Good afternoon. Good morning, ladies and gentlemen. Welcome to this Metso Outotec conference call, where we discuss our fourth quarter and full year 2021 results, which we put out earlier today. We will first have the presentation by President and CEO Pekka Vauramo and CFO Eeva Sipilä, and after that, we'll be ready to take your questions. We try to limit the length of this call to 60 minutes, and we are ready to start after I'll point your attention to forward-looking statements that are mentioned in the disclaimer in the second slide of our presentation deck. With these remarks, we are ready to start, and I'll be handing over to President and CEO Pekka Vauramo. Please go ahead.
Thanks. Thanks, Juhana, and welcome to this call. Closing our fourth quarter and also finishing last year with sort of fairly positive market conditions. Strong activity has continued in all segments. We are growing both orders and sales, as we will see later on in the presentation. We still have headwind, as I guess everyone else has headwind with the supply chain, with inflation, with logistics, with many issues. Nevertheless, we are in growth mode, and with the backlog, we should see the growth also to continue.
By the end of the year, we also ended our integration project, and we will finish off the follow-up on cost synergies and revenue synergies also with this call basically. We have achieved the targets, overachieved, and faster than originally planned. Looking just first at the sort of group numbers, orders received fairly flat on the quarter. We need to remember that a year ago, we had more big orders than now fourth quarter this year or last year. We had in 2020 at least two big orders in a quarter, and now we only had one order exceeding EUR 100 million in 2021. Sales finally growing.
That is about EUR 300 million growth that we show there for the fourth quarter. If we look at the annual growth, it's just over EUR 300 million, so all the growth that we delivered took place in the fourth quarter, or 90% of it, in fact, in the fourth quarter of the year. Clearly growing now and with the backlog, we expect that one to continue.
EBITDA improving by nearly 60%, adjusted EBITDA, and the margin going up to 12.8% and good solid increase in operating profit and EPS naturally growing as well and strong cash flow and it was strong also for the full year, exceeding EUR 600 million as it was on the same level year before. These are the full year numbers here. Here really strong order growth, sales only 9%, but that's mostly coming, all the growth coming from the fourth quarter. EBITDA growing, going up by about EUR 100 million.
Margin going up by 1.4%. Operating profit nearly 70% up. EPS up by 75%, now at EUR 0.35. Strong cash flow, as already said, EUR 600 million. This of course has had a clear positive impact on our balance sheet, as we will see later on. Looking at the segments, Aggregates fourth quarter is typically the low season for Aggregates, as it's well known. Orders, however, were on growth path, some 10% more orders than a year before.
If we recall a year ago, fourth quarter was the first strong order intake after the initial COVID impact that we had very strong in the aggregates. The strong activity continued. Our order intake was limited by the component availability, and we declined or we didn't confirm orders for approximately EUR 50 million of sales. These have not been canceled. They are still there, and we will book them as soon as we get confirmations for mainly engine deliveries for them. Services are growing as well. Sales really growth from year before.
Equipment growing faster now than services, which is always, I mean, always the case when cycle turn positive. Services share now at 27%, slightly below of last year. Here again, supply chain is an issue for us. Adjusted EBITDA affected by some year-end adjustments. There's some discontinued products that we decided to do at the end of the year. Then we also have been in process of renegotiating our joint venture in China and that program is still ongoing there.
We decided to take some write-downs relating to the stock that the joint venture is having in their inventory out there, a sort of low season, but overall strong performance from aggregates for the full year and best year ever for our aggregates business. In the minerals side, orders did grow on strong market activity. Service orders went up as well by 22%.
What was more important for minerals was that finally we did get the sales number to grow and also services did grow as it started to grow already at the end of third quarter, and it continued throughout the fourth quarter and we are now 16% higher level than a year ago in services. Services share dropped a little bit because of the mix change now at 58%. EBITDA went up to 110 margin, 14.1%.
