Ladies and gentlemen, welcome to the Earnings Call of FLSmidth for Quarter Two and First Half of the Year. The usual presenters, myself, Mikko Keto, and my colleague, Group CFO, Roland Andersen. The usual forward-looking statements that you need to pay in mind. If I highlight the quarter, the company transformation is progressing well. It's progressing exactly as we planned, and a bit faster. Other main takeaway from this one is that the exit from NCA is progressing much faster than even I anticipated when we started the journey nine months ago. If you look at the mining order intake growth of 6%, for me, that is pretty okay. If I dive into mining order intake development, in the product orders, there has been some timing, as you saw some orders coming in immediately after closing of the second quarter.
When we went through the pipeline of quotations and wins, we are basically winning the business that we want to win. Service order intake was slightly below my personal expectation for the quarter. The main reason for that one was the timing of some capital service orders in the latter part of the quarter in Chile, where customers optimized the fiscal year result and then placing the orders 2 week later. There was small timing issue there in Chile, in particular, with the service order intake. The underlying business in mining is solid, is healthy, and it will support our transformation and future profitability. In cement, we saw a decline, as we anticipated.
It's exactly as the macroeconomic, kind of forecasting indicates for the cement market, in the middle of the year. In cement, we are focused on transforming the cement operation into lighter, more streamlined, and more of a service-centric business. That transformation is ongoing. With this order intake, what we saw a significant decline, but also we can look at the mix with 65%-60% service mix in our revenues going forward. Also in cement, we didn't take any bad business in, all the order intake, what we got in cement, is meeting the quality criteria for us, meaning profitability risk. It's there. We continue right-sizing the organization to ensure the profitability of the business. In sustainability, there has been a good development, and I will go into that detail in a minute.
We have a few highlights for the performance bucket, transformation is progressing well. One of the indicators is that we are roughly at the same level in the headcount as prior to acquiring thyssenkrupp Mining, with about 2,000 people. We are down in the headcount about 13%. NCA backlog has been reduced to DKK 1.4 billion, even before closing of the KOCH deal. We raised our guidance for the mining as a result. All apart from one sustainability indicators are improving. We are putting more emphasis now on the safety, and the reason for decline there is heat-related incidents. We are fully aware that operating, working in hot environments under the sun requires more attention. We have all our eyes on that improvement.
If you look at the order intake for mining, the product order intake is, for me, at a good level, and there is always a timing issue in the capital orders. We saw some lots of packages of products ordered in the quarter, Northern Star in Australia in particular, but then we also saw some, some orders slipping into, into quarter three. There's a timing challenge in the, in the, in the capital product order intake. We are winning the markets there, and we are winning the orders that we want to win, and we are winning them with the prices and decencies that we elected to have.
I'm very pleased about quality of the order intake in products. As I said in the beginning, slight kind of a disappointment for service order intake. That had to do with the couple of last weeks of the quarter, and in Chile in particular. Some of the customers decided to postpone, delay, a couple of the large orders until the next fiscal year. We saw those orders coming in then in July. Underlying health of the service business in mining is really good. Also the mix of the service is getting better. We are seeing more, in relative terms, more orders coming in, in categories of spare parts and wear parts, as we are migrating away from basic labor services, which has inherently low margin.
All in all, I'm pleased about the development in this area. Revenues, it just indicates our ability to execute. We can execute products, we can execute service extremely well, and that's why the revenue growth is very significant. Also, the mix is close to optimal, 65% of the sale of the service. Longer term, of course, that is very close to the optimal, what we want to have. This is actually one of my favorite slides. I love this page. I look at it a lot, because this is summarizing where we are in our transformation journey. 10.8 adjusted EBITDA shows that quarter by quarter, we are progressing our journey, and we see quality of the earnings getting better and better quarter by quarter.
As is discussed in the past, the order intake backlog quality starts to be very good for the FLSmidth. We still have a dilution impact of Mining Technologies, TK, which is less than 2 percentage points toward end of the year. We still are executing some low-margin contracts from the backlog that dates often back, the deal-making dates back to 2, 3 years ago, and we are just executing those. All in all, this is summarizing the journey where we are and how we can improve our performance, quarter by quarter. We then look at the order intake for cement, this is pretty much what we expected to happen in the cement market, and there are a couple of takeaways from this order intake.
