Sustainable use of Earth s natural resources. IR presentation Q1 2018

Transcription

1 Sustainable use of Earth s natural resources

2 Safety performance 1.7 Lost Time Incidents per million working hours (LTIR), includes Outotec employees and contractors working under Outotec s supervision. 2

3 Outotec at a glance Business overview Global leader in optimized solutions for minerals and metals processing, water treatment, and waste-to-energy Minimizing the plant s lifetime cost by maximising recovery and utilizing less energy and water Deliveries in past 150+ years to more than 80 countries HQ in Finland, some 4,150 employees (2017) in 36 countries Key figures FY 2017 FY 2016 Net Sales, EUR million 1,139 1,058 Share of services in sales, % Gross Margin, % Adjusted EBIT, % (excl. one-time items) 3-2 Gearing, % -1-1 Equity ratio, % Balance sheet total, EUR million 1,346 1,427 Financial performance EUR million Sales Operating profit margin % ,087 1, ,386 1, ,218 1,201 1, ,000 1, *) *) Combined basis 2010 onwards aebit, excl. restructuring and acquisition-related costs as well as purchase price allocation amortizations. Geographic coverage Outotec R&D, sales and service centers Outotec manufacturing/assembly -4 3

4 Our business on the value chain from ore to metal Exploration Development Extraction Processing Metallurgy Materials handling Comminution Separation Refining Outotec Outotec Superior technologies and customer service From ore body Minerals processing for all ore types Comminution Flotation Dewatering Concentrator plants Metals refining Pyro- and hydrometallurgy Ferrous metals, ferroalloys Light metals Acid and off-gas treatment Effluent treatment To metal Optimized lifecycle services and digital solutions 4

5 Minerals Processing segment s offering Outotec #1-3 globally in minerals processing with its complete portfolio of leading process solutions and services, as well as full plant delivery capability Grinding Flotation Thickening Filtering Analyzers Automation Tailings management Services Water Technology 1,100 grinding mills delivered, strong in S/M size mills and process technology 10,000 flotation units delivered since 1960s,big cell technology references, automation 1,800 thickeners delivered, global project execution capability, feedwell design 3,500 filters delivered, most efficient concentrate filtering, proven performance Full analyser portfolio, lowest min detection limits, only Xray used Unique combination of automation & analysers, important for risk management Full process and equipment portfolio, effluent treatment and backfill plants Prop equipment and total process knowhow, global service network Competition fragmented, a number of players competing in part of the portfolio FLSmidth, CITIC, Metso, ThyssenKrupp FLSmidth, Metso, BGRIMM, Tenova, Woodgrove FLSmidth, Tenova- Delcor, WesTech Aqseptence- Diemme, Metso, Andritz, FLSmidth Thermo Fisher, BGRIMM, Blue Cube APC: Metso, Woodgrove, SGS Minerals DCS: Major DCS suppliers FLSmidth, Golder, GR Engineering, AMC Customers own maintenance, Major tech. suppliers, Local companies 5

6 Metals, Energy & Water segment s offering Outotec is #1-3 globally in metal refining, selected niches in energy, opportunistic approach in water Alumina, Aluminum Ferrous metals Ferroalloys Sulfuric acid/offgas/roasting Base metals (Cu, Ni, Zn, Au, Ag, PGM) Energy Water Services Alumina calciner, Green anode plants, Rod Shop Sintering, Pelletizing, Direct Smelting Smelting, Preheating, Steel Belt Sintering Sulfuric acid plant, Roasting Smelting, Converting, Leaching, SX/EW, electrorefining Waste-to-energy, Sludge incineration, Oil shale processing Industrial water treatment, municipal water systems Advisory, maintenance, operations & remote services, upgrades Strong in CFB Aluminium Calcination and HOT Tube Digestion Strong in traveling grate technology, some100 iron ore pelletizing and over 300 sintering plants Strong in Ferro Chrome, 20 pelletizing and sinter plants and 9 smelters for ferroalloys 650 acid plants and 270 nonferrous roasting plants Strong in Cu smelting, anode casting, SX and Zn leaching, strong in Ni smelting and EW Versatile wasteto-energy solution, over 250 materials used Effluent treatment plants, backfill plants, water recycling Shutdown services, best suited to provide services for own technologies Competition fragmented, a number of players competing in part of the portfolio Fives, FLSmidth, Metso, Aqseptence- Diemme Kobelco, Metso, Primetals, Jemeco SMS Siemag, Tenova, Jemeco GEA Bischoff, MECS Glencore Technology, Tenova Valmet, Andritz, Babcock&Wilcox Veolia, GE Water, Suez FLSmidth, Metso, major tech suppliers, locals and customers 6