We had positive impact from volume and synergies, but supply chain, freight, energy costs primarily in our consumables business went up quite drastically during the fourth quarter, and we are of course taking countermeasures to that one. There was really rapid cost increase of primarily natural gas affecting some of our foundries' profitability during the quarter. Minerals segment overall in very good growth mode at this point. Metals segment, the turnaround is now confirmed with the Metals segment. Orders stable on high level. Good activity over there. There was only one order.
A year ago, we had two orders in metals that were bigger ones. This year, only one. Sales doubled from last year, basically. Services share dropped slightly to 15% because of the mix impact here. Adjusted EBITDA EUR 20 million. Good margin we were targeting at 10%. We have some provision releases at the year, and we always look at the balance of projects that we have closed and the closure was slightly positive. There was clear sort of underlying profitability in project delivery and then a minor impact out of these provision releases that came from the closed and finished, completed project.
Main impact really came from the volume and the turnaround program. Then Eeva, over to you, the financials.
Thanks, Pekka. Good morning. Good afternoon on my behalf. For a final time, I would like to, for the sake of clarity, remind of the Metso Outotec merger completion date, June 30, 2020 impact on our financials. Nothing to note or remember on looking at quarterly figures. When looking at the year-over-year comparisons, please bear in mind that the 2020 first half under IFRS only includes the financials of Metso Minerals. Whereas when we discuss illustrative combined figures for 2020, they also include Outotec figures for the January-June 2020 period, hence offering better operational comparison.
With those words, really a few points on the income statement. Our CEO already comment on or commented a lot on the sales and adjusted EBITA, so I'll really focus my comments on the other items. One final point perhaps on the adjusted EBITA for those of you interested in the FX impact included in it, namely the net figure of mark-to-market valuation of derivatives, as well as any impact of items falling outside of hedge accounting. The figure for the fourth quarter was a negative EUR 6 million, and that is included, hence, in the EUR 164 million adjusted EBITA figure.
Going forward, we had adjustments of EUR 16 million in the quarter relating mainly to the finalization of our integration actions, leading to an operating profit of EUR 130 million for the quarter. The full year adjustments were EUR 50 million. For the full integration period, including also adjustments from the second half of 2020, the one-off total ended up at EUR 81 million, slightly higher than the earlier indicated EUR 75 million, yet still clearly below the original EUR 100 million estimate. With the slightly higher cost, we did achieve a run rate of 22 million more than estimated cost synergies, the total of EUR 142 million at year-end. We are indeed very happy with the achievement. I'm also very pleased with the work done in our treasury and tax area.
Integration benefits are clearly visible as lower financial cost and a lower effective tax rate. On the effective tax rate, I would note that the unique level of 24% was partly thanks to tax-exempt divestment proceeds. Going forward, I would still guide on the same approximately 26% level as I have done earlier. In the graph on the right, you see the solid EPS development, EUR 0.11 in the quarter and EUR 0.35 for the full year from continuing operations. Now, when looking at the gray pillars, including also the result for discontinued operations, in Q2, we booked the gain on the divestment of the aluminum business, and in Q4 from the divestment of the waste recycling business. Unlike in 2020, our EPS including discontinued operations was slightly higher than the one from continuing operations.
Moving to our balance sheet, total assets are up almost EUR 300 million from the beginning of 2021. Assets held for sale have decreased following the successful completion of the mentioned two divestments. The growth in assets comes mainly from working capital items. Inventories are up mainly in work in progress, as can be expected from our order backlog. Due to the strong sales growth in the final months of the year, a big portion of that had landed in accounts receivable at year-end. As such, we have done well on collection, and the overall aging profile is healthy. The graph on the right tells the most important story on our balance sheet.
Very proud of the fact that in 18 months following the merger, we have been able to halve our net debt. This gives us the possibility to move forward on our growth strategy as well as supports the dividend proposal of the board for the AGM. The cash flow is obviously the story behind the successful debt reduction. We generated EUR 164 million of cash in the fourth quarter from operating activities before financial items and taxes. The figure for the full year ended at EUR 608 million. In the quarter, we saw a negative impact from net working capital. For the full year, it was a positive contributor. For the full year, it was also similar, sort of slightly negative.
