Metso Outotec Oyj (OUKPF) Q4 2022 Earnings Call Transcript

Metso Outotec Oyj (OTCPK:OUKPF) Q4 2022 Earnings Conference Call February 17, 2023 6:00 AM ET

Company Participants

Juha Rouhiainen - VP, IR

Pekka Vauramo - President, CEO & Chairman

Eeva Sipila - CFO & Deputy CEO

Conference Call Participants

Klas Bergelind - Citi

Antti Kansanen - SEB

Christian Hinderaker - Goldman Sachs

Vladimir Sergievskii - Bank of America

William Mackie - Kepler Cheuvreux

Max Yates - Morgan Stanley

Panu Laitinmaki - Danske Bank

Erkki Vesola - Inderes

Juha Rouhiainen

Good afternoon, and bully morning, everyone. This is Juha from Metso Outotec Investor Relations, and I want to invited you each to this convention call, wherever we talk Metso Outotec's Fourth Quarter and Full Year 2022 Results, which were published earlier today. We will person nan accustomed agenda, pinch a position fixed by our President and CEO, Pekka Vauramo; and CFO, Eeva Sipila. After which, we will beryllium taking your questions. And arsenic you tin spot from our descent deck, we person nan descent discussing forward-looking statements. They are successful nan beginning.

With these words, I'll beryllium handing complete to Pekka to commencement nan presentation. Please spell ahead.

Pekka Vauramo

Thanks, Juha, and invited to this call, our 4th fourth results call. We had a beardown 4th quarter, beardown decorativeness of nan year, which, if I look backmost is somewhat exceptional, because we usually person had a dip successful nan 4th quarter, but this year, past year, nan execution was coagulated passim nan year, until nan past time of December. And, therefore, nan 4th was beardown altogether.

The marketplace was very active, and if you remember, our galore property releases during nan quarter, particularly successful December, truthful our bid intake was beardown and it was chiefly consisting of mean size and mini orders. Three orders exceeding EUR50 cardinal were besides recorded during nan quarter. But I think that's complete a normal number of, let's say, bigger orders that we booked successful nan month, truthful coagulated activity successful smaller orders. Also precocious income maturation and I deliberation it's besides worthwhile astatine this infinitesimal to mention that maturation some successful orders and successful income were 99% organic. So M&A effect is very minor. M&A effect successful nan numbers and besides worthwhile to mention that each nan comparison numbers see successful 2021, besides our Russian income and orders, and we person not eliminated them away.

And if we did that one, then, of course, nan maturation percentages would beryllium moreover higher than what they were and what they are successful these coming comparisons. But adjusted EBITA 14.82%, 2 percent points much than a twelvemonth before. Exactly nan aforesaid separator arsenic we delivered successful nan 3rd 4th of nan year. And if you recall, nan 2nd 4th wherever we had awesome rate headwind. So we've been solidly connected this level, nan past 3 quarters of nan year. We're making advancement successful sustainability successful galore areas. Internally, we are looking into our plants and operations and delivering bully steps towards cleaner operations there. And past externally, our satellite affirmative income is increasing very quickly astatine this moment.

During nan year, nan rate travel has been nan anemic constituent successful our performance, but we move nan area successful nan 4th fourth and delivered a rate flow, which was adjacent to our adjusted EBITA astatine nan extremity of nan year. Then looking nan group numbers arsenic such, truthful orders received grew by astir EUR300 cardinal to EUR1.59 billion, maturation of 21% and let's retrieve nan Russia effect here, which -- truthful without Russia, nan maturation would person been overmuch bigger, positive past nan truth that it's each integrated growth.

Sales growth, we grew to EUR1.43 cardinal from EUR1.3 million, maturation of 12%. So coagulated maturation location arsenic well. Adjusted EBITA, EUR212 million, 30% maturation complete past twelvemonth and nan margins 14.8% and past twelvemonth comparison number for nan aforesaid quarter, 12.8%. So very beardown maturation connected that statement arsenic well. Operating profit EUR185 million, EUR130 cardinal successful past twelvemonth and 12.9% of nan sales. Earnings per stock EUR0.16 and past twelvemonth aforesaid 4th EUR0.11 and rate flow, EUR212 cardinal for nan quarter.

Then if we look astatine nan afloat year, afloat twelvemonth numbers, orders conscionable exceeded EUR6 billion, truthful 11% growth. And present especially, we spot nan effect of Russia present and each integrated plus income maturation of astir EUR1 billion, 25% altogether. Adjusted EBITA EUR731 million, up 34% from twelvemonth before, representing 13.8%, astir 1% higher than a twelvemonth before. And operating profit EUR504 million. This is, of course, present nan EUR150 million, proviso that we made for Russia successful past twelvemonth successful nan 2nd 4th is visible and reduces that number, past accordingly.

EPS for nan afloat twelvemonth for nan continuing operations, EUR0.40 and EUR0.35 past year, and past present arsenic well, nan EUR150 million, proviso for Russia is intelligibly visible. Without that one, I deliberation nan EPS would person been location successful nan ballpark of EUR0.50 -- person to EUR0.60. And rate travel for nan afloat year, EUR322 million, acknowledgment to stronger rate travel -- rate conversion successful nan 4th quarter. And connected nan graph, we spot nan dividend history and connection for this year. Now nan connection that we did -- do put guardant for nan AGM is EUR0.30 payable successful 2 parts arsenic before, representing a clear maturation from twelvemonth before.

Then erstwhile we look astatine nan segments, truthful we only person nan quarterly numbers here, but really beardown performances connected each lines from aggregates. And erstwhile we look astatine orders, orders we've been flagging a small spot softness successful European marketplace earlier. European marketplace has performed amended than what we expected. It is not backmost to normal yet, but it's intelligibly amended 1 than what we thought it would be. And then, of course, depending connected nan adjacent fewer months improvement successful Europe, we spot past this affirmative inclination to either to proceed aliases not to continue, but uncertainty is there, nan warfare is still location and those reasons are successful place. But truthful far, it has not affected arsenic heavy arsenic we thought. So we saw summation successful orders. Roughly 10% maturation connected bid line.