7 Long-term customer relationships with the industry s top companies Selected reference customers of Outotec Major global mining companies Intermediate sized companies Local mining and metallurgical companies in emerging regions In history, top ten customers have accounted for some 35% of sales. 7

8 Mining companies key challenges: energy, water, and productivity improvement Energy Making metals is energy intensive, energy contributes largely to CO 2 emissions. Water Water scarcity is a concern and cost factor, concerns with tailings ponds at mine sites. Productivity improvement Ores are more complex and grades are declining. Emission trading schemes, increasing regulation and social license to operate. More recycling is needed. Outotec s solutions Energy-efficient process technologies, gas handling and heat recovery systems Water management solutions for significant reduction in freshwater consumption through recycling and purification of wastewater Deep knowledge of processing all types of ores to achieve high yields and optimize plant performance; Lifecycle services to further improve productivity Clean technologies to avoid emissions Technologies for producing metals from secondary raw materials and tailings 8

9 Offering industry s most sustainable processing technologies In 2017, customers generated 6.2 million tonnes less of CO 2 -e when using Outotec s technologies compared to annual baselines. From Outotec Ferrochrome Process alone the CO 2 -e emissions avoided are 2.9 million tonnes. 88% of order intake represent Environmental Goods and Services (OECD criteria). 5th most sustainable company in Global 100 Environmental Goods and Services equals to 88% of orders (2017) 9

10 Share of sales by end product 10

11 Demand remains supportive for the mining industry Lithium Cobalt Gold Stainless steel Potash Ferrochrome Aluminium Copper Steel Phosphates Steam coal -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Construction Infrastructure Expected demand change and commodity driver Transport Energy Source: Thomson Reuters, HSBC, CRU % change in demand Consumer goods Agriculture Capital goods Other Surplus Deficit Surplus Aluminium Outside China, the market remains in deficit Copper Need for some new and replacement investment -200 Deficit Metals Balance Deficit More investments expected in short term. Long term the market will be oversupplied by China Zinc 2017 Nickel Surplus Surplus Deficit Surplus -20 Deficit Iron ore 2016 The price still needs to be more supportive before new investment High oversupply

12 Production outlook for battery metals Lithium supply growth Cobalt supply growth Nickel supply growth Tonnes LCE Tonnes 000 tonnes % % % Source: Macquarie Research 12

13 Capex investments growth seen in most metals, copper and gold leading Total capex investments for Copper, Gold, Iron ore, Lead, Nickel and Zinc (mine only), bn USD) Expansion capex investments by commodity: Copper and Gold expected to lead the growth bn USD bn USD Copper Expansion Sustaining +8% Gold Iron Ore Lead Nickel Zinc Source: Woodmac, February

14 Expansion investments by region Africa Asia Europe Latin America Middle East North America Oceania Russia and the Caspian Copper 000 USD 000 USD Gold Zinc 000 USD 000 USD Source: February 2018, Woodmac Nickel

15 Copper and gold investments by company Cumulative investments over 3 years Copper: Top 20 producers account for aprox. 70% of total investments Codelco Antofagasta Freeport- McMoRan Teck Anglo American BHP Billiton Hudbay Minerals Rio Tinto First Quantum Minerals Southern Copper (ex SPCC) CRCC Tongguan Western Copper and Gold KGHM Polska Miedz Erdenes Oyu Tolgoi Russian Copper Company Turquoise Hill Resources NovaGold Resources Nevada Copper Minsur Pacific Booker Minerals Gold: Top 20 producers account for 70% of total investments Barrick Seabridge Gold Gold Corporation Goldcorp Kinross Gold New Gold Allied Nevada Gold Munduro Mining Vista Gold Government Eldorado Corp. of Venezuela Gold Corp Argonaut Gold Iamgold Agnico- Eagle Mines Falco Pallavicino Resources Holdings Lundin Gold St Augustine Gold & Copper Midas Gold Euromax Sandspring Resources Resources 15 Source: February 2018, Woodmac

