Outotec : January-June 2015 Interim Report

OUTOTEC OYJ                         INTERIM REPORT                    JULY 30, 2015 AT 9.00 AM

INTERIM REPORT JANUARY-JUNE 2015

Improved profitability, growth in capex orders

January-June 2015 in brief (comparison period in 2014):

• Order intake: EUR 654 (590) million, +11% (in comparable currencies +6%)
• Order backlog: EUR 1,207 (1,260) million, -4%
• Sales: EUR 588 (679) million, -13% (in comparable currencies -16%)
• Service sales: EUR 244 (226) million, +8% (in comparable currencies +4%)
• EBITA (excluding one-time items): EUR 24 (16) million, +46%
• EBITA (excluding one-time items), %: 4 (2)
• Earnings per share: EUR 0.03 (0.02)

April-June 2015 in brief (comparison period in 2014):

• Order intake: EUR 395 (380) million, +4% (in comparable currencies -0%)
• Sales: EUR 311 (335) million, -7% (in comparable currencies -10%)
• Service sales: EUR 126 (118) million, +6% (in comparable currencies +1%)
• EBITA (excluding one-time items): EUR 16 (4) million, +308%
• EBITA (excluding one-time items), %: 5 (1)

Financial guidance for 2015 reiterated

Based on the 2014 year-end backlog and current operating environment, the management estimates that in 2015:

• Sales will be approximately EUR 1.2-1.4 billion, and
• EBITA (excluding one-time items) will be approximately 5-7% 

President and CEO Pertti Korhonen:

"The minerals and metals processing market continued moving sideways as investments in the industry progressed slowly due to weak metal prices, slow metals demand growth and concerns regarding China's growth projections. Companies are focusing on improving the operational efficiency of existing operations and maximizing free cash flows.

In this challenging market environment, I am pleased that we managed to grow our capex order intake strongly, resulting in a book-to-bill ratio of above one. This also included significant greenfield capex orders. While spare part orders grew strongly, the overall service orders were down due to customers' postponement of maintenance activities, especially in the iron ore value chain. 

In line with our expectations, our sales contracted from the comparison period due to small order intake in the plant and equipment businesses in 2014. Our service sales continued to grow especially in spare parts, shutdown, upgrade, as well as operation and maintenance services. Service growth was augmented by the Kempe acquisition.

Our profitability improved clearly from the comparison period due to better project execution in the Metals, Energy and Water segment. The Minerals Processing segment's profitability weakened due to lower sales and currency exchange impacts. Our cost saving program is running in line with the plan and will continue until the end of 2015. However, our fixed costs increased approximately EUR 15 million due to currency impacts, lower resource utilization rate, and IPR litigation costs, as well as the Kempe acquisition.

Despite the solid order intake in the second quarter, our cash flow was weakened by the increase in working capital, mainly due to the maturity of large capex projects in the backlog, as well as an increased share of the service business.

The market outlook for 2015 continues to be uncertain due to further depressed metal prices and customers' focus on maximizing their free cash flows. While the overall market outlook is weak especially in the minerals processing area, Outotec has good sales prospects in certain pockets of the market by commodity, geography and customers. We expect that investments in base metals will gradually start to revitalize to compensate for reducing capacity. However, the recent further drop in metal prices and current macroeconomic uncertainties may further postpone investments. We have a strong sales funnel, and our priority going forward is to continue to grow our order intake and maintain the service growth momentum. At the same time, we will continue to improve our profitability through further improvements in our cost structure and better resource utilization stemming from improved order intake. In addition, improving the cash flow will be a key priority."

RECLASSIFICATION OF PRODUCT MANAGEMENT COSTS IN OUTOTEC'S INCOME STATEMENT

In Outotec's income statement from January 1, 2015, all costs related to technical product management have been included in Research and Development (R&D) expenses, and all costs related to commercial product management have been included in Selling and Marketing expenses. Previously, some of the costs related to product management activities were reported in the Cost of Sales above the Gross Margin in the income statement.

Since 2011, Outotec has been developing and deploying uniform global business processes and related information technology platforms. The company has now established a more comprehensive technical product management process as part of its R&D, and a commercial product management process as part of its selling and marketing. The reclassification of product management costs is consistent with the redefinition of the product management business processes, and reflects the true nature of these activities in the profit and loss statement.

When applying the reclassification to Outotec's 2014 full year income statement, EUR 19.6 million transfers from Cost of Sales to R&D expenses, and EUR 6.9 million to Selling and Marketing expenses.

Reclassification does not impact Outotec's sales, EBITA, EBIT, or 2015 financial guidance.

ADDITIONAL SEGMENT INFORMATION

Outotec has started to report the segments' order intake and service sales figures as of January 1, 2015.

This text is a summary of Outotec's January-June 2015 Interim Report. The full report is available as an attachment to this report

FURTHER INFORMATION

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 +358 400 954 141

Format for e-mail addresses: firstname.lastname@outotec.com

BRIEFING

Date: Thursday, July 30, 2015

Time: 2.00 PM (Finnish time)

Venue: Bank, Unioninkatu 20, 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 in the teleconference and Q&A session, please dial in 5 to 10 minutes before the start of the event, using the number/confirmation code below.

Confirmation Code: 3786797

FI: +358 9 2310 1619
SE: +46 8 5065 3932
UK: +44 20 3427 1928
US: +1 646 2543 368

Contact information is gathered for registration purposes only and is not used for commercial purposes.

FINANCIAL REPORTING SCHEDULE IN 2015

·         Interim Report for January-September: October 29, 2015

DISTRIBUTION

Nasdaq Helsinki
Main media
www.outotec.com

Outotec provides leading technologies and services for the Sustainable use of Earth's natural resources. As the global leader in minerals and metals processing technology, we have developed many breakthrough technologies over the decades for our customers in the metals and mining industry. We also provide innovative solutions for industrial water treatment, the utilization of alternative energy sources and the chemical industry. Outotec shares are listed on Nasdaq Helsinki.