We are disciplined, refusing to take low margin, loss-making orders in cement products and capital business. We don't do it. That has been questioned by some of you in the past, if you see the decline in the market, whether you are disciplined enough to, to ensure the quality of the orders. We are very disciplined in the, in the, in the, in the capital business. Our focus is that the mix between service and, and products would be above 60%, preferably around 65%. Of course, order intake, despite seeing the decline, significant decline, we see the mix getting better. Our full focus is on transforming the cement operation to become more service-centric. We started the transformation in the beginning of the year, but we are not yet done. It will take time.
We are working against the market, which is, which is not very good. We are able to generate consistent EBITDA out of the cement business with our actions today. 4.3% EBITDA for the quarter is also, well, not ideal mix. In relative terms, we executed a fair bit of capital in relation to the service. Over time, we want this relationship to move into 60-65 to service ratio. We are also understanding that significant cost out is needed in cement operations to meet the lower demand, and then to having SG&A and COGS at a level that is supporting the profitability. Backlog quality, also in the cement, in terms of profitability and risk, is pretty good.
One of the major achievements, in my opinion, in our transformation journey, what we started less than nine months ago, is the NCA exit. We've been extremely determined with the exit, one might say that we've been borderline aggressive with our exit. Therefore, we achieved the result end of the quarter, that backlog is down to DKK 1.4 billion, bearing in mind that the KOCH Solutions sell is not completed yet. Very fast progress here, and we are estimating that we are out of the NCA end of next year. That is at least a year earlier than our base scenario was when we started the journey. I'll hand over to Roland for some of the more details of the financials.
Thank you for that, Mikko. Adding the whole thing up, the quarter two 2023, is a revenue of DKK 6.4 billion, and an adjusted EBITDA of 6.7%, DKK 97 million worth of integration costs, sits in the P&L, and the reported EBITDA margin ends at 5.2%. After financials and tax, a profit and loss for the group of DKK 118 million. Gross margin is improving, for gross profit is improving for the group. It's driven forward both by the gross margin in mining and in cement, but partly offset by the negative gross profit still sitting in Non-Core Activities pocket.
Our SG&A cost, compared to same quarter last year, now we carry the full load of the former thyssenkrupp Mining, and also a chunk of our integration costs, sit in SG&A, but 16.9% of revenue for this quarter. Our adjusted EBITA, as Mikko mentioned, 6.7%. We have tried to outline the bridge here a little bit, so same quarter last year, 6.1%. Acquisition cost worth of 2%, and therefore last year, 8% adjusted. Since then, we have added in a revenue, predominantly from ex-TK's mining business.
NCA pulling back in our gross margin as also Mining Technologies is diluting on group level around 1.5%, a few other items, the adjusted group EBITDA margin ends at 6.7%. Deducting DKK 97 million in integration costs, we end at 5.2% for the quarter. Net working capital improved slightly for the quarter, 10.1% of revenue. There's a few moving items. We improved receivables a bit, also improved the work in progress. On the offsetting part, we continue to spend a chunk of the prepayments from our customers, net, net, a slight improvement.
Consolidating that up, it ends with a positive cash flow from operations for the group of DKK 372 million. A few investments and also acquisitions were made, and then free cash flow for the quarter of good DKK 218 million. That means that our financial gearing remains at level with the previous quarter at 1.0x, and we still well be below our capital structure targets. Financial guidance were latest lifted up on August 8, and that means for mining, we are now guiding a revenue of around 17%, with an adjusted EBITA between 10% and 11%. Cement guidance were adjusted in August when we sold the FT Media business.
We changed the initial revenue guidance for DKK 6 million-DKK 6.5 million to around DKK 6 billion, and the EBITA margin is now 5.5%-6.5%, which is driven from the original guidance of 4%-5% only by the sale of FT Media business. That means that the underlying is still in line with the original guidance. Non-Core Activities is unchanged, DKK 0.8 billion-DKK 1 billion in revenue expected and a loss between -DKK 250 million to -DKK 350 million for the year.