As the supply chain continues very tight, I do expect us to tie more money in inventories as we can expect imbalances of what we're able to stock on and what not, causing some inefficiency on the overall level. Considering all the challenges on the supply chain side last year, I think the sort of outcome from a cash flow point of view was excellent. Moving to the breakdown of our net working capital. Inventories are up by some EUR 30 million from the end of September and about EUR 230 million from the start of the year. Payables more than offset receivables, and additionally, advances received have slightly grown in the fourth quarter.
Provisions and other non-interest-bearing liabilities reduced the overall net working capital figure to EUR 254 million at year-end. I will conclude with a slide on our strengthened financial position. Our net debt is down to EUR 470 million at year-end, thanks to early repayments of bank loans of EUR 350 million during the year. This we have been able to do while still maintaining a strong liquid funds position. During the year, we canceled early two credit facilities deemed unnecessary, totaling EUR 90 million. Following our sustainability-linked revolving credit facility launch of EUR 600 million in Q3, during the fourth quarter of the year, we entered into another sustainability-linked funding arrangement, and this time with the Nordic Investment Bank.
Both arrangements include sustainability targets we have as part of our science-based targets to reduce emissions, not only in our own operations but also within our supply chain. Finally, I would mention that we also note in our financial review published earlier today that we have further repaid debt in the beginning of 2022 with a new EUR 50 million repayment to balance the ample liquid funds we have. With that, I will hand it back to our President and CEO. Pekka, please.
Yeah. Thanks, Eeva. A few slides about our strategy and integration as such. I said already we closed the integration follow-up now with this info call. We reached 142 million of cost synergies at the end of the year, and this is above our target of EUR 120 million. Just reminding the original target was EUR 100 million, and a year later, basically. I'm very sort of satisfied with the performance, and our organization has really done a great job in taking the cost out of the operations globally.
We really have the same list of where the synergies are coming from, but organization restructuring of that one, eliminating overlapping parts, facilities, IT and procurement. Despite the inflationary environment, we made good progress in procurement as well. These are the main items where the synergy costs are coming from. On revenue side, our sales in last year totaled EUR 110 million, and we were targeting EUR 150 million by the end of next year on annual basis. We have now order backlog of EUR 115 million of revenue synergies, and we know that we will reach EUR 150 million by the end of the year, even though we are not providing the follow-up anymore from here onwards.
The one-time cost, EUR 81 million, slightly more, like Eeva said already, than planned, but less than the original estimation of EUR 100 million. Overall, really good and happy with how the integration process has gone, and adding on top of that one that all the work has been done during the restrictions of pandemic. Another reason to be satisfied of the outcome and results. Several structural developments that have taken place or are taking place in Metso Outotec waste recycling. We completed the divestment in December. Metal recycling, we've agreed to divest, closing expected in first half of this year of that one.
Our announcement a few weeks back, where we said that our Metals will go through strategic review. As part of that review, we concluded that hydrometallurgy is more synergistic with our Minerals business area, and we move it to the minerals. that move has taken place already. the reason for this one really is the synergies. Hydrometallurgical plants, they are very often at the mine site, and there are same people operating them as they would the remaining part of the process is operated by.
Same people are taking decisions on services, on investments as are there in the combination part of the process. Therefore, it's much more synergistic with the minerals, and that's the main reason we wanted to move that to minerals. The remaining three business lines, smelting, metals and chemicals processing, ferros and heat transfer, will go through strategic review, where we look for best environment for the future growth and development of these businesses. They might be within Metso Outotec, they might be together with a partner, they might be also divested. Like I said, we are now going through the review.
It will take several months to go through, and depending on outcomes, we will then communicate about them when the time is right for that. Sustainability is really on top of our agenda, and we launched the Planet Positive label for our products that are the most sustainable products and that keep us on track achieving the 1.5-degree warming target, as we have set to ourselves. The sales are growing nicely as we speak of planet positive products and technologies. We still don't have the services included in that one due to complexity of and great variety of services.