Markets successful North America proceed to beryllium very strong. We've been actively managing nan ostentation done galore intends by being costs conscious and progressive successful nan pricing beforehand and that is, of course, visible successful each lines of our operation. And I'll proceed pinch nan aforesaid remark that we've been up of nan ostentation pinch our actions successful costs and pricing side, and that is visible successful nan aggregate results very clearly.

Strong maturation successful nan instrumentality orders. Services declined somewhat successful nan 4th astir 5%, 3%, quickly calculated astir EUR5 cardinal driblet successful sales. So we want you to not interest excessively overmuch astir that, that 5% antagonistic improvement successful work line. Sales, stronger maturation than orders. This was really delivering nan backlog and executing. That part, it was done successful a coagulated measurement and services stock now 30% arsenic it was 32%, this was because of faster maturation of instrumentality income than nan services.

Adjusted EBITA astir doubled from twelvemonth earlier and separator reached 16.2% for nan conception successful nan quarter, and it was 10.6% past year. So very beardown improvement. We had immoderate one-time issues past year, truthful that depressed a small spot nan numbers, but nevertheless, nan capacity betterment was really beardown successful nan aggregates, and it's really successful a bully shape of nan improvement astatine this moment. Well managed, good executed business pinch very beardown integration capabilities of nan number of bigger and smaller companies that we person acquired complete nan past 3 years, 4 years into our aggregate segment.

In minerals, nan quarter, we saw an bid growth, beardown bid growth. And present especially, I mean, nan Russia effect is successful minerals and to immoderate grade successful metals, but mostly truthful successful our mineral conception and we request to publication nan numbers against that fact. So we were capable to compensate some nan bid statement and nan income statement from different markets, because our capabilities to present to Russia were very limited, and we only delivered those things aft 24th of February, that we were committed done our wind-down agreements. We did not book immoderate caller orders, arsenic we person said.

And of course, we person been very strict and observant that we haven't delivered thing that is restricted, and we person not dealt pinch immoderate of nan sanctioned customers successful Russia. So bully performance, very beardown capacity and we took actively actions successful different parts of nan world successful bid to unafraid bully compensation for nan mislaid portion of nan business successful different areas.

Sales, we saw instrumentality income declining somewhat 7% and that was because of nan Russia wind-down. At nan aforesaid time, nan services maturation was beardown successful location and services stock was 62% of nan income successful nan mineral conception during nan quarter. And adjusted EBITA grew by almost EUR40 million, separator 15.8%, which is almost 3 percent points higher than twelvemonth before. We spot really -- spot and consciousness each nan last synergies that we did execute done integration and naturally, nan measurement improvement was affirmative contempt of nan truth that Russia was taken retired of nan equation early successful nan year. And present arsenic well, we've been capable to successfully to mitigate nan summation of our input costs and that is, of course, visible successful nan results arsenic well.

Metals segment, bully beardown maturation successful caller orders, includes 1 bigger bid location and past a coagulated travel of smaller orders. Healthy activity and that activity is continuing successful nan metallic side. Execution of nan bid book EUR120 million, EUR25 cardinal sales, almost EUR20 cardinal maturation from past year. And services stock increasing, immoderate bully activities we've been capable to initiate successful nan services side, and now services correspond 18% of nan metallic income and contributing, of course, to nan successful turnaround of metals.

Adjusted EBITA, EUR15 million, past twelvemonth EUR21 million. We did not person immoderate benignant of awesome proviso releases arsenic we had a twelvemonth before. So that made up nan number past twelvemonth higher than what nan 4th fourth number now was, but this was much benignant of operational afloat than nan comparison a twelvemonth before. 12.4% separator and acknowledgment to bully maturation and besides good mitigated costs successful nan projects that we delivered successful nan metallic side.

And pinch this one, I will manus it complete to Eeva for much elaborate number reappraisal and past I'll travel backmost pinch immoderate different things aft that. Eeva?

Eeva Sipila

Thank you, Pekka. Good morning, bully day connected my behalf arsenic good to everybody. Pekka already presented our beardown operative figures, truthful I'll attraction my comments connected nan items aft adjusted EBITA. As adjustments, we recorded a antagonistic EUR10 cardinal successful nan 4th connected nan group level. However, you whitethorn person noted successful nan notes conception that we had a sizable antagonistic successful minerals and nan sizable affirmative successful nan group. These some related to nan Russia wind-down.

Originally, nan EUR100 -- EUR150 cardinal proviso was made connected group level astatine nan extremity of June and by twelvemonth end, arsenic we person progressed and settled customer by customer, we person transferred nan proviso for usage into nan segments, chiefly minerals wherever nan existent task related inventories and AR person been booked and request to beryllium written off, of course, location arsenic well.

We had EUR65 cardinal of nan proviso near astatine twelvemonth end, waiting for nan last wind-down activities. This we are assured will surface. Net financial expenses are somewhat up quarter-on-quarter and much visibly year-over-year, reflecting somewhat higher gross indebtedness and liking costs successful today's market. Our effective taxation complaint for nan twelvemonth ended astatine nan little extremity of our target scope astatine 25%, wherever nan fig for 2021 was 24%. Our net per stock for continuing operations was EUR0.16 for nan 4th fourth and EUR0.40 for nan afloat year, nan afloat twelvemonth fig including a nonaccomplishment successful discontinued operations. And past nan number 4, including nan discontinued operations was EUR0.13 for nan quarter.

Moving to our equilibrium sheet. Total assets are up immoderate EUR900 cardinal from nan opening of nan year, but down EUR70 cardinal from nan Q3 end. M&A successful nan twelvemonth consisted of 2 mini acquisitions, which had constricted effect connected our equilibrium sheet. Net indebtedness astatine nan extremity of nan twelvemonth was EUR684 million, truthful an inch down from nan extremity of September.