That means that the group is now around DKK 24 billion in revenue, with an adjusted EBITA of DKK 7.5-8.5, and an EBITA margin reported between 5.5% and 6.5%. I think it's important to mention here that we expect the Mining EBITA margin to be diluted by less than 2% by Mining Technologies ex-TK. We still expect to spend around 400 and 550 million DKK for the full year, taking out the synergies and integration cost. The guidance for the non-core segment here, the loss in this year is part of the loss to the lifetime of the Non-Core Activities of DKK 1 billion in total, and that's improved from DKK 1.2 billion in loss from the outset.
We continue to have good transformation progress. We still target DKK 560 million in annual run rate cost synergies to be taken out by end of 2023. If we look at a number of headcounts, employees in the mining segment, as it looks today, have been reduced by 800 since we took over TK's mining business.
NCA have reduced by about 200 people. The simplification in cement, since we started last, mid last year, means that a more lean organization, a delayered organization, and also with presence in less countries, have reduced the needed manpower by about 700 people. Our risk management and de-risking continues. Much higher part of our revenue is now in the category we call lower risk orders. That goes both for cement and for mining. On group level, we started out with about 150 offices after taking out or taking over thyssenkrupp's mining business. We target to get down to 80. Since then we have closed about 40. Admittedly, the low-hanging fruits, still progressing, maybe slightly ahead of our plans.
Importantly, also to, to note that our pure play separation of, of, our mining business and cement business into two separate, company groups is progressing on track, so we expect the legal, entity separation in two separate, corporations to be completed during the course of, next year, and that's also on track. With that, I think we give it over to, Q&A.
At this time, if you'd like to ask a question, please press star one now on your telephone keypad. Again, that is star one to ask a question. We'll take our first question from Christian Hinderaker of Goldman Sachs.
Yes, good morning, everyone. Thanks for the opportunity. I've got three questions, starting with the mix change that you mentioned, Mikko, in mining service. You've flagged a shift away from basic labor services towards spares and wears. Can you please quantify the total mix for the aftermarket business in terms of labor services, spares, and any discretionary refurbishments or other components that might be relevant?
We, we don't give out the kind of detailed %, but toward the end of the year, the labor part will be insignificant. Basically, it doesn't really kind of, what do I say? Move the needle in terms of profitability, so it will be insignificant toward the end of the year. We are exiting 2 of the last large service contracts, so it means that we do only professional services, which is kind of high expertise services, and of course, the volume there is much smaller. In upgrades and retrofits, we are focusing on a kind of a standardization of the kind of standard packages. For example, just use an example that we would do upgrade to all our install base of High Pressure Grinding, with a kind of, with a pro version.
That would be the kind of standard upgrade for all 150, 160 HPGRs, what we have out there. That is a standard upgrade and retrofit. And we don't go into this kind of highly engineered, non-standardized engineering projects where you upgrade. It means that also the upgrade retrofit will be low risk and more standardized compared to the past. It will be dominantly, I would say that, by far there is dominantly spare parts and wear parts, the aftermarket beyond this year.
Thank you. Second question is on the long-term margin target for 2026 within minerals, 13%-15%. Bear with me as I just walk through this. The consensus has DKK 19.3 billion of revenue for 2026, which implies, given that margin range, a DKK 2.7 billion of adjusted EBITDA at the midpoint. If you take the new 10%-11% margin guide as the base for this year, you then need to find an incremental DKK 1 billion or so of incremental profits in the next three years, which is about a 60% uplift versus the 2023 number. You've got DKK 560 million of run rate synergies targeted by next year, that leaves around DKK 440 million or so to come from the other six building blocks in the bridge.
Just trying to understand scaling those and, and the proportion that might be considered volume agnostic, i.e., the simplification dynamic you mentioned, and also the de-risking versus, say, shift in mix towards aftermarket.