In future, we will see also services joining, and that will naturally add to the sales of that one. We have upgraded our commitment to net zero. It stands now at 2030, and we made really great improvement and progress in last year already. CO2 level in own operations was reduced by 58%, mainly moving into use of renewable energy in our consumables business, which is really the energy consumer of our business. Then some further reduction in logistics contributed 18% for that part. In our science-based targets, we have also committed to engage our suppliers into this program, and we are making good progress.
More than 10% of our suppliers are already committed to science-based target, and this number is by the spend, not by the number of the suppliers. We have also several acknowledgments that we received throughout the year. We are on the list of Global 100 CDP ranking. We have A-minus there. Those are really important milestones for us to be on this list. We are clearly either the only company or amongst one or two companies in this business that are making those listings. COVID is still with us, as we all know.
Latest version seems that it is going through especially those operations where we have big concentration of people working at the factories not capable of working remotely. As well known, this variant sweeps through quite extensively, but rapidly through the organization with very mild symptoms. We are not expecting any major disruptions of that one. Those factories that have been affected, yes, they may have a slowdown for about a week or so during the first quarter of the year.
We feel that is something we can catch up then either during the quarter or latest by the second quarter. Same restrictions do apply with customers, but since the symptoms are mild and we know that restrictions are being lifted in some parts of the world and this might happen also more globally once the sort of variant spreads and goes through our main markets. Still affecting our business, but not a sort of major concern at this moment. Of course, no guarantees of what the future variants will bring along then into business and what their impact is.
Market outlook, we repeat the same outlook that we have had already for several quarters. We are currently on a strong level. We expect that one to continue. Yes, unknowns in the world, COVID is one of them, but maybe some other ones there as well, but they are all more sort of speculative ones. This is a sort of factual, the COVID part. Strong current level expected to continue. Thank you.
Operator, now we are ready to open the telephone lines for questions.
Thank you. Our first question comes from Klas Bergelind with Citi. Please go ahead.
Thank you. Hi. Hi, Pekka and Eeva. Klas at Citi. The first one I have is on the margin in Minerals. It seems like there is a EUR 15 million net drag to the margin for not yet compensating for the logistics and energy costs. The Minerals margin, therefore, would have been 16% if you would have compensated fully. From what you can see now, Pekka, do you think these costs will be higher quarter-on-quarter into the first quarter? Can you please tell us how we should think about the magnitude of the pricing running in the P&L at the moment? It was most of the 7% sales increase in the third quarter at the group level.
How much was it now in the P&L, and how much do you think it will be in the first quarter given your new price increases if you like? Thank you.
Yeah. Thanks for questions. Yes, we saw a really rapid increase in some of the costs during the fourth quarter. The main item affecting or most rapidly increasing during the quarter was in fact energy, and that affected our consumables business, which is big part of our minerals segment altogether. We also had some freight charges that tend to come after deliveries. Some of the invoices really come late in, so those were unfortunate things that we needed to book in. We have not seen the freight charges going down yet.
We have not seen them really going more higher lately, so we're expecting that one to be more or less stable level going forward. Then on the pricing side, always need to be cautious commenting on the prices, but naturally, we are following the cost development and working together with our suppliers in order to secure our competitiveness in all conditions. I would say that overall, when I look at our margin levels, sales margin mostly, which is the best indication on that one, I would say that our margins have held reasonably well.
Just to follow up, I know it's tricky to know exactly, but you said freight costs stable. Would you say that on the energy side as well into the first quarter? Just on the pricing, if you could help us at least on what happened in the fourth quarter, because last time you said that it was most of the 7% organic at group level. I was just curious, is it still around 6% in the P&L? Thank you.
Yeah. We are managing our pricing, product line by product line, and I do not have any number to give out on that side of it. Energy price currently it's more or less on the same level where it was sort of in the middle of fourth quarter and towards end of the quarter. The biggest really variable for us has been the cost of natural gas, and natural gas primarily in Europe affecting our European foundries, to some extent rubber plants as well, that are the main natural gas users for us.
These price hikes were really extraordinary in the fourth quarter and remains to be seen where they then end up and how they stabilize, but they haven't really gone further up from those levels yet.