The communicative of 2022 was really nan maturation successful nett moving superior from 29% of income successful 2021 to 36%. Supply concatenation challenges and ostentation led to a important complete EUR0.5 cardinal summation successful our inventories. Accounts receivable and payables were some up arsenic well, but successful smaller proportion. Receivables really grew overmuch little than sales, representing 16% of income successful 2021. They were really down to 15% of income successful 2022. However, importantly, arsenic Pekka besides already referred to, we were capable to alteration people during Q4, and our inventories decreased by EUR40 cardinal during nan quarter. As proviso concatenation challenges person reduced, we person been capable to return down our buffer stocks. And whilst nan effect successful nan 4th was alternatively small, it was nevertheless important to stabilize and amended had an nonstop impact, a affirmative effect connected our rate flow. Also bully to retrieve that nan alteration successful euros is reduced because of nan value constituent continuing to summation until year-end. So nan measurement simplification successful inventories was really somewhat more.

Looking backmost astatine nan inventory maturation during 2022, I would say, it was much 50-50 measurement and price, whereas earlier successful nan year, we communicated it was astir successful nan 60% volume, 40% value split. Cash travel successful nan 4th fourth was a clear betterment from nan earlier quarters, whilst nan nett moving superior alteration was still a flimsy EUR36 cardinal negative. However, our nett rate from operations earlier financial items and taxes was EUR212 cardinal for nan quarter, contributing nicely to bring nan afloat twelvemonth fig up to nan EUR322 million. Clearly, nan afloat twelvemonth number is only half of nan 2021 level, arsenic nan antagonistic alteration successful nett moving superior really consumed rather a spot of rate successful '22.

Then possibly a constituent conscionable for nan liking of clarity, nan different items successful this chart. So they mostly subordinate to nan Russia wind-down. The antagonistic proviso affects nan profit for nan year. However, erstwhile nan immense mostly is non-cash write-downs, nan antagonistic effect is neutralized from a rate constituent of position successful this different items row.

Moving past to my last descent and nan main points connected nan financial position. During nan 4th quarter, we issued a caller EUR300 cardinal bond, while besides making a tender connection for nan outstanding 2024 bond. And of that, EUR103 cardinal was purchased back. Now these transactions improved our maturity floor plan significantly. Additionally, during nan 4th quarter, we signed a caller EUR100 cardinal word indebtedness and EUR50 cardinal RDI loan, of which, nan erstwhile was drawn during nan quarter. Liquidity astatine nan extremity of nan twelvemonth was much than EUR100 cardinal higher than astatine nan commencement of nan year. Debt to superior stands astatine 33%. And finally, location were nary updates connected our ratings successful nan quarter.

So pinch that, I would manus it backmost to our President and CEO. Pekka, please.

Pekka Vauramo

Okay. Thanks Eeva. I will benignant of person a fewer notes connected our strategy, sustainability and past finally, outlook earlier going to nan Q&A. Already mentioned that we saw a very beardown maturation of our satellite affirmative offerings and it is intelligibly a motion that our efforts to motorboat much and much satellite affirmative products and solutions is really a correct guidance to spell and we proceed to motorboat caller products altogether during nan year.

Here and there, of course, nan integer portion is moreover much powerfully coming now and we spot that location is overmuch much further imaginable to amended nan results done improving value pinch integer solutions for our customers' processes. We've besides signed respective business for developing, chiefly decarbonized alloy production. Therefore, we besides took a determination to put successful Circored aviator plant, successful bid to make tests pinch hydrogen-based nonstop simplification of good robust ore and we do spot activities astir decarbonized and hydrogen-based nonstop simplification increasing astatine this moment. These are, of course, very early shape developments, but intelligibly a guidance wherever robust and alloy manufacture is headed.

We besides saw respective orders pinch important satellite affirmative content. Battery metals activity is precocious -- was precocious ordering activity, but we're doing a batch of investigation activity successful that area for our customers, a batch of aviator works activity arsenic good for our customers. We spot much and much inquiries for tailings guidance and barren stacking solutions, which are very affirmative for h2o consumption. They besides very affirmative for biodiversity arsenic nan barren stacking allows higher storing of tailings, and therefore, reducing nan footprint that mining causes.

And past successful nan smelting side, adjacent procreation pelletizing, smelting and pelletizing are perchance merging to immoderate grade astatine 1 constituent and past besides sulfuric acerb plants for decarbonizing galore of our customers industries. We spot imaginable location and a batch of activity successful those areas. Very important portion and looks for illustration that sustainability is really maturing successful passim nan manufacture and decisions are much and much being made pinch nan sustainability arsenic a benignant of starring thought [indiscernible] of nan decisions.

Some different sustainability highlights. We person internally completed respective greenish modulation projects. In in-house, our science-based targets, implementation of those targets and actions down nan targets is progressing. Now 20% of our walk is pinch suppliers that person committed to nan science-based targets. And astir 100% of our R&D projects do person sustainability targets successful them.

Part of our ESG is people our advancement successful group and civilization side. And we person location galore actions, driving diverseness and inclusion. And for illustration we person said, earlier that we measurement very often nan engagement of our organization, and we person reached to very precocious level successful our engagement, and we are now connected apical 10% pinch our world reference group, benchmark group consisting of astir 100 companies.

So it is simply a bully position to beryllium astatine nan times erstwhile location is simply a batch of activity successful nan labour marketplace and group broadside successful marketplace globally. Our marketplace outlook has changed. I mean, we are saying that we proceed connected existent level. And if you recall, our existent level is simply a beardown level. We are not anymore flagging nan weakness in, peculiar weakness successful aggregates successful European market. Of course, nan warfare is still there. War is not over, truthful we request to beryllium alert of that one. But clearly, we spot that nan markets are not arsenic soft arsenic we thought them to beryllium earlier.