Maybe I'll give a few comments and then hand it over to Roland. If we, if we split the transformation between service and products, in service, we're pretty far. Basically, end of the year in order intake and starts to be visible revenue, basically, we equalized difference between FLSmidth and Mining Technologies. As we discussed earlier, that we've seen significant uplift in order intake margin between last year and this year, because last year, up to this point, has been really high inflation times. We basically done the kind of big leap there in terms of order intake profitability.
I think now, what I see happening in service is that we've reached a level in order intake, what we need to support the 2026 target already end of the year. That is turning into revenues. Of course, then the journey is much longer in the capital business. We are still executing contracts that have been signed well before we acquired thyssenkrupp Mining. We are in early parts of some of those deliveries that were signed one and a half years ago, 2 years ago. It means that we still have a low margin revenues flowing through our books for the next 2 years.
The new order intake, we have, we made no compromises in the quality of the order intake for products, so that everything needs to meet our standards. As I said earlier, I'm happy with the order intake, the volume. I think we are winning what we expect to win, and the margin and decencies are roughly at the level that we expected. Of course, then impact of that low margin, product revenue will be less and less over time. We are not yet done with the cost out of the synergies, so we have way to go there. Roland, I think if you want to.
I think you pretty much touched most of it, Mikko, right? Christian, I'll have to point you back to our capital market presentation, where we had the bridge and significant levers. We are still pulling is of course, the synergy out outtake. We'll significantly reduce number of offices and also people employed in the mining business. We will concentrate in smaller but bigger sites or hubs. We work dedicated with product pruning, both within service and also within products. There's an element of that, and then there's an element of the backlog currently being built, becoming better than what we have historically. You know, we will reach the long-term target of 13%-15%.
We started this year at 9-10, now we're guiding up to 10-11, and continue to, to, to push up. That will enable us to close that gap to, to the long-term targets in 2026 or before.
That's very clear. Maybe finally, just on cement. Just curious why the, the revenue guidance is, is unchanged. Obviously, it, we've sort of had two updates in, in a relatively short period, but given you're signaling a slowdown in market demand, is that just backlog conversion? So maybe we expect a slower pace of revenues next year. I guess just wonder how confident you are in the current backdrop, progressing your aftermarket penetration rates.
W e are reiterating the guidance for the revenue in Cement today. Initially, we actually set out with a guidance of DKK 6 billion-DKK 6.5 billion, now we're saying around DKK 6 billion, when we sold AFT. Why can we do that? We can do that because we have backlog conversion, assuming we continue to execute the way we executed in the first half, then we will hit the, hit around DKK 6 billion. We are confident about that.
Yeah, also about what I commented earlier, that we are going through the service transformation. We are making the business and organization much more service-centric. It has been a 100% capital, products, project-centric organization, so the transformation will take a bit of time, but we are well on our way. We are implementing new operating model, a new organization, all that, so it will take time to kick in. But we've seen some early positive results from some of the countries where we are longer in that transformation, that despite the market, we've been actually able to maintain, and even increase in certain cases, the kind of order intake.
It's, of course, we are even in service transformation, we are fighting against the market, which is kind of depressed and going down. Question is that, what happens with the overall market? Also that, then if you look at the whole P&L of cement, we may... As I said earlier, we make no compromises with the quality of the order intake, so we don't take bad business in to have employ people. We know that the organization requires continuous right-sizing , and especially the support functions. If I look at the mix of the people, what we have today, around 3,000, there will be significant, significant adjustment, and especially in the support functions, which are far too heavy.
We are looking at other measures to save costs in cement. We are looking at costs. We are looking, of course, there might be still something, some portfolio decisions that we need to make for, for cement. It's as planned, but now we need to, of course, accelerate that process on back of the weak market conditions. We, we want to show the profitability of the business, and we are less obsessed about the top line.
Understood. Thank you very much.
We'll take our next question from Andrew Wilson of J.P. Morgan.