Mm-hmm. Thank you. My second one is on aggregates. It's the margin here is 12.2% underlying if you back out the inventory adjustment as you reorganize the JV in China. Still pretty low level. How much of this is mix of more OE sales versus services versus you not being able to compensate for the cost increases like we've seen in minerals. I'm just trying to understand if this was largely mix or also price cost.
I would say that it's a mix issue. That's one thing. Second thing truly is then those adjustments that you mentioned out there. Those are the main impacts that we do have. There's also some currency impact on those numbers. That's where it comes from. Eeva, do you have anything further to say on?
Yeah, I would also point to the mix. I think in aggregates because of the shorter term cycle, it's been a bit, we've been able to react quicker on the inflationary pressures and hence I think that still whilst obviously, you know, third quarter was great, but I think it kind of falls in the sort of variation in that we've seen also in previous years in aggregates, so.
Okay. For 12.2%, given that the mix will continue to be quite challenged ahead of you, that suggests that this is a new level for the first half then.
Yeah, well, we continuously improve and take actions, sorry, within aggregates as well. That is something that the business area is very much focused on and
I think, Klas, as we come into the sort of, you know, seasonally, you know, high season, high months in a way, I don't think there's any reason to expect why we wouldn't also sort of be pushing out as much as possible on the sort of higher margin equipment in a way. So you have said, that, in that sense, I don't think you should necessarily draw too long sort of standing conclusions on that. But it's fair to point out that there is a certain sort of variance that does happen between quarters.
Okay. Thank you.
Our next question comes from Manu Rimpelä with Nordea. Please go ahead.
Good afternoon. Our first question would be on the pricing topic still. When you look at the cost inflation and your prices, when do you think you will see the kind of net pricing turning neutral or pro-positive and flowing through into your P&L? Then also with the orders you're taking at the moment, are you able to take those in the backlog on a kind of a net neutral pricing or do you see that you kind of have not been able to anticipate all of the cost increases in Q4? When you deliver those, they will still be under pressure on the net pricing level.
Yeah.
Thank you.
I would say that we've been able to respond well on those that have behaved with a bit more sort of on those cost items that have behaved on a more sort of consistent way. The energy price, especially the natural gas price increase, was really very high and steep. It was out of normal inflationary development. Same happened in fact in the fourth quarter with the freight charges. We've adjusted on those levels at this moment. Then of course, the future will show how well we are able to to then compensate for those things.
We also need to remember that this changes the competitive arena as in some of our businesses, like consumables, for example. We may have a high energy cost here, but we are also protected by very slow logistics from Asia against Asian competitors and also very high logistics charges for their supplies to Europe. It's not only one-way street and not necessarily sort of showing the trend as it is. Some of these unexpectedly high increases did sort of cause a surprise to us, yes.
Okay. I'm following up on that. If you take the consumables where you probably had the biggest surprises, that's probably a fairly fast turnover business. If you started to implement price increases in the fourth quarter, the orders you're booking now, are those reflecting already all of the higher costs, which means that then you will probably start delivering those into the sales maybe in the second quarter or third quarter, or what's the lead time from order to sale in consumables?
We are of course taking very fast actions on situations like that.
Maybe just to add Manu that
I'm able to say what?
Yeah, Manu, just to add on that, you sort of it may be good to bear in mind that, you know, there is a certain sort of a lead time of older orders. Obviously, we're able to sort of react on new orders. Maybe just to caution a bit that, you know, everything in consumables would be in and out. I mean, these are big parts and the market has been very good and there's a lot of these things are easily booked sort of several months in advance. It's not sort of in and out business. This is sort of serious manufacturing operation. It's more sort of more closer to six months than a 1-2 months.
Just that you understand the type of pro-production when you are fully sort of really selling rubber or sort of metallic parts that are. You have to remember the size of a room.
Perfect. Thanks for that clarification. The second question would be on the cost savings. Can you help us to understand how much do you still have on a kind of P&L basis we should expect will hit this 2022 P&L from the programs that you ended last year?
