive programs as well as
personnel increases.
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 9.8 million with 138,144
shares allocated and EUR 6.1 million paid in cash to cover income taxes.
The total reward paid to president and CEO Pertti Korhonen totaled EUR
876,796.08 (9,824 shares and cash to cover income taxes).
The former president and CEO Tapani Järvinen, also participated - according to
his CEO agreement - in the incentive program 2010-2012 earning period 2010. The
total reward paid to Mr. Järvinen totaled EUR 884,312.33 (9,824 shares and 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, earning per share and
sales growth. The maximum total reward (including a cash payment which equals
income taxes) for the 2011 earning period equals 435,625 Outotec shares.
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. As part of the plan, the
executive board members established Outotec Management Oy company, whose entire
share capital is owned by them. The purpose of the plan is to commit executive
board members to Outotec by encouraging them to acquire and hold Outotec shares
and thus increase the company's shareholder value in the long run. They invest a
considerable amount of their own funds in company shares and partly through a
loan provided by Outotec. The company's board of directors granted to Outotec
Management Oy an interest-bearing loan at the maximum amount of EUR 4,980,000 to
finance the acquisition of the Outotec shares. The executive board members hold
approximately 0.34% of Outotec shares through the company.
Outotec has consolidated Outotec Management Oy into the Group's balance sheet.
At the end of the reporting period, Outotec Management Oy held 191,211 (July
29, 2011: 191,211) Outotec shares which have been accounted as treasury shares
in Outotec's balance sheet.
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.
The annual general meeting 2011 authorized Outotec's board of directors to
determine the repurchasing of company's own shares, and to issue new shares. The
maximum number of shares related to both authorizations is 4,578,037.
Authorizations are in force until the next annual general meeting. The board has
not executed its authorizations per July 29, 2011.
TRADING, MARKET CAPITALIZATION AND SHAREHOLDERS
In the reporting period, the volume-weighted average price for a share in the
company was EUR 40.81; the highest quotation for a share was EUR 46.78 and the
lowest EUR 34.90. The trading of Outotec shares in the reporting period exceeded
36 million shares, with a total value of over EUR 1,488 million. At the end of
the reporting period, Outotec's market capitalization was EUR 1,795 million and
the last quotation for the share was EUR 39.20. 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 194,399. There have been no purchases of Outotec
shares based on this agreement during the reporting period.
Outotec has consolidated Outotec Management Oy (incentive plan for Outotec
executive board members) into the Group's balance sheet. At the end of the
reporting period, Outotec Management Oy held 191,211 (July 29, 2011: 191,211)
Outotec shares which have been accounted as treasury shares in Outotec's balance
sheet.
At the end of the reporting period, Outotec had 13,938 shareholders. Shares held
in 18 nominee registers accounted for 57.5% and Finnish households held roughly
12.3% of all Outotec shares.
EVENTS AFTER THE REPORTING PERIOD
On July 12, 2011 Outotec announced that it had agreed to deliver concentrator
technology for the Petropavlovsk Group in Malomyr gold mine in the Russian Far
East. The contract value is EUR 25 million and it complements the pressure-
leaching process technology contract Outotec and Petropavlovsk disclosed on May
3, 2011. The order will be booked in the third quarter order intake.
On July 14, 2011 Outotec announced that it had agreed with Ma'aden Bauxite
Alumina Company, a joint venture between Saudi Arabian Mining Company (Ma'aden)
and Alcoa in Saudi Arabia, to deliver two calciners to the joint venture's
integrated aluminum complex at Ras Al Khair (formerly Ras Az Zawr), Saudi
Arabia. The overall price for the calciners is approximately EUR 62 million, of
which roughly EUR 50 million will be booked in Outotec's order intake in the
third quarter.
On July 15, 2011 Outotec announced that it had signed signed a contract with ZAO
Miheevsky GOK, a subsidiary of Russian Copper Company, for the design and
delivery of a new copper concentrator for the Miheevsky porphyry-copper project
located in Chelyabinsk, Russia. The contract value exceeds EUR 60 million, which
will be booked in Outotec's third quarter order intake.