Hi, good morning, guys. Thanks for, for taking my questions. I've got 2. If I can start just on the, the aftermarket side or the service side, in both mining and cement. I guess at the moment, because of the actions that you're taking in, in a number of different areas, I, I guess there's an element where the growth rates are, are quite hard externally to sort of see almost what they should be. I guess my question is kind of through the cycle, and it's kind of the next 5 years or so, what do you think the, the growth rates in those two businesses should be, if we just think about the service component? I'm just trying to kind of isolate that underlying growth or underlying growth opportunity, maybe versus what you're seeing at the moment. Maybe I start there.
I think if I start with the mining and prospecting , I think also in mining, we used to be project capital-centric organization. But inherently, the aftermarket is healthier in mining compared to the cement. Therefore, we are confident that we can grow against the market. Whatever is the market condition, we can grow above the market rates. We know that we have a pretty good, pretty good, kind of capture rate on the spare parts, but wear parts, consumer parts is the area that we can grow faster than market.
Let's say that if the market over the cycles average is 3-6, we will be able to grow faster than the market, but it's more in the consumables, wears area than in spare parts. Spare parts are for securing basically the kind of capture. Of course, we can incrementally improve in the spare parts as well, but the big opportunity is, is, is in wears. Going to the cement aftermarket, we've analyzed the global aftermarket, all cement plants that are supplied by FLSmidth, and what we saw is that there are huge differences in the share of wallet between the markets.
Comparing our capture rate for the aftermarket in North America compared to some other markets, of course, bearing in mind that there are some fundamental differences in how the different markets operate. We see opportunity there to grow the service just based on our install base. There can be situation, there are no single new cement plant. Everything is about the install base, and we have a good install base and service base to develop in cement. As I said earlier, wherever it stabilizes, we can grow faster than the market, but of course, depending on the overall market rate, that if the market goes down fast and we are going down only a little bit, we are increasing our share of wallet.
Cement is the even more project-centric history in FLSmidth than mining. We are starting from very kind of, undeveloped, kind of service operations. There's a, there's opportunity there, but of course, now we are facing, headwinds from the, from the market at the same time. I believe that we can grow the service in cement. Of course, if you look at the P&L, if you can do 65% service and then rest products, then certainly it's pretty, good for the P&L as well. The positive thing in cement is that the order intake margins are actually good. They are...
We've been able to push the margins higher than what anticipated a year ago it's really healthy the spare part margins on order intake in cement, they are very good. Also in the products, we are at a good level, and the big issue is now with the volume, is the SG&A burden that we have, especially from the support function. That is without that SG&A burden, it actually the business would look quite, quite healthy and vibrant. As we are downsizing, historical from large organization, I think it's easy to say downsizing, but then it takes quite a lot of hard work.
Thank you. Thanks for the detail. Maybe if I can ask a second one, and it's, I guess, possibly a little bit longer term, but if you think about the mining and the cement separation, and obviously that plan is in progress, so I appreciate this might be early. Is the intention that that will be kind of done without adding any cost to the businesses? By which I mean, if we look at the cement margin today and the ambitions for the cement margin, if it was to stand as a standalone business, is there any additional cost that needs to go in that from a kind of support back office, functional compliance, et cetera?
You know, can we think about those costs already being factored in when we sort of think about the, the longer term targets and, ultimately, where we think cement might get to? Hopefully, that, that makes sense.
Thank, thank you for that, Andrew. The answer is a little bit both. The reason why we are separating them is because they are very different in size and also in footprint, in terms of where we have offices. Once we get that right-sized, you know, we can scale down a lot on offices, support functions, infrastructure, ERP platform. Then it becomes a small and more lean organization to run. Of course, in the absolute top layers, there's a little bit of these synergies if you establish a separate corporate structure.
The advantages of doing this is by far outpacing the synergies that will be in terms of adding a few support functions on top. Net-net, a lot of savings by delayering, scoping into the relevant market, boots on the ground in the markets and where our customers are, and not 40 or 50 countries where, you know, we generate 80% of our revenue in less than 10. That's the plan.
Very clear. Thank you very much, guys.
We'll take our next question from Claus Almer of Nordea.