Yeah. The 142 is a run rate, so obviously that will then sort of flow fully through then in during 2022. Of course, we're very happy with the overachievement in a way of the target because in this with the sort of pressures we see that sort of tailwind will obviously be important for us and in a way support margins going forward.
Are you able to say the kind of, what's the remaining part that did not hit the P&L in the 2021 year?
Yeah. I mean, you can basically sort of. One thing is obvious you can compare and think that we generated some EUR 20-plus million more of savings during Q4 and then that sort of comes through in, obviously, in the coming four quarters if you think of a run rate being and then you have the 12 months coming in. That's one way to look at it if you have modeled already the sort of end in the Q3.
Another way to look at it is then perhaps that, okay, 142 run rate, so that means that by sort of during the sort of next year over the coming quarters, that will be the sort of better margin result, yeah, as we get then to the end of this year. Depends a bit on how you want to model-
Perfect.
Yeah.
Perfect. No further questions for me. Thank you.
Our next question comes from Max Yates with Credit Suisse. Please go ahead.
Thank you. Well, good afternoon. I just wanted to check firstly on the aggregates backlog, because we've heard a few companies in construction equipment talk about some of the earlier orders that they took in 2021 and that the cost situation is now very different to the way that those orders were priced, and that may hit sort of margin short term in Q1. I just wanted to understand, is any of the margin weakness that we've seen in aggregates related to this? Is there risk that kind of we have some lower priced orders still to come through to revenues that is a risk for first half margins maybe getting worse rather than better?
Just, I'm saying, how you feel about the price cost and the backlog in aggregates.
No, I wouldn't say that's an issue. I think we have a more sort of more rapid turnover of the backlog, but that's one important reason why we are managing the backlog, sort of order intake. Some of you may have felt that the quarterly order intake was a bit low, but that was really sort of a conscious decision to manage and not confirm orders when we don't have confirmation on supply. Obviously, when you don't have either confirmation or availability on price, you would sort of expose yourself if you were just too keen to book.
I think we've done a very good job in aggregates in being cautious and really sort of taking into account the fact that this has really been a moving train throughout 2021, and we don't expect it to change in 2022, so one really needs to take it step by step so that you don't end up into overbooking yourself with lower margin business.
Just my second question was on minerals margins and maybe thinking about them going into next year. I mean, the EBIT is pretty similar year-over-year in minerals, despite obviously the cost savings and the synergies that have come through. I just wanted to understand, kind of, was there any element of the synergies erosion that has come from what you would consider more self-inflicted actions. Maybe I think you've talked about sort of changes to your warehouse systems. I mean, do you have any double costs in the business that will naturally roll off as we go into next year as the completion of the merger or the integration is now done?
Is this really all market conditions related to mix cost increases? Is there any kind of double cost that might roll off that we should think about?
Maybe some absorption issues, because if you recall, we really didn't grow in our minerals business, including service and equipment. In the first part of year, we started to see some growth in the third quarter, but mostly the growth we were up in growing speed in the fourth quarter only. Our backlog is good and looks solid as well. I'm a bit more optimistic on how it looks like.
Okay. What we've seen, I guess, the synergies now kind of quite a bit behind us. It hasn't changed your sort of ambition to get this division to high-teens margins given the cost environment is clearly more challenging and mix is maybe more in favor of equipment. I assume that
High teens margin still stands?
It still stands. We have not changed anything in those ones. Those ones, like I tried to say, is that last year is not really very stable volume wise for us. It always means that you have especially in this type of business that requires really specialized engineering resourcing that one cannot really sort of reduce during the months when things are a bit quieter. There's always some under absorption when things are not sort of going in a stable way forward.
Okay. Thank you very much.
Our next question comes from Robert Davis with Morgan Stanley. Please go ahead.
Yes, thanks for taking my questions. My first is just, I guess, stepping back a little bit, just on the broader outlook that you see across the minerals division. Obviously, there's been a mixture of sort of issues with COVID and logistics costs and all these kind of things. But just generally in terms of sort of tendering activity on the ground, what are our customers saying in terms of is there any catch-up effect coming through from things that were sort of pushed out? I think you mentioned in your initial release, particularly on the aftermarket side.