On July 18, 2011 Outotec announced that it had signed a contract with OJSC
Almalyk Mining & Metallurgical Company (AMMC) for the design and delivery of a
gas cleaning and sulfuric acid plant to AMMC's existing copper production
facilities, located near Almalyk, Uzbekistan. The contract is valued at
approximately EUR 30 million.
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. Operations in global markets may present risks related to
economic and political instability. Turbulence in financial markets and the
potential escalation of sovereign debt may have a severe negative impact on
global economy and mining companies' project financing. Conditions may rapidly
change and create delays and changes in order placement and execution.
Risks related to Outotec's business
As part of the overall project delivery, Outotec gives performance guarantees
and is liable for the warranty period defects. In the project risk assessment
during the reporting period, all unfinished projects were evaluated and
provisions for performance guarantees and warranty period guarantees were
updated. There were no material changes in the Group's project risk provisions.
Global economic uncertainty may reduce the demand for Outotec's products and
services. Volatility in sales may affect the operating profit margin since the
adjustments in fixed costs may become effective with a delay. Outotec's gross
margin is also impacted by product mix. 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 the availability of
components can affect Outotec's profitability. Outotec hedges these risks mostly
contractually.
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, which would reduce 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.
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 as
well as bankruptcies, which can also result in losses for Outotec. These risks
are reduced by advance and milestone payments as well as letters of credit. In
the reporting period, there were no material credit losses related to payments
by Outotec's counter-parties and at the end of the reporting period all
receivables were reviewed and credit loss provisions were updated.
Outotec's business model is based primarily on customer advance payments and on-
demand guarantees issued by Outotec's relationship banks. Changes in advance
payments received due to e.g. change in business volume have an impact on the
company's liquidity. Exposure to on-demand guarantees has remained high. Cash
held by the company is primarily invested in short-term bank deposits and in
Finnish corporate short-term certificates of deposit. The lower interest rate
levels reduce the interest income generated from these investments.
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 fluctuate substantially, 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 on the basis of
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 forward agreements. The cost of hedging is
taken into account in project pricing.
MARKET OUTLOOK
The strong market activity is expected to continue based on the long-term metals
demand projections, high metals prices, declining ore grades and tightening
environmental regulations. The order pipeline is strong since several mining and
metals companies are still in the process of re-activating projects that were
put on hold during the downturn. Project financing availability has improved,
especially for companies with good cash flows and investments in projects in the
emerging and developing economies. However, the more complex structures of the
financing packages, especially in large investments, continue to take time.
Furthermore, major disturbances on global financial markets may affect the
availability of project financing.
Tightening efficiency and environmental requirements and the declining ore
grades continue to attract investments in plant modernization, optimization and
increased automation. Rising energy prices are driving the industry to improve
processes in order to achieve lower unit costs. Global relocation of production
is driving the investments to new capacity.
Non-ferrous Solutions
The strong activity in the non-ferrous technology market is expected to
continue. Not only are gold and copper projects being activated and developed,
but also zinc and some nickel projects are coming to the market. Investments in
new mines and concentrators are progressing fast and the investment activity in
the downstream metals refining technologies is starting to pick up. This trend
is further supported by high base metals prices. Competition continues to be
tight in new projects; however, there are no material changes to the competitive
landscape. Long-term fundamentals remain strong as ore grades decline; thus more
processing capacity and advanced technology solutions will be needed in both
concentrators and metals refining. Meanwhile, environmental regulations tighten
and the cost of energy and water mounts; increasing the need for new and modern
technological solutions.
Ferrous Solutions
The demand for raw materials used in steel making, iron ore and coking coal is
expected to continue to be high. The demand for stainless steel raw materials
also shows strong growth and the activity in ferroalloy projects is continuously
strengthening. Brazil, India and South Africa continue to rapidly develop their
infrastructure and to utilize their large natural resource base. There are
several iron ore processing plant expansions and new investments under
development particularly in Brazil and India, catering mainly to the Chinese
market where concentrates and pellets are in constant demand. In addition, the
depletion of lump ore deposits is driving sinter and pellet plant investments in
India. Outotec's sustainable solutions - both in iron ore as well as ferroalloys
sintering and pelletizing technologies - continue to be in strong demand because
of their energy efficiency, capacity and environmental aspects. In the future,
unconventional techniques, such as the direct reduction of iron ore, offer more
and more opportunities to use lower grade raw material resources as well as
optimized energy production and the reduction of CO2 emissions. Deliveries in
the Ferrous Solutions business area are mainly 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.