Thank you. Also, a few questions from my side. The first question, Mikko, is to you. You mentioned during your presentation that you saw some orders slipping from Q2 - Q3. Could you put some numbers to that effect? That would be the first one.
Well, basically, there's a couple of finer points. One, one finer point was that service order intake for mining was slightly below what we anticipated. Then when we investigated, there was a delay in Chile for customer, some customers pushed lots of service orders, capital spare part orders to the next quarter. It's not fundamentally changing the picture in service. It's, we believe that, and what we see is a healthy service market. But maybe if you look at just the top line, then that put a bit of a dent there.
We saw those orders coming in the following month, so it's not that it was nothing was canceled, so it was timing. Then in the product business was significant order from Ma'aden from Saudi, that was a touch-and-go , whether it's a kind of quarter two or quarter three. We decided that we don't look at quarters. N ikko is the best possible contract for us in terms of T& Cs, then it closes when it closes. We don't want to hurry up anything just to kind of meet the quarter and make compromises.
It's the baseline service, I would say that, yeah, it's kind of back on track after the kind of small blip in the, in the last two weeks of the quarter.
Sorry, Mikko, is it kind of DKK 200 million that within service that, that was pushed to Q3, or just get a, you know, more a magnitude of effect here?
I think what we said earlier in the year, that, that, the steady state was like, Q4 and Q1 kind of average. That has been our kind of baseline estimate. You can, of course, can be up or down from the baseline, but that's kind of a steady state at the moment for service.
A question regarding the Cement Division. In the report, it is mentioned that the underlying margins are stable and the profitability of the order intake is improving. Just to be sure, the quality of backlog is better what we see in the P&L right now, I guess. Does also the comment about the pipeline imply same margins as in the backlog, or is the pipeline actually having a better margin than the backlogs? That would be the second question.
Claus, I think there's a slight uptick in the future revenue margin compared to today, because backlog is, o f course, in service, the backlog is turning to revenue quite fast. I t's a small uptick. Then the bigger issue with the P&L is that with the decline in the volume, we adjusted the cost level in quarter four, after quarter four, for the volume level at the moment. Of course, when volume is dropping, 30%, then we are, we are burdened by too high SG&A. Basically, the result is, is hindered by the, by the SG&A. That's why we need to do the right sizing of cement to adjust the new market conditions.
It's, like a self-help, more in, inside the company rather than. We can have a profitable business with a low volume, but it requires a light, more simple, operational model and of course, full focus on service.
That sounds good. That was all for me. Thank you so much.
Thanks, Claus.
We'll take our next question from Nick Housden of RBC Capital Markets.
Yes. Hi, everyone. Thank you for taking my questions. I've got two. The first one is on the product order intake for mining. You mentioned that for some of the larger order decisions, you're seeing delays, and you mentioned political and permitting uncertainties there. Then even if we strip out the effect of the large amounts orders, it looks like there was still, a pretty sharp decline in what would be the smaller and medium-sized orders. I'm just wondering if you've seen a sort of slowdown in those decisions as well, or is that purely down to some of the portfolio de-risking that you've spoken about?
I think it's a bit of both. I think, when we said that we are de-risking portfolio, I can't give the exact number, but whatever large orders we, we get in, we've scoped out maybe 20-30% non-product content. Most of the large, large orders that we get, which are today products or bundle of products, we could have, extended scope, steel structures, this, this and that, which could basically impact easily 20%-30% for the volume. Of course, that's, low or no margin, high-risk content. We don't want to have that.
We've seen slowness a little bit in the activity with the small, medium-sized mining players because, of course, they are more dependent raising capital from the market rather than fund, being able to self-fund like the top-tier players. There we've seen some slowness. Nobody's canceling anything, but just cost of capital, raising capital takes a bit longer time, and that would be a bit more in North America, and the commodity may be impacted is gold. Because lithium is a hot selling a hot potato, so you are able to secure the offtake of the of that production and kind of lock that in.
I think, slight slowness in activity in parts of the world for small gold- related opportunities. Lots of players are executing plans as previously.