16 Zinc and nickel investments for Zinc: Top 20 producers account for 75% of total investments Refers to project Metates: Zinc not primary commodity, but Gold Chesapeake Gold MMG Limited MBC Resources Glencore Vedanta Resources Teck SSR Mining Gecamines Ironbark Zinc Terramin Tau Ken Samruk Silver Bull Nexa Karoun Ansan Chihong Yunnan Resources Resources Dez Dasht Wikfs Zinc & Metallurgical HadramautGermanium Group Nickel: Top 20 producers account for 95% of total investments BMC Minerals Ormonde Mining Minorbis - Grupo Mexico Vale Nornickel BHP Billiton Clean TeQ Wellgreen Platinum Oremine Madencilik Horizonte Minerals Eramet Tsingshan Group Polymet Aneka Tambang Glencore Western Areas Ltd Pengxin Group IMX Brazilian Nickel Cassini Noront GME SLN - La Resources Resources Resources Societe Le Nickel 16 Source: February 2018, Woodmac

17 We will grow our service business profitably Services that improve customers productivity and reduce their total cost of ownership Increased customer share Improve efficiency and profitability Build service organization Annual average service sales growth over 10% 17

18 Most of the service growth will come from own installed base 1,100 grinding mills 130 non-ferrous smelters 10,000 flotation units High service potential 80 full deposit stripping machines 3,500 filters 650 sulfuric acid plants 18

19 Digitalization is increasingly embedded into everything we do Our elements: Smart connected equipment Smart processes Smart sites Smart services Smart ways of working Value: Asset performance and reliability Process productivity Process optimization Service effectiveness and efficiency Efficient internal processes 19

20 How will we achieve 10% adjusted EBIT by 2020 Annual average service sales growth over 10% Grow volumes while containing fixed cost Improve margins through product competitiveness and project excellence Service Volumes/fixed cost Margins 2017: 2.8% aebit 2020: 10% 20

21 Key financials 21

22 Markets continued positive in Q1 Demand outlook continued positive Copper, iron, sulfuric acid projects active Market active globally Decisions slow in large investments Mainly brownfield investments 22

23 MEUR Minerals Processing MEUR Q4/17 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q1/18 Order intake picking up in MEW, service demand solid Metals, Energy & Water Order intake 6 months rolling, annualized Sales 6 months rolling, annualized Order intake 6 months rolling, annualized Sales 6 months rolling, annualized Services Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Order intake 6 months rolling, annualized Sales 6 months rolling, annualized 23

24 Order intake up 5%, service orders increased by 14% Americas 23 (35) % EMEA 40 (53) % APAC 37 (12) % Iron ore pelletizing plant and filter press, India > 50 M Modular sulfuric acid plants, Democratic Republic of Congo ~33 M IRON COPPER, COBALT M Order intake QoQ Iron ore pelletizing technology, China > 40 M Q1/2017 Q1/ Service orders Capex orders IRON 0 24 MEW order

25 Solid order backlog EUR million EUR 1,054 million, some 20% services April 25 Interim Report Roughly EUR 760 million to be delivered in 2018 Q3/2006 Q4/2006 Q1/2007 Q2/2007 Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016 Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/2018 Order backlog at the end of the period Share of unannounced orders Order intake by quarter

26 Sales grew and profitability improved EUR million Q Q Change, % In comparable currency, % Sales Service sales Share of services in sales, % Gross margin, % Adjusted EBIT * 7 1 Adjusted EBIT *, % Restructuring and acquisition-related costs PPA amortization -2-2 EBIT 5-1 EBIT, % 2-0 Result for the period 2-3 Unrealized and realized gains related to valuation of FX forward agreements 1 2 * Excl. restructuring and acquisition-related costs as well as PPA amortizations. 26

27 Higher volume and lower fixed costs improved profitability 7 1 aebit Q1/2017 Volume Margin and FX Fixed Costs aebit Q1/2018 Negative margin impacts in 2018: GM erosion in some projects Sales mix 27