Energy, Light Metals and Environmental Solutions
Rising oil prices and the depletion of oil reserves increase the demand for
alternative energy sources, such as oil shale, oil sands and biomass. The
world's recoverable oil shale and oil sand resources are at least ten times
greater than those of conventional oil reserves, with large deposits found in
the US, Canada, Brazil, China, Jordan, Russia and Estonia. Outotec and Eesti
Energia have jointly developed a new technology solution, Enefit, utilizing
Outotec's circulating fluidized bed technology. This technology will be used in
Eesti Energia's oil shale plant currently under construction in Narva, Estonia.
The Enefit technology can be applied globally for processing oil shales as well
as oil sands in the future.
The demand for aluminum is also growing. Consequently, aluminum and thus bauxite
and alumina projects, are also being revitalized. The Middle East is leveraging
its advantageous energy position by building new smelters and refining capacity.
The business area's environmental solutions include sulfuric acid plants as well
as applications for gas cleaning and heat recovery systems. The outlook for the
sulfuric acid technology market remains positive due to the strong activity in
copper projects since sulfuric acid is needed in hydrometallurgical processes
and is produced as a by-product in the pyro-metallurgical processes including
the minimization of the impact to the environment. The sulfuric acid market is
also driven by an ongoing need from the fertilizer industry. In addition to
sulfuric acid plants, any metallurgical process requires off-gas cleaning and
effluent and water treatment technologies to reduce its environmental impact.
New opportunities in environmental technologies, such as materials recycling and
waste management, are steadily increasing. Interest in industrial waste water
treatment solutions is also growing. The technologies acquired by Outotec in the
reporting period further strengthen the business area's portfolio.
Services business
Outotec's Services business is driven by a life cycle service concept. In
addition to operational spares, these life cycle services include the increase
of capacity utilization levels, modernizations, upgrades of existing operations
as well as new capital investment projects. Customers need for spare parts,
services and modernizations are expected to further increase due to re-
commissioning of production lines and higher utilization rates. The scope of
services varies from single spare parts to completely outsourced service
agreements. This industry trend creates new growth opportunities on many levels
and supports the company's goal to be a life cycle partner for its customers.
The businesses acquired in 2010 further bolster Outotec's service offering and
strengthen its capabilities globally.
FINANCIAL GUIDANCE FOR 2011
Outotec reiterates the previous guidance for the year 2011. Based on a strong
opening order backlog and active market, in 2011:
* order intake is expected to continue to grow,
* sales are expected to grow to approximately EUR 1.25-1.35 billion, and
* operating profit is expected to improve from 2010 and operating profit
margin from business operations is expected to be approximately 8-9%.
Operating profit is dependent on exchange rates, product mix, timing of new
orders and project completions.
FINANCIAL REPORTING SCHEDULE IN 2011
Outotec will publish the Interim Report for January - September 2011 on
Thursday, October 27, 2011.
INTERIM REPORT JANUARY-JUNE 2011 BRIEFING
Date: Friday, July 29, 2011
Time: 14.00 (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 7162 0025
US/CANADA: +1 877 491 0064
Password: 891319
In addition, an instant replay service of the conference call will be available
for three days until August 1, 2011 midnight using the following numbers:
FI/UK: +44 20 7031 4064
US: +1 888 365 0240
Access code: 891319
The contact information is gathered for registration purposes only and is not
used for commercial purposes.