So reasonably assured connected near-term outlook. Metal prices are connected reasonably precocious level. They of people are bouncing a small spot up and down, but bouncing connected precocious level aggregates. Customers products are besides enjoying very favorable pricing position successful galore markets and location seems to beryllium continued demand, and this makes america to judge that, that nan markets will proceed to beryllium progressive successful that area, particularly successful North America. Then we spot first signs besides successful China rebound effect of Chinese market. It's presently connected benignant of connection and activity by pipeline level, which past remains to beryllium seen if it turns into orders later on. But a reasonably beardown and coagulated outlook position astatine this moment.

Juha Rouhiainen

All right. That concludes our presentation. And operator, we tin now unfastened nan convention telephone lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The adjacent mobility comes from Klas Bergelind from Citi. Please spell ahead.

Klas Bergelind

Thank you. Hi, Pekka and Eeva. Klas astatine Citi. So nan first 1 I had is connected nan services. You opportunity that, request is still healthy, but bid maturation slowed to low-single digits, ex-currency successful minerals. I'm trying to understand, if this was softness post, possibly earlier pre-ordering, wherever do you possibly lacked immoderate larger work orders that will travel done now astatine nan commencement of nan year, i.e., if this is conscionable a timing issue, why we saw this crisp slowdown? And besides evidently quarter-on-quarter down 9% to 10%? I'll extremity there. Thanks.

Pekka Vauramo

Yeah. I deliberation what we saw erstwhile I look back, we saw a highest successful request successful services, which astir apt was nan pent-up of nan COVID times. And looks for illustration that pent-up request is over, but we spot still a very patient request successful services altogether. So I really don't -- erstwhile I benignant of look astatine existent trading and things for illustration that, I really don't spot that services is turning down. But clearly, location was a -- immoderate benignant of highest because of nan pent-up demand.

Klas Bergelind

Do you deliberation -- I cognize it's tricky, possibly to gauge this, but do you deliberation work orders will enactment astatine nan existent level into nan first quarter, aliases tin we beryllium up connected immoderate benignant of seasonality into nan first?

Pekka Vauramo

Well, we are not really guiding it arsenic I said. But for illustration I said, I mean, our activities are connected precocious level successful services. So, I really don't spot that location would beryllium a downturn successful that regard, that request for services would driblet by me. We person been very engaged delivering instrumentality successful each areas and, therefore, we tin expect besides nan services to follow.

Klas Bergelind

Yeah, okay. My 2nd 1 is connected nan separator and your 15% target. When do you deliberation -- erstwhile you deliberation of nan positives and negatives backmost again for 2023, we person accrued costs inflation, constituent costs, i.e., value-add is still not leveling disconnected out, location you still transportation bully pricing done nan backlog, astatine slightest successful nan first half. But astatine nan aforesaid time, your synergies is nary longer a large tailwind successful nan bridge. So with, let's say, high-single-digit gross maturation supported by a coagulated backlog, do you deliberation you tin scope your 15% separator for nan year? Just to understand nan moving parts. And I cognize you don't guideline nan margins. But conscionable to understand nan moving parts of perchance really to get there.

Pekka Vauramo

Yeah. Of course, we -- aforesaid wish that I had past year, a spot much normality that we wouldn't person large swings that we request to return and make successful nan business. I'm referring to Russia now successful past twelvemonth and that benignant of things. I think, we person each nan pieces successful -- each nan puzzle successful place. It's mobility astir execution and let's retrieve that we activity continuously besides connected our costs side, moreover though we don't denote awesome campaigns, but we person astir what we person said earlier that. In nan past, we utilized to opportunity that it's astir net ostentation that we activity connected betterment actions. Now nan net ostentation mightiness beryllium somewhat higher, and we needfully don't scope that level successful our betterment actions, but it's still a sizable number of millions that we activity connected that side.

Klas Bergelind

Okay. My very last 1 is connected further separator upside, I'm reasoning astir minerals obviously. You said earlier that, that you're moving connected standardizing nan instrumentality going into projects, much modularization and truthful distant to get that gross separator up, improving evidently separator successful this measurement astatine nan gross level is much sustainable, but it tin return rather a agelong time. Is that still a 3 twelvemonth to 4 twelvemonth travel Pekka from present aliases do you deliberation you tin do that 20% quicker than that?

Pekka Vauramo

We request different actions for that 20%. We request to turn faster successful services, and that is an area that we are presently looking into. And evidently successful our yearly strategy update, we will reside that 1 past a spot later on. In this year, we're conscionable putting our thoughts together, but that's an area wherever that we want to velocity up and summation nan services share, particularly successful minerals connected higher level.

Klas Bergelind

Thank you.

Operator

The adjacent mobility comes from Antti Kansanen from SEB. Please spell ahead.

Antti Kansanen

Hi, Pekka and Eeva, it's Antti from SEB. Just mates of questions, firstly connected aggregates. And if we deliberation astir nan request outlook sequentially stable, truthful if we spell backmost to past year, I guess, nan marketplace successful Europe was still reasonably progressive successful commencement of nan year. So would you opportunity that nan request is astir apt somewhat beneath past year's level still and erstwhile we are entering nan twelvemonth arsenic we are benignant of stabilizing connected a spot little level?

Pekka Vauramo

Yeah, we are now, of course, almost astatine nan extremity of February and we each cognize what happened extremity of February past year. And if I remark from much aliases little from this time on, I wouldn't opportunity that we aren't needfully down from past year's activity level astatine this moment. But if we look astatine from opening of year, possibly that is nan case.

Antti Kansanen

Yeah, exactly. And past secondly connected benignant of nan profitability numbers successful aggregates. I mean, successful 2nd 4th you had that benignant of a FX-related nonaccomplishment successful nan numbers. And since then, we've seen a really beardown separator improvement. So is this benignant of afloat operational connected your pricing and execution? Or is location thing FX-related reversal that is successful nan figures?

Pekka Vauramo

Eeva?