28 Minerals Processing Minerals Processing EUR million Q Q Change, % In comp currency, % Order intake Sales Service sales Adjusted EBIT *) Adjusted EBIT *), % 10 8 Unrealized and realized gains/losses related to valuation of FX forward agreements 0-0 * Excl. restructuring and acquisition-related costs as well as PPA amortizations Sales and adjusted EBIT development by quarter Sales aebit*, % Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016 Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/ % 15% 10% 5% 0% 28

29 Metals, Energy & Water Metals, Energy & Water EUR million Q Q Change, % In comp currency, % Order intake Sales Service sales Adjusted EBIT *) -7-9 Adjusted EBIT *), % -6-8 Unrealized and realized gains/losses related to valuation of FX forward agreements 1 3 * Excl. restructuring and acquisition-related costs as well as PPA amortizations Sales and adjusted EBIT development by quarter Sales aebit*, % Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016 Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/ % 10% 0% -10% -20% -30% -40% 29

30 Strong cashflow due to new orders and receivables EUR MILLION Q OPERATING PROFIT 5-1 Total depreciation and amortization EBITDA 15 9 Total change in net working capital Other -1 2 Capital expenditure & other investing activities -5-4 FREE CASH FLOW Interest received 1 1 Interest paid -1-2 Income tax paid -2-2 INTEREST AND TAXES -1-3 FREE CASH FLOW AFTER INTEREST AND TAXES Repayments of long-term debt -0-0 Change in current debt Hybrid bond & interest Other financing cash flow -0-0 NET CASH FROM FINANCING ACTIVITIES NET CHANGE IN CASH AND CASH EQUIVALENTS Foreign exchange rate effect on cash and cash equivalents -2 2 Cash and cash equivalents at March

31 Solid balance sheet Q Q Net interest-bearing debt*, EUR million Gearing*, % Equity-to-assets ratio*, % Return on investment, %, LTM 4-8 Return on equity, %, LTM 2-12 Net working capital at the end of the period, EUR million Advances received Equity, EUR million Balance sheet total, EUR million 1,319 1,436 * If the hybrid bond were treated as a liability, the net interest-bearing debt EUR 94.0 million, gearing 30.9%, and the equity-toassets ratio 27.9% on March 31, 2018 (March 31, 2017: EUR million, 57.8% and 27.1% respectively). 31

32 Market sentiment continues solid Market and complex ores offer attractive opportunities Prospects in several metals and energy New uses such as EVs support longterm view Service opportunities in all categories 32

33 Financial guidance for 2018 reiterated The guidance for 2018 is based on the current order backlog as well as expected order intake. Sales are expected to be approximately EUR billion, and Adjusted EBIT* is expected to be approximately 5 7% * Excluding restructuring and acquisition-related costs, as well as purchase price allocation amortizations. 33

34 Our focus areas 2018 towards profitable growth! Customer focus Service business Product competitiveness Project excellence Our people 34

35 Simplifying our organization and way of working Outotec takes the next steps in implementing its strategy to achieve 2020 targets. The planned changes clarify the roles and responsibilities and include: Simplifying the structure of the segments with global end-to-end business responsibility Reducing management layers and streamlining global functions Simplifying business processes New structure as of July 1, 2018 Reduction of approx. 200 employees globally EUR 25 million impact on cost structure, restructuring costs approx EUR 12 million Support the achievement of growth and profitability targets 35

36

37 POC and cash flow profile example Timing of large project completions affects quarterly earnings MEUR 120 0% 100% Percentage of Completion, % Order backlog YE 2017: Cumulative project POC vs total contract value Timing of large project completions, and possible provision releases, affects quarterly earnings Advance payment ~10-30% 20 0 Month POC Cumulative cashflow NOTE: The figures are illustrative and vary project by project 37

38 Improving profitability and liquidity,00,00,00,00,00,00,00,00 Balance sheet development (conceptual) Improving liquidity in the upcycle Better profitability increasing equity Hybrid bond repayment from liquidity reserves ,0 600,0 400,0 200,0 Investments in fixed assets to stay below depreciation level Net working capital affected by: - Growing service business - Advances received,00,00, Interest bearing debt Other equity Equity (hybrid) Cash 0,00 200, Effect of net working capital to liquidity not as prominent as in previous cycle due to higher share of service business 38