Great. That's really helpful. O n a related note, just about China. It seems like pretty much every month that goes by, we get more, yeah, unencouraging data coming out of China in terms of economic recovery or lack of economic recovery there. Is that something that your customers are, are bringing up in conversations that you're having with them? Or are they still feeling pretty confident and looking more towards the electrification story 3, 5 years out?
Even when we talk to our customers, there seems to be still a very kind of optimistic bullish about the kind of longer-term prospects of mining. Of course, most of the decisions are not done on an annual basis, so that if you make a decision of an investment, then it's for next 10, 20, 30 years. You never make an investment based on the outlook of today. But of course, then different commodities are impacted differently, so that I think our exposure to copper is really good. One is 40% copper in the order intake, and that's quite typical for us. I think that's extremely good commodity to be in.
Maybe the commodity most impacted by any potential slowdown in China would be then iron ore exposure of FLSmidth is relatively small. If you look at the mix, number one is, copper, gold, where we see that there has been some slowness, but we actually got a good gold shop there, in the last quarter. Then in the smaller commodities, iron ore. Iron ore is typically maybe the most impacted by the, by the China.
Great. Thanks very much.
We'll take our next question from Tomi Railo of DNB.
Hello, it's Tomi from DNB. Coming back to the previous question on the mining orders, just wondering, we have seen this couple of quarters, stripping out the announced large orders. We are looking at the unannounced order level of roughly DKK 800 million. Would you be able to say how much TK was of that, and if this is sort of a good proxy for orders to come in terms of base, base order activity for small and medium-sized activity?
The largest product that what we acquired from TK is HPGR, high-pressure grinding rolls. In the world, there has been no large HPGR orders for the last 12 months, so it means that impact of the TK for the product order intake is tiny. Of course, if you look at the annual average order intake for the HPGRs, it's kind of not very even. They might have a year that there's no single order for that, because it's really specialized heavy capital equipment. Some year there might be 10, 15, but there has been no significant HPGR orders in the world, regardless of the supplier for the last year. I think that they will come, but it's more about timing.
The big thyssenkrupp opportunity is actually in servicing the largest install base, what we have for the HPGRs, and then the repair centers that we acquired. For the last 6 months, it has been more the service opportunity from Mining Technologies rather than the capital. Capital will come. We are the market leader there, and also that it, we are looking at possibly to retrofit all our HPGRs and upgrade them in the world. You need to look at it more through the lens of the service rather than capital.
Okay, thank you. That's clear. Second question, in terms of second half guidance, you are essentially guiding for pretty sort of a stable mix in revenues, first half and second half. Any insight to sort of seasonality between third and fourth quarter? Fourth quarter should be perhaps again, the biggest.
I think we are, you know, we're still steaming forward with our de-risking approach. We had a relatively good service quarter in Q1, and seasonality traditionally is Q4, so, you know, guidance is 50/50.
Thanks. Finally, apologies if I have missed this, what was the TK synergy achieved synergy number for, for the first half? Have you told that?
W e're saying currently in the numbers, DKK 20 million to DKK 30 million per quarter. We will be around DKK 150 million to DKK 200 million for the full year, because the last wave of synergy take outs will come very late in the year.
Thank you very much.
Once again, to ask a question, please press star 1 on your telephone keypad. We'll move next to Elliott Robinson of Bank of America.
Hi, guys. I was just wondering, how are you seeing demand in MissionZero products relative to your wider product base? Is there any sort of like areas, either by type of miner or the size, commodity, or geographical region where this demand is further boosted? Thank you.
Elliott we see the demand from mining to look at energy efficiency of the operations. Then, of course, we have certain products which are kind of market leaders in energy efficiency. We see all the new decisions by the mining companies are emphasizing energy efficiency, and in the process plant, energy efficiency usually comes from power consumption and all the piece of equipment, and then the latter part of sustainability is kind of capture all the recycling of the water end of the process.