Espoo, July 29, 2011
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
Eila Paatela, Director - Corporate Communications
tel. +358 20 529 2004, mobile +358 400 817198
Format for e-mail addresses: firstname.lastname(at)outotec.com
INTERIM FINANCIAL STATEMENTS (unaudited)
Consolidated Statement of Comprehensive Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
Income
EUR million 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Sales 288.4 223.8 536.0 410.8 969.6
Cost of sales -228.3 -166.8 -410.0 -308.3 -715.7
--------------------------------------------------------------------------------
Gross profit 60.2 57.0 125.9 102.5 253.9
Other income 1.2 0.3 5.4 2.9 7.1
Selling and marketing expenses -21.8 -21.4 -41.6 -42.2 -85.0
Administrative expenses -20.6 -18.8 -44.1 -36.4 -75.1
Research and development expenses -7.7 -6.6 -15.2 -13.7 -28.5
Other expenses -0.3 -5.0 -0.5 -17.5 -30.6
Share of results of associated companies -0.0 -0.1 -0.0 -0.3 -0.3
--------------------------------------------------------------------------------
Operating profit 10.9 5.5 29.8 -4.6 41.6
Finance income and expenses
Interest income and expenses 1.2 0.6 2.3 1.1 1.5
Market price gains and losses -0.3 0.5 -0.7 0.6 -1.7
Other finance income and expenses -0.6 -0.9 -2.2 -1.6 -4.4
--------------------------------------------------------------------------------
Net finance income 0.3 0.2 -0.6 0.0 -4.5
Profit before income taxes 11.2 5.7 29.2 -4.6 37.1
Income tax expenses -3.3 -1.6 -8.8 1.4 -10.4
--------------------------------------------------------------------------------
Profit for the period 7.8 4.0 20.4 -3.2 26.7
--------------------------------------------------------------------------------
Other comprehensive income
Exchange differences on translating 0.1 8.3 -9.6 17.6 25.5
foreign operations
Cash flow hedges 0.0 -0.3 -0.0 -0.4 0.9
Income tax relating to cash flow hedges -0.0 0.1 0.0 0.1 -0.2
Available for sale financial assets -0.3 0.0 -0.1 0.0 0.3
Income tax relating to available for - - - - 0.0
sale financial assets
--------------------------------------------------------------------------------
Other comprehensive income for the period -0.1 8.2 -9.6 17.4 26.5
Total comprehensive income for the period 7.7 12.2 10.8 14.2 53.1
--------------------------------------------------------------------------------
Profit for the period attributable to:
Equity holders of the parent company 7.8 4.0 20.4 -3.2 26.7
Non-controlling interest - - - - -
Total comprehensive income for the period
attributable to:
Equity holders of the parent company 7.7 12.2 10.8 14.2 53.1
Non-controlling interest - - - - -
Earnings per share for profit attributable to
the equity
holders of the parent company:
Basic earnings per share, EUR 0.17 0.09 0.45 -0.07 0.59
Diluted earnings per share, EUR 0.17 0.09 0.45 -0.07 0.59
All figures in the tables have been rounded and thus the sum of individual
figures may deviate from the sum presented. Key figures have been calculated
using exact figures.
Condensed Consolidated Statement of Financial June 30, June 30, December 31,
Position
EUR million 2011 2010 2010
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 223.5 215.3 223.8
Property, plant and equipment 53.7 54.1 52.7
Deferred tax asset 41.5 34.7 37.8
Non-current financial assets
Interest-bearing 2.4 2.0 2.5
Non interest-bearing 2.6 0.3 2.3
--------------------------------------------------------------------------------
Total non-current assets 323.6 306.3 319.0
Current assets
Inventories *) 164.6 105.0 101.0
Current financial assets
Interest-bearing 0.5 0.4 0.5
Non interest-bearing 393.4 285.5 367.2
Cash and cash equivalents 313.5 220.9 280.3
--------------------------------------------------------------------------------
Total current assets 871.9 611.8 748.9
TOTAL ASSETS 1,195.6 918.2 1,068.0
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the 335.1 321.3 356.7
parent company
Non-controlling interest 1.0 0.9 1.0
--------------------------------------------------------------------------------
Total equity 336.1 322.2 357.7
Non-current liabilities
Interest-bearing 51.8 32.0 56.6
Non interest-bearing 103.0 103.7 98.1
--------------------------------------------------------------------------------
Total non-current liabilities 154.8 135.7 154.7
Current liabilities
Interest-bearing 14.0 24.5 25.7
Non interest-bearing
Advances received **) 289.2 166.5 198.7
Other non interest-bearing liabilites 401.4 269.3 331.1
--------------------------------------------------------------------------------
Total current liabilities 704.7 460.3 555.5
Total liabilities 859.5 595.9 710.2
TOTAL EQUITY AND LIABILITIES 1,195.6 918.2 1,068.0
--------------------------------------------------------------------------------
*) Of which advances paid for inventories amounted to EUR 28.4 million on June
30, 2011 (June 30, 2010: EUR 25.8 million, December 31, 2010: EUR 17.9 million).