39 Our long-term financing is secured for the next three years Long-term debt repayment profile (conceptual) 200 MEUR EIB R&D loan Senior unsecured bond Other L/T interest bearing debt

40 Customer solutions 40

41 Using our strong metallurgical and technology expertise to improve customers productivity Availability Productivity Total cost of operations Environmental & safety performance Metallurgical capability + Technology capability Service offering Advisory Services Maintenance Services Operations Services Remote Services Spare and Wear Parts Training Services Upgrades 41

42 We enabled significant improvement in silver recovery for Met Mex Peñoles in Mexico 42 Met Mex Peñoles zinc plant with silver production Peñoles is one of the biggest silver producer in the world A newly commercialized Pure Jarosite process will improve metals (Ag, Pb) recovery typically by 20%, silver being economically most important This project will be combined with the expansion project and delivered in Direct Leaching expansion project Pure Jarosite process including Process equipment (reactors, thickeners, filters, etc.) Erection, commissioning and start-up support & site services Comprehensive e-catalogue of spare parts Roaster feed pre-treatment system

43 Our solution provides huge savings to the customer with better zinc and lead recovery Challenges In conventional jarosite process roughly 20% of silver lost to iron residue In addition, losses of lead and zinc Problem especially for zinc producers with high silver content concentrates Solution Outotec s Pure Jarosite process avoids almost all losses of silver, lead and zinc Benefits Increased overall silver zinc and lead recovery Value to customer: tens of millions USD annually with short payment time Relatively simple and cost-effective modifications at the plant 43

44 Monetizing substantial lithium mineral deposits at AMG Mineração, Brazil AMG Advanced Metallurgical Group N.V. Produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, tantalum, niobium and silicon metal AMG Mineracão S.A. (Brazil): Produces tantalum and tin concentrates In 2018 production for lithium carrying spodumene concentrate Turnkey delivery of spodumene concentrator plant Engineering, procurement and construction (EPC) of the plant Proprietary equipment; grinding mill, high intensity magnetic separators, slurry conditioners, flotation cells, thickeners, PF filter, sophisticated process control with on-line automatic slurry analyzers 44

45 Substantial lithium mineral deposits residing in tailings ponds and stockpiles What are tailings? Tailings are the materials left over after the process of separating the valuable minerals from the uneconomic fraction of an ore. The amount of tailings can be large, ranging from 90 98% in valuable minerals to 20 50% with less valuable minerals. What are the applications for lithium? Lithium mineral concentrate is used in applications such as glass and ceramics. A high growth market for lithium chemicals is in re-chargeable batteries, and the growth is accelerating with the demand for electric vehicles, grid battery storages and personal electronic devices. 45

46 Background to the project at the Mibra mine Tailings from AMG s tantalum plant are collected to a tailings pond New tailings are continuously generated from the operations The tailings contain valuable lithium For close to 10 years AMG has studied the utilization of lithium carrying tailings, and Outotec has been involved since 2010 Lithium resource map at the Mibra mine 46

47 Finding the right solution at the Mibra mine In Outotec completed conceptual, pre-feasibility and definitive feasibility studies for lithium carrying spodumene production October, 2016: AMG and Outotec agreed to build a 90 kilo-tonnes per annum spodumene plant on EPC turnkey basis Guarantees for process performance, project budget and schedule Order value exceeds EUR 35 million, commissioning starting in May

48 Our local team supports plant commissioning and operation with sophisticated process control Operational support and services by Outotec s local team in Brazil The plant has sophisticated process control with high-end analyzers. AGM has the possibility to remote advisor support for operation and maintenance by Outotec global technology centers. 48

49 Benefits of our solution for the customer Monetizing the substantial lithium mineral deposits currently residing in tailings with low production cost Fast-track access with our EPC delivery to the growing lithium market Tailings area reduced for future operation, reclaimed water back to the process reducing fresh water need 49

50 Top 10 shareholders end of Q1, nominee registered 41% 50

51