Eeva Sipila

Yeah, I mean, evidently benignant of nan Q2 was nan symptom point, erstwhile we saw a benignant of a specified a accelerated benignant of change. Then, thereafter, it has stabilized. The afloat twelvemonth effect of FX was still antagonistic for each businesses, including aggregates, but of people excessively much. It's often, we started to spot a overmuch much of nan positives besides from nan benignant of accounting losses correcting themselves successful Q3 and Q4. So I deliberation you could see this benignant of very overmuch benignant of operational consequence there. Really nary one-offs. I deliberation nan squad has conscionable done an fantabulous occupation successful -- pinch value guidance addressing benignant of fighting ostentation proactively and past evidently been capable to besides execute well. So we had bully benignant of -- dependable benignant of volumes successful each nan plants, truthful that helps america well.

Antti Kansanen

All right. Very clear. And then, secondly aliases lastly, a follow-up connected nan erstwhile mobility regarding mining services. And erstwhile you're talking astir this benignant of a pent-up request being over, are you referring to this benignant of a longer lead clip modernization refurbishment projects aliases has location been benignant of an inventory accommodation arsenic good regarding spares and consumables request that your clients possibly person been filling up inventories and now benignant of adjusting them to a much normal levels?

Pekka Vauramo

It's mostly relating to modifications, really for illustration you said yourself little to aliases not astatine each to destocking aliases thing for illustration that now. There is still a awesome request for spare parts, deterioration parts and that benignant of items successful nan marketplace. And besides these modifications, but we are getting to much for illustration a normalized level, erstwhile it comes to orders -- these orders. These modifications, wherever nan rhythm is overmuch longer than successful immoderate of nan different work activities. So nan orders mightiness beryllium a spot lumpy there, but nan existent deliveries will beryllium overmuch much moreover connected that side.

Antti Kansanen

Yeah. And should want to presume that possibly your services income improvement will beryllium a spot stronger than nan orders, fixed that you person this longer lead clip items that you person taken, but not yet afloat benignant of converted to income or?

Pekka Vauramo

Yeah. Well, I wouldn't needfully tie that conclusion. I deliberation some lines are still solidly processing immoderate lumpiness connected bid statement successful nan services. Sales broadside is much of a benignant of dependable improvement connected that side.

Antti Kansanen

All right. Very clear. That's each from me. Thank you.

Operator

The adjacent mobility comes from subordinate from Goldman Sachs. Please spell ahead.

Christian Hinderaker

Yes. Good morning, everyone. It's Christian Hinderaker present from Goldman. Thank you for nan presentation. I've sewage 3 questions, if I may. Perhaps, we'll return them successful turn. Firstly, I conscionable wanted to travel up connected margins. Obviously amended than statement had expected crossed each of nan businesses. Can you supply a small granularity possibly connected nan contributions to that to date? I guess, location were immoderate operation tailwinds wrong minerals, for example, but you've besides talked astir mitigation of costs for pricing, arsenic good arsenic much possibly structural costs savings. And I conscionable wonderment if you tin thief america a small spot pinch really to deliberation about, successful particular, nan costs actions successful nan twelvemonth ahead?

Eeva Sipila

Sure. So evidently benignant of operation varies from 4th to 4th to quarter, and it's not conscionable nan benignant of superior versus aftermarket mix, that we besides benignant of tin person different mixes wrong superior aliases wrong services impacting. But, of course, that's complete time. It's not that relevant. I would opportunity that, clearly, truthful nan overall, I mean, services -- aftermarket stock improved towards nan year-end, we had a slower start, but past we had bully sales, income volumes successful aftermarket and that evidently was a positive. Then again, not -- successful aggregates, nan separator betterment is really overmuch coming from instrumentality arsenic nan maturation location was conscionable truthful overmuch stronger.

And past connected per se, costs actions, I deliberation nan main attraction successful -- arsenic we proceed to spot inflationary unit is really astir value and being benignant of caput connected that and proactive connected that is astir important. Then 2nd is, coagulated execution. And past obviously, nan costs savings, past travel connected mean -- connected benignant of mean ratio improvements. But arsenic we are growing, truthful I would still opportunity that nan attraction needs to beryllium connected that -- connected nan value and ostentation management. And I deliberation we benignant of did good successful '22 connected that beforehand and that surely was 1 of nan main occurrence factors successful our '22 net definitely. And, of course, benignant of nan thought is to proceed benignant of pinch those learnings into '23.

Christian Hinderaker

Thank you, Eeva. Maybe I tin travel backmost past connected nan aggregates side. I guess, that's wherever you had a affirmative astonishment successful position of demand. Just willing successful nan developments that you've seen there. You mentioned a pickup successful seasonality successful Europe, for example. And I wonderment whether that factors into nan summation successful nan guidance aliases nan outlook astatine slightest for nan 4th ahead? How we should deliberation arsenic good astir nan benignant of value versus volume? And past yet connected Tesab, I deliberation you've been shifting location to a trader led model, wondering really that's going and besides really revenues for that business person developed versus I deliberation EUR30 cardinal that you reported for 2021?

Pekka Vauramo

Yeah, that's right. We are not really basing our outlook arsenic specified connected seasonality. It's a truth of life. We are well-known fact. We are, of course, comparing it to nan play astatine immoderate fixed clip that wherever we should beryllium going. So it's not astir seasonality this one. In our aggregates side, yes, nan volumes are besides comparing erstwhile seasons. We are connected little levels erstwhile it comes to volumes, but we person done -- taken galore actions, because of ostentation and nan pricing levels are different from what they utilized to be, and that's evening a small spot nan output wherever our benignant of guidance aliases nan outlook changed really refers to is that, we don't spot that benignant of softness correct now, what we saw during nan erstwhile 4th aliases 2 quarters, successful fact, erstwhile we moved -- changed nan aggregates guidance. So, not astir that one.

Then nan different portion of nan question, it was astir nan separator and that broadside of it. Of course, nan ostentation is still there, moreover though it's connected reduced level. Some of nan freight charges person normalized to pre-COVID levels. Not each of them, but immoderate of them. So location are immoderate affirmative signs, but ostentation is still there. It is thing that we request to manage. And moreover though we don't guideline really we scheme to do that one, but our way grounds has been particularly successful our aggregates side, very bully successful managing that inflation. And I deliberation we are good alerted of nan truth and person actions successful spot to activity nether these conditions.