**) Gross advances received before percentage of completion revenue recognition
amounted to EUR 1,244.0 million on June 30, 2011 (June 30, 2010: EUR 1,107.5
million, December 31, 2010: EUR 1,042.1 million).
Condensed Consolidated Statement of Cash Flows Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2011 2010 2010
---------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 20.4 -3.2 26.7
Adjustments for
Depreciation and amortization 9.3 10.5 19.0
Other adjustments 10.2 7.5 28.1
Decrease in working capital 83.8 40.2 41.0
Interest received 3.2 2.0 5.2
Interest paid -0.7 -0.7 -0.9
Income tax paid -20.5 -14.3 -31.6
---------------------------------------------------------------------------
Net cash from operating activities 105.7 42.0 87.5
Purchases of assets -13.2 -6.5 -16.8
Acquisition of subsidiaries, net of cash - -34.7 -38.8
Acquisition of business operations - -2.2 -2.3
Acquisition of shares in associated companies - - -0.2
Proceeds from disposal of subsidiaries - - 0.8
Proceeds from sale of assets 0.6 3.9 5.2
Change in other investing activities -0.0 - -
---------------------------------------------------------------------------
Net cash used in investing activities -12.6 -39.5 -52.1
Cash flow before financing activities 93.1 2.5 35.3
Repayments of non-current debt -6.0 -12.3 -17.3
Borrowings of non-current debt - - 30.0
Decrease in current debt -10.3 -18.1 -17.7
Increase in current debt 0.0 10.3 11.4
Related party net investment to Outotec Oyj shares - -0.1 -4.1
Dividends paid -34.3 -32.0 -32.0
Change in other financing activities -0.0 0.5 0.4
---------------------------------------------------------------------------
Net cash used in financing activities -50.7 -51.7 -29.4
Net change in cash and cash equivalents 42.4 -49.2 5.9
Cash and cash equivalents at the beginning of the period 280.3 258.5 258.5
Foreign exchange rate effect on cash and cash equivalents -9.1 11.6 15.9
Net change in cash and cash equivalents 42.4 -49.2 5.9
---------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 313.5 220.9 280.3
---------------------------------------------------------------------------
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 at January
1, 2010 16.8 20.2 0.3 1.1 -4.6 63.4 3.5 214.3 27.4 342.4
--------------------------------------------------------------------------------
Dividends paid - - - - - - - -32.0 - -32.0
Share Issue 0.4 - - - - 24.3 - - - 24.7
Management incentive
plan for Outotec
Executive Board *) - - - - -1.0 - - - 0.9 -0.1
Share-based
compensation - - - - - - - 0.2 - 0.2
Total comprehensive
income for the period - - - -0.2 - - 17.6 -3.2 - 14.2
Non-controlling
interest related to
Larox Group
acquisition - - - - - - - - -27.4 -27.4
Other changes - - 0.0 - - - - 0.2 - 0.3
--------------------------------------------------------------------------------
Equity at June
30, 2010 17.2 20.2 0.4 0.9 -5.6 87.7 21.1 179.5 0.9 322.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity at January
1, 2011 17.2 20.2 0.4 2.1 -9.7 87.7 29.0 210.0 1.0 357.7
--------------------------------------------------------------------------------
Dividends paid - - - - - - - -34.3 - -34.3
Management incentive
plan for Outotec
Executive Board *) - - - - - - - - 0.0 0.0
Share-based
compensation - - - - 2.4 - - -1.0 - 1.4
Total comprehensive
income for the period - - - -0.1 - - -9.6 20.4 - 10.8
Other changes - - 0.0 - - - - 0.4 - 0.4
--------------------------------------------------------------------------------
Equity at June
30, 2011 17.2 20.2 0.4 2.0 -7.3 87.7 19.4 195.4 1.0 336.1
--------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
191,211 (July 29, 2011: 191,211) Outotec shares which have been accounted as
treasury shares in Outotec's consolidated statement of financial position.