We see that it's part of all the decisions, so it's, because that's very much in line also with the cost that, if the product is more energy efficient, of course, its running cost is lower because almost 50% of the Or let's say 40% of the mine, process plant cost is energy. Energy efficiency is driving the decision. In that sense, we see that in many areas we are leading the pack in terms of technology. Like a pyro, we have by far the best pyro solution in terms of for lithium, which is in terms of emissions, but still, some customers might opt for cheaper solution.
If they opt for the the most sustainable solution, for the pyro, it's, it's ours. We see that to be really driving, especially the larger mining company decisions, then sometimes smaller ones, they are balancing between the cost of the most optimal solution from sustainability point of view against the cost. All the major players, they are driving all the decisions with the sustainability lenses in their eyes.
Okay, that's great. Thank you. I have a second question, if that's okay. Your book-to-bill on a last 12-month basis is now below one. How should we sort of see this developing over the coming sort of quarters, given the sort of order and revenue dynamics that you're seeing? Thank you.
The book-to-bill is a little bit seasonal, right? Traditionally, Q1 is our lowest quarter in terms of order intake. That didn't happen this year. Then it builds up through second half. Q4 is our strongest, strongest quarter, and that's where you would expect the highest book-to-bill. If that answers the question.
Well, I was thinking more on a 12-month basis, because obviously, you saw a big inflow of orders, and now you're delivering on those. I was just wondering whether you're going to see a period of lower orders and higher revenue and how long you can kind of sustain that for, or whether we should kind of see revenue moderate once you've gone with that initial build backlog or the excess backlog relative to historic levels.
I'm not quite sure what the question is, but the service, if we look at the service backlog, that will typically run off over the next 2-6 months, maybe a bit longer, whereas the products backlog can be everything from 3-6 months, up to 2 years. I think that's where this question is going, if demand is dropping, then you would see a delay until it hits through the P&L with the revenue. I s that where, what the question was?
Give or take. T hat's fine.
There's no seasonality in products revenue, right? That's spec by the contract with the customer. Service is different.
I think more across sort of the mining equipment players, we've seen a of bulking up of o rders and across capital goods in general, we've seen higher backlogs relative to history. It's more just a question of how you kind of see that backlog playing out and how long you sort of see s upportive revenues from this backlog level.
i f you think about the kind of products business, capital business, I think there's still noise from the past, meaning that NCA, Russia, from o f course, Russia was out after the first quarter last year, but there's still a lso derisking, meaning that we are kind of giving up that excess, bad quality part of the order. I think the derisking plays part as well, that as I said, if we have a DKK 100 million order, we could easily make it 130 if we wanted, but why would you take steel structures and that sort of thing content for your order?
I think it's stabilizing in terms of that it becoming more and more comparable, but there's still some noise from derisking NCA and a few other bits and pieces. I think we are not yet on a steady state, in terms of comparing apples to apples to the previous year. It will stabilize now that now we've been running this year fully with the derisk strategy and that type of thing. I think, now it starts to be comparable, what we do, quarter by quarter, year- on- year Roland, if you want to comment that further.
I f that was the question, then I misunderstood. The first quarter we will have this year's Q4, that will be like-for-like comparable, where our derisking approach is fully implemented, where NCA is separate in a segment, where Russia is fully out, and where MT is, or, former thyssenkrupp Mining is fully in. There will be noise a little bit in the numbers again for Q3, and then we will have clean comps, as from Q4.
T hat's great. No, I've got a lot. Thank you very much. That's everything from me.
Okay. Cheers.
There are no further questions at this time. I'd like to return the call to our host for any concluding remarks.
I think I'd like to conclude that we are happy with the quarter. We are progressing well on our journey of transforming the company into kind of a higher-quality and better quality of the earnings company, derisking, focusing on the core technology and service. I think we are well on our way, and the mining market is solid. We talk about nuances of the mining market, but basically, beyond those nuances, what we discussed is a really good market. Cement saw the decline in the market, and we are fully adjusting the operation, cement operation into new volume scenario and focusing there also on transforming the company to be more simple, more straightforward run company with a more service-focused .
We are well on our way, and the quarter result, is evidence of that one. Thanks very much for your time, and, look forward to talking to you all soon again.