I just wondered how you could in any way kinda quantify if there, A, is a catch-up potential and, B, how long and how big you think that'll take before it sort of flushes through and we get to a sort of normal run rate in the minerals business. Thank you.
Yeah. If you look at our sort of past quarters in Minerals business and the service portion of that one. That one we've been able to grow the service orders almost every quarter last year, but sales did not really move up before now really on the fourth quarter. That's probably telling the story in financial terms what we said earlier on that modifications and upgrades that have a longer lead time. Customers did not take decisions early on during the COVID on those things 'cause prices have been fairly high. Metal prices have been fairly high all the time and customers didn't want to stop their production. They kept on producing.
Very often these longer lead time modifications, they require shutdown, to be taken and with this disruption in the production. Now that work and activity is clearly catching up, providing the growth.
I see. Thank you. My other question was around the profitability within the metals division. I guess it's obviously been pretty volatile in the last sort of six or eight quarters. There was a big benefit in Q4 2021 just because of the level of organic sales growth. But just as a sort of sustainable run rate, are you still kinda happy with the sort of upper high single digit as an achievable level, or are you expecting it to still be quite volatile on a quarter-by-quarter basis depending on the lumpiness of these contracts that come through?
I guess, should we expect a more steady upper high single digit number, or should we kind of, you know, average that but be bouncing around anywhere from sort of 0%-10% on a quarter? Just trying to get a sense of with all the portfolio changes you've done and moving bits of businesses around, whether you're happy the stability there is gonna improve.
Yeah. Of course, we have the orders now at hand, and we can operate at very stable load in our businesses. Some variation we need to expect because some projects are early on there and early on we tend to do engineering and revenue recognition tends to be low at that moment. Then when the projects get into delivery phase, that's normally where we see the sales pick up. We have now projects in different phases, some in engineering, some in delivery phase. The orders that we have, they are solid orders. I'm not expecting a huge volatility, but always some volatility because of timing of things how they do.
We are not happy with single-digit profitability, not at all. We said that first phase target is to reach 10% for every business, out there. We are now quarterly basis just above 10%. There are some provision releases, but they are not sort of significant, provision releases as such that there is really good strong underlying profitability as well in high single digits. That's where we stand at this moment. We are rather far now there and things are progressing well now in metals.
Thank you. My last one was if I can just squeeze one more in. Just in terms of bridging the gap between where you are from a group profitability standpoint and where the targets that you're trying to get to. Given that you're effectively at the end of your synergy program, or at least the sort of reporting of the synergies, what's gonna get us from where we are now to, you know, the 15% group margin target? Is it just operational leverage? What's gonna get us there?
Yeah. Really executing our order book. We have a strong order book right now. Right now, we don't count on having major disturbances in supply chain either. Certain stability that we expect. We expect also the COVID restrictions at one point to go away and COVID moving to a normal influenza or something like that we all can live with and move freely. Those are the kind of things that we do. After all, it's operational leverage that we can concentrate on executing and delivering rather than managing exceptions.
I see. Great. Thank you for answering my questions.
Our next question comes from Antti Kansanen with SEB. Please go ahead.
Hi, Pekka and Eeva, this is Antti from SEB. Two questions from me. First is on the minerals, and if we think about the mix going into this year, could you comment a little bit about the backlog that you have on the minerals side and what do you expect to deliver for this year? How does that compare to the previous year's figure? Then as you mentioned, kind of the conditions on the minerals services side have perhaps returning to normal. One would assume there's quite high growth in early parts of the year from lower comparison period. How should we think about this, service versus equipment this year?
Yeah. It's a good question, Antti. Obviously, the sort of now having two good quarters of aftermarket orders was important for us. I believe we highlighted in the previous call that it was that one quarter of strength in orders is enough. It's good for the mix and now clearly sort of fourth quarter orders is even. We were happy with that. That does provide a better balance for the mix. Now, obviously, we are at that point in the cycle where we are perhaps a bit more CapEx heavy, quite naturally, and nothing wrong with that.