Eeva Sipila

And possibly conscionable a last statement connected Christian. So yeah, bully commencement integration proceeding very well. And yes, evidently we're benignant of integrating besides location to optimize our -- scope nan customers. So benignant of readying nan income transmission activity connected that, but going very well. And past we surely spot besides clear profitability betterment areas pinch nan synergies than that nan Metso Outotec level tin connection nan products.

Christian Hinderaker

Thank you, guys. And past finally, possibly conscionable connected nan rate flow. Interested successful really we should deliberation astir moving superior developments successful peculiar into 2023, successful peculiar astir inventories? I cognize there's a EUR40 cardinal simplification successful Q4. I guess, funny successful wide position '23, really we should deliberation astir it? And besides connected a quarterly basis, what mightiness want to see benignant of champion lawsuit inventory betterment to deliberation about?

Eeva Sipila

Yeah, obviously, benignant of -- whilst we turned nan corner, which was important and a clear target for america successful Q4. past obviously, location is ever room to improve. So nan inventory is still successful absolute position are connected a precocious level. And it from nan benignant of very, very challenging proviso concatenation situation, it does return benignant of respective quarters to balance. And of course, we're benignant of -- we are still a spot benignant of cautious. Let's spot what nan twelvemonth up has for america stored, truthful that we don't want to consequence availability. That's our main customer committedness and we request to beryllium very focused connected that. But surely benignant of nan target for this twelvemonth is overmuch amended rate travel procreation and really nan -- that must travel from nett moving superior releasing cash, dissimilar it did successful 2022. Usually nan benignant of nan early portion of nan twelvemonth is tied -- does necktie immoderate capital. We are particularly successful nan aggregate side, we're building benignant of for nan upcoming building play successful nan Northern Hemisphere. So not needfully benignant of nan champion and past we're benignant of going guardant dream to amended connected that. But there's surely imaginable and then, we don't person an definitive target connected alternatively than benignant of it being a clear attraction conscionable based connected nan benignant of levels wherever we are. All businesses person an opportunity to improve.

Christian Hinderaker

Okay. Thanks very much.

Operator

The adjacent mobility comes from Vlad Sergievskii from BofA. Please spell ahead.

Vladimir Sergievskii

Hi, everyone. Thank you for taking my questions. I'll commencement pinch services if I may, but attraction connected sales. Obviously, grounds income successful Q4 and services. At nan aforesaid time, orders declined sequentially for 2 quarters now for nan reasons you explained. Book-to-bill successful services was -- I would opportunity materially beneath one-time successful Q4, which really seldom happens to you guys. So nether this backdrop tin services income turn versus a grounds Q4 level successful nan coming quarters, aliases they whitethorn moderate?

Pekka Vauramo

Yeah, for illustration I said earlier, we don't spot immoderate peculiar diminution successful activity successful services. So -- and don't consciousness immoderate softness successful that marketplace either. Maybe nan only constituent is that, that really nan pent-up request for immoderate of these activities wrong services is possibly complete now, but we are still connected intelligibly higher level than pre-COVID pinch our services arsenic we speak correct now.

Vladimir Sergievskii

Brilliant. Thank you very overmuch for that. And if I tin inquire 2 speedy questions connected nan P&L, please. Firstly connected gross margin, it's down a spot sequentially successful Q4. Well, nan operation betwixt instrumentality and aftermarket was broadly unchangeable connected my calculation. Any peculiar logic for that? And secondly here, location was a beautiful meaningful affirmative publication from different operating income and expenses statement successful Q4, it was astir EUR20 cardinal if I'm not mistaken. While this statement is mostly antagonistic historically, would you beryllium capable to remark besides what drove this affirmative publication successful this different income line?

Eeva Sipila

Sure. So connected nan gross separator side, truthful nothing, successful peculiar arsenic such. It is evidently a mobility of nan operation of nan different businesses and past nan benignant of execution successful those and besides a spot betwixt nan segments arsenic it does vary. But thing really to benignant of constituent retired connected that. And connected nan different operating income, indeed, it was a plus. I don't person thing circumstantial successful my mind, but why don't we person a look astatine that, pinch Juha, we tin benignant of travel backmost if location was thing worthy highlighting.

Vladimir Sergievskii

That's brilliant. Thank you very much. And possibly nan very past one, housekeeping from my side. Your equilibrium expanse provisions successful Q4 has moderated rather materially, which is evidently a bully thing. Could you remark connected nan cardinal drivers? Can we utilize astir of them? Have you released some? Any colour would beryllium really helpful.

Eeva Sipila

Yeah, location is simply a mates of factors. The Russia wind-down evidently affects nan wide proviso level, that was a very important provision. And arsenic I said, we had from nan 150, 65 only near astatine nan year-end. So, that evidently impacts nan numbers and generally, nan provisions thin to move pinch arsenic nan benignant of projects evolve. Again, I deliberation there's been quarters erstwhile you've noted that it's been up and truthful nan task portfolio moves it somewhat now benignant of towards nan better. We had a beautiful bully benignant of income deliveries and past connected that. But again, benignant of, that portion will travel sometimes a spot up, sometimes a spot down. But, really nan wind-down evidently is simply a circumstantial topic.

Vladimir Sergievskii

Super. That's each clear. Thank you truthful much.

Operator

The adjacent mobility comes from William Mackie from Kepler Cheuvreux. Please spell ahead.

William Mackie

Good morning. It's Will Mackie from Kepler Cheuvreux. Good morning, Pekka. Good morning, Eeva. Thank you for nan time. I conjecture nan first mobility is simply a follow-up connected nan affirmative value initiatives that you've achieved during nan twelvemonth crossed nan business. I callback during '22, you had to negociate very crisp ostentation wrong your consumables business, which affected margins successful a number of quarters. Could you really standard aliases quantify, please, nan level of value effect successful Q4 aliases for nan afloat twelvemonth crossed nan business? And really you were capable to nett amended erstwhile you comparison that to nan inflationary pressures?