Key figures Q2 Q2 Q1-Q2 Q1-Q2 Last 12 Q1-Q4
2011 2010 2011 2010 months 2010
--------------------------------------------------------------------------------
Sales, EUR million 288.4 223.8 536.0 410.8 1 094.7 969.6
Gross margin, % 20.9 25.5 23.5 25.0 25.3 26.2
Operating profit, EUR million 10.9 5.5 29.8 -4.6 76.1 41.6
Operating profit margin, % 3.8 2.4 5.6 -1.1 6.9 4.3
Profit before taxes, EUR million 11.2 5.7 29.2 -4.6 71.0 37.1
Profit before taxes in relation
to sales, % 3.9 2.5 5.5 -1.1 6.5 3.8
Net cash from operating
activities, EUR million 45.9 34.6 105.7 42.0 151.2 87.5
Net interest-bearing debt at the
end
of period, EUR million -250.6 -166.8 -250.6 -166.8 -250.6 -200.9
Gearing at the end of period, % -74.6 -51.8 -74.6 -51.8 -74.6 -56.2
Equity-to-assets ratio at the
end of period, % 37.1 42.9 37.1 42.9 37.1 41.2
Working capital at the end of
period, EUR million -196.5 -107.8 -196.5 -107.8 -196.5 -113.5
Capital expenditure, EUR million 11.3 27.0 14.8 80.7 30.9 96.7
Capital expenditure in relation
to sales, % 3.9 12.1 2.8 19.6 2.8 10.0
Return on investment, % 12.0 5.6 16.6 -2.9 20.6 9.2
Return on equity, % 9.4 5.1 11.8 -2.0 15.3 7.6
Order backlog at the end of
period, EUR million 1,664.1 1,310.1 1,664.1 1,310.1 1,664.1 1,393.1
Order intake, EUR million 532.1 349.7 875.7 769.1 1,501.3 1,394.7
Personnel, average for the
period 3,428 3,171 3,325 3,168 3,229 3,151
Profit for the period in
relation to sales, % 2.7 1.8 3.8 -0.8 4.6 2.8
Research and development
expenses, EUR million 7.7 6.6 15.2 13.7 30.0 28.5
Research and development
expenses in
relation to sales, % 2.7 2.9 2.8 3.3 2.7 2.9
Earnings per share, EUR 0.17 0.09 0.45 -0.07 1.11 0.59
Equity per share, EUR 7.38 7.08 7.38 7.08 7.38 7.87
Dividend per share, EUR - - - - 0.75 0.75
--------------------------------------------------------------------------------
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME AND FINANCIAL POSITION
These interim financial statements are prepared in accordance with IAS 34
Interim Financial Reporting. The same accounting policies and methods have been
applied in these interim financial statements as in the recent annual financial
statements and also the following revised standards have been applied which have
been effective from the beginning of 2011. These interim financial statements
are unaudited.
Adoption of new and revised IFRS standards and IFRIC -interpretations
Outotec has applied the following revised or new standards and interpretations
since the beginning of 2011, which do not have material impact on the Group's
interim financial statements or financial statements:
* IAS 24 Related Party Disclosures. The changed standard simplifies the
disclosure requirements for government-related entities and clarifies the
definition of a related party.
* IAS 32 Financial Instruments: Presentation: Classification of Rights Issues.
The amendment concerns the accounting of rights issues denominated in a
currency other than the issuer's operating currency. A derivative associated
with the party's equity is an equity instrument if it entitles to receive a
fixed number of shares in the company for a fixed amount of currency or
other financial receivable. Previously, such subscription rights were
classified as derivative liabilities.
* IFRIC 14 - Prepayments of a Minimum Funding Requirement (an interpretation
of IAS 19). The interpretation removes unintended consequences arising from
the treatment of prepayments when there is a minimum funding requirement.
The amendment results in pre-payments of contributions in certain
circumstances recognized as an asset rather than as an expense.
* IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.
According to the interpretation a debtor and creditor may renegotiate the
terms of a financia
Unternehmensinformation / Kurzprofil:
Datum: 29.07.2011 - 11:01 Uhr
Sprache: Deutsch
News-ID 56837
Anzahl Zeichen: 65611
contact information:
Town:
Espoo
Kategorie:
Business News
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