Pekka Vauramo

Well, we really don't person a benignant of a floor plan that would break down that one, but I deliberation we commented connected a headwind successful our consumables that it was connected yearly level of astir EUR40 cardinal and looks for illustration that we person recovered that now pinch our actions going forward. So bully consequence successful that field, but pricing guidance has been an rumor and I consciousness that we've done it successfully done nan year. And that management, of course, includes each kinds of actions, actions successful costs side, actions successful pricing broadside and different things for illustration that. We besides person to retrieve that what effect were connected existent prices is besides nan rate improvement and we person seen location are positives and negatives successful that area. Net effect still is antagonistic successful nan currencies connected a afloat twelvemonth level, but, of people we are expecting that 1 to level now going forward.

William Mackie

Okay, convey you for nan color. My 2nd mobility relates to your existent appraisal of nan marketplace trends, peculiarly wrong nan minerals segment, you mentioned that nan group and nan institution was successful to compensate for nan nonaccomplishment of volumes from Russia. Could you possibly supply a small colour of really you spot aliases really nan income teams are seeing nan prospects, successful peculiar verticals for illustration copper, golden aliases cobalt and lithium and different artillery metals?

Pekka Vauramo

The artillery metals is intelligibly that activity is precocious presently and we booked respective orders extremity of past year. And from that area our benignant of investigation labs are engaged pinch 10s of samples. We are doing batch of laboratory tests, we're doing batch of aviator works testing successful that area and it's mostly greenfield activity and it's lithium, it's nickel. When it comes to artillery metals, immoderate different railroads arsenic well. We spot activity successful galore truthful called captious metals and minerals activity, which is starting up, but it's astir apt 1 very applicable sample of deglobalization successful our customer industry. Because each bigger countries person their ain captious metals program, each regions for illustration EU person successful nan aforesaid way. And clearly, nan intent is location to unafraid either home proviso of these captious metals aliases astatine slightest a proviso from nan adjacent countries and regions, wherever nan relationships are friendly. So intelligibly a motion of deglobalization successful that part.

William Mackie

And were location immoderate peculiar countries aliases regions that were capable to specifically compensate for nan nonaccomplishment of Russian opportunity?

Pekka Vauramo

I deliberation that activity was successful each regions, I would say. Of course, nan first guidance what we saw successful nan metals marketplace was that nan prices went up and they went up from a very precocious level. And that arsenic a specified initiated many, galore actions and activities. And erstwhile we -- for example, erstwhile we first looked astatine that really should we respond connected activity successful Russia going down and nan first thought was that, okay, we request to trim costs very quickly, because wide volumes will travel down. But wrong a fewer weeks, it was evident that nan activity successful nan remainder of nan world will compensate and alternatively of entering nan costs cutting, we did each kinds of actions successful bid to boost our income capabilities and information successful our statement to triumph and bring much orders successful from those areas wherever nan activity increased. And it was really, really world nan summation that we saw happening.

William Mackie

Thank you. And my last area of mobility was relating to follows connected from that, relates to 1 of your comments during nan position astir China. Perhaps you could conscionable refresh america connected your existent footprint successful China and really Metso Outotec is positioned to use from nan imaginable reopening and nan various stimulus measures that are being discussed?

Pekka Vauramo

Yeah. We do person respective factories successful China. Most of them are really focused and geared up to present and service Chinese market. The Chinese market, of course, for america includes China itself, but it includes besides what we call, Silk Road. Silk Road business that is business, wherever Chinese aliases either companies are either straight investing aliases Chinese authorities is backing nan building of aliases improvement of a excavation successful different countries extracurricular China. And we person been peculiarly successful successful increasing that business for america and mixed nan Silk Road business and business wrong China is not nan biggest marketplace area arsenic such, but is increasing quickly to go 1 of nan biggest marketplace areas for us.

William Mackie

Super. Thank you very much.

Operator

The adjacent mobility comes from Max Yates from Morgan Stanley. Please spell ahead.

Max Yates

Thank you. Can I commencement connected my first mobility to inquire astir nan strategical reappraisal successful minerals? Could you conscionable springiness america an update -- sorry, strategical reappraisal of metals? Could you conscionable springiness america an update connected wherever you are pinch that? Are you benignant of entering into negotiations astir a imaginable disposal? Just immoderate reasoning pinch timeline connected erstwhile that is apt to person results and really it's evolved truthful far? Thank you.

Pekka Vauramo

Yeah. We said successful nan Q&A portion of our CM, Capital Markets Day successful past twelvemonth that we spot that we would travel to conclusion during nan first 4th of nan twelvemonth timeline arsenic such, it's not fixed. And past year, erstwhile I look astatine it backmost was not really unchangeable capable to reason that part. The M&A marketplace successful peculiar turned alternatively difficult for known reasons, including nan liking complaint and nan readiness of backing and nan valuation disparity betwixt sellers and buyers that opened up. And I would opportunity that, if we spot a spot much stableness successful that one, then, of course, that will thief america to conclude, but that's each I person to opportunity astir nan strategical reappraisal successful that part.

Max Yates

Okay. But we should person an update successful immoderate shape wrong nan first quarter, is that correct? [indiscernible] Is that nan correct measurement to construe it?

Pekka Vauramo

That's what we look, but I mean, location is guarantees for that one. Because things will person to autumn successful nan correct places earlier we tin reason that.

Max Yates

Okay. And conscionable a housekeeping mobility astir nan cardinal seashore line. That's evidently been rather a spot higher this year. Could you possibly talk a small spot astir benignant of what was driving that and what you consciousness a benignant of sustainable level aliases a normalized level for this statement would beryllium going forward?

Eeva Sipila

Well, it's a combination, of course, Max, of galore things. I would say, nan 1 circumstantial point affecting this twelvemonth has been Russia-related items, which are benignant of nan -- benignant of, location is different costs than benignant of axenic wind-down aliases restructuring related conscionable from a speedy exit. So that are not business specific, truthful that's been 1 abnormal impact. I mean, typically, of course, we person assortment towards nan year-end. We person each kinds of year-end valuation beryllium it pensions, insurances and these type of things. Say, it'd typically thin to person a spot of a bigger number successful Q4. They are conscionable difficult to scheme and clip benignant of amended than during nan year. So successful that sense, not needfully nan afloat year, of course, was connected nan precocious side, Q4 possibly not truthful much. And past location is still immoderate benignant of remaining group benignant of IT-related issues from nan last tails of nan integration successful these type of things. So I would guideline for benignant of a little number successful '23. That is our really is rather a chunk of one-off, but astatine nan aforesaid time, it's not to benignant of, location will beryllium costs going -- besides going guardant successful this roadworthy and benignant of don't fresh people immoderate of nan segments.

Max Yates

Okay. And conscionable my last mobility is astir pricing successful nan aftermarket. And I guess, 1 thing, I wanted to understand now that immoderate of nan input costs astir steel, freight, power are coming down. I would ideate immoderate of your aftermarket. So your consumable contracts person indexation clauses successful them that protect you connected nan measurement out. So I conscionable wanted to understand benignant of really these typically work? How immoderate of nan costs moderate? So if you could springiness america a consciousness for, do you deliberation that benignant of a mini proportion, mean proportionality of your aftermarket contracts will beryllium affected aliases will beryllium impacted by these? And conscionable really we should deliberation astir that successful position of indexation clauses now? Some of those costs are coming down.

Pekka Vauramo

The scale is location to protect our separator and that's really they work. It's not a continuous adjustment. It takes spot astatine definite frequencies, quarterly frequencies, and, of course, wrong bonzer costs increases aliases reductions, location is simply a anticipation to spot a faster respond connected that one. But for illustration I said, they are location to protect our separator and arsenic I said, it's a affirmative improvement that we see. So acold nan activity is not very high. I don't perceive our customers turning to us, but, of course, location are immoderate automatic scale adjustments happening, which I needfully wouldn't beryllium aware. But for illustration said, I mean, it's protecting our margins.

Max Yates

Okay. And I mean, I would -- conscionable truthful I understand, would you opportunity this is benignant of manufacture modular that connected a, benignant of, if location is specified point arsenic a normal aftermarket consumables contract, would you opportunity location are connected nan mostly of contracts aliases would you say, it's connected little than 50%? I'd conscionable emotion to understand benignant of really normal this is successful position of conscionable your benignant of -- your emblematic aftermarket statement pinch nan customer?

Pekka Vauramo

Yeah, of course, it is simply a statement detail. But we person spoken astir it, erstwhile it relates to our contracts and I would say, that it's a modular word successful our contracts.

Max Yates

Okay, helpful. Thank you very much.

Operator

The adjacent mobility comes from Panu Laitinmaki from Danske Bank. Please spell ahead.

Panu Laitinmaki

Thank you. I conscionable had 1 last mobility astir nan outlook. So really should we benignant of really understand it? If you opportunity that, you expect nan marketplace activity to stay astatine nan existent levels, truthful does it mean for illustration level connected year-on-year comparison for nan orders for nan adjacent six months aliases astatine nan aforesaid gait of improvement? Or what do you mean, if we deliberation astir it benignant of literally?

Pekka Vauramo

Yeah. The guidance, it is simply a six-month guidance and it's not really reflecting erstwhile year, if I understand it correctly. From our broadside it is really sequential improvement based connected caller quarters aliases successful comparison pinch caller quarters.

Panu Laitinmaki

So basically, it's for illustration EUR1.6 cardinal orders for nan adjacent 2 quarters?

Pekka Vauramo

We don't guideline nan orders.

Panu Laitinmaki

Yeah. Okay. Thank you.

Operator

The adjacent mobility comes from Erkki Vesola from Inderes. Pease spell ahead.

Erkki Vesola

Hi, Pekka and Eeva. Erkki from Inderes. Continuing connected China, could you comparison your existent tendering activity successful China to nan 1 anterior to COVID adjacent starts? And wherever do you expect this activity to materialize arsenic orders?

Pekka Vauramo

Yeah, I would opportunity that nan home request successful China, we spot immoderate early rebound from restrictions and restrictions were lifted for illustration conscionable period and a half ago. So it's a very caller point and a large portion of nan past period and a half was successful Chinese New Year and related traveling. So it's not really actions that would beryllium visible successful our bid bookings aliases numbers. But we cognize that activity level has accrued there. Our dealers successful aggregates marketplace are engaged successful China. Their activity level is connected wholly different level, wherever it utilized to be. And if things proceed smoothly, we tin expect to spot things turning into orders during nan coming months. In nan minerals side, nan activity has been beardown passim some successful China, aforesaid applies to metals. If you recall, we booked respective pelletizing orders successful China successful past twelvemonth and that broadside has been almost for illustration unaffected. And past I commented earlier nan Silk Road portion of nan business that has been progressive and increasing each nan time.

Erkki Vesola

Okay, convey you truthful much. And past regarding nan aggregates trading successful nan US. How important will nan IRAs projects beryllium for you successful nan coming years, and erstwhile do you foresee aggregates request materializing linked to these project?

Pekka Vauramo

Yeah, I'm not that judge really nan -- really overmuch nan IRA relates to our aggregates request arsenic specified directly, possibly indirectly to immoderate extent. But what is nan truth is that location is tens of billions of still unallocated road reconstruction attraction costs that hold for reward. And that is what I deliberation will beryllium nan main driver for aggregates successful nan US. That will support nan benignant of infrastructure conception of building connected very progressive for months to come.

Erkki Vesola

Okay, acknowledgment truthful much.

Juha Rouhiainen

All right. I guess, those were nan questions. At this time, we convey you for participating. We convey you for taking portion successful Q&A. This concludes our 4th fourth and afloat twelvemonth 2022 results convention call. We'll beryllium backmost pinch nan first 4th results connected May 3rd, and dream to spot you astatine that time, astatine nan latest. So, convey you and good-bye for now.