As said, I think we're more now nevertheless into a sort of better balance that we can expect to see clear growth on the services. Maybe one point to note that obviously these supply chain challenges do also impact part of the aftermarket business in a way that they do lengthen lead times. So I think you should take into account a certain longer lead times also on that sort of aftermarket backlog than perhaps what we've seen in the previous cycle. I think we'll see very much during this year all of us kind of how that evolves and develops in a way.
That's maybe the sort of only thing also to my earlier sort of earlier comment to the discussion on consumables. Then I think it's fair to assume that there's certain months of additional sort of lead time on just how when you're working with a full pipeline and in a way dependent on orders.
Yeah, that would sort of, as said, sort of still important now really, as Pekka also mentioned earlier, that we have a sort of good sort of low absorption level from the beginning in a way that we have full sort of utilization efficiency, and that's what we try to take care of.
Okay. Kind of on the backlog, I mean, it's up substantially on the minerals side as well. Is there any kind of a ballpark figure, how much kind of a more equipment would you expect to deliver out of the backlog if we compare to the situation a year ago?
Well, I would say that the number I have in my head is that some three quarters of the backlog are for 2022, but this is now the total for the backlog, so including capital and aftermarket. That kind of gives you a bit of an idea. Then the rest really for 2023 and also parts into 2024. Certainly we are sort of expecting sort of a double-digit growth in the equipment in the equipment side, clearly. With the current outlook also on the services. Overall, sort of good growth what we're planning for.
Okay. That's very helpful. The second was still on the aggregate side and on the profitability development. I didn't fully understand kind of 'cause you sounded like that there's no discrepancy between price and cost on the Q4 deliveries, and it was more about the mix issue and obviously the write-downs that impacted margins. However, at the same time, you are a bit more cautious on taking on new orders in order to manage kind of the cost side. For me, this sounds a bit contradictory. Are you just seeing a very rapid increase in cost headwinds during the quarter, or how should I understand this?
It's a cost issue, but at the end of the day, when we look at really orders that either dealers or customers are placing with a very long delivery time, it's also about revenue management. Because, I mean, if we book up our capacity long into the future, we might lose some pricing opportunities out there. I think this is very important, and that has been managed very well with our aggregates business management lately.
All right. That's all from me. Thanks.
Our next question comes from Magnus Kruber with UBS. Please go ahead.
Hi, Pekka, Eva. Magnus here from UBS. A couple of questions from me also, and a follow-up from Manu's question before regarding the higher than expected synergies. I mean, I think you had a EUR 22 million high delta on the run rate than originally planned. How much of that impacted you in Q4? Like, how much positive impact did you have in the P&L in Q4 from that?
Very minor positive impact because those are things that were achieved during the Q4. It's really marginal impact.
Okay. Got it. Thanks a lot.
During the quarter.
On the cost headwind you had in minerals, I just wanted to verify that number. Was it EUR 15 million between supply chain issues and energy costs?
I think that was the number your dear colleague used.
Yes
We didn't sort of aggressively deny his calculation, but it's not our number per se.
Oh, got it. Okay. Thank you. Thank you so much. Finally on the margin mix in minerals in the quarter, obviously you stepped up the deliveries quite a bit there. Have you any comment around what the impact from mix was in the quarter?
Yeah, the sort of mix impact was really mixed because we had issues in our consumables, which is in the Services side. We really had there this energy price increase did hit our numbers in consumables during that time. We also had some freight charges, those invoices that came late in and we were not fully prepared for those things. Also the currency impact that we saw during the quarter.
Perfect. Thank you so much. Just a final one on the organic growth on the minerals aftermarket side. Could you discuss a little bit how the different products developed there, refurbishment, upgrade versus wears and spares?
Really the growth has been in the upgrades and modifications. That part of it that we were lagging. We've booked a lot of orders over the past quarters in this area, but deliveries have been really minor in that area because of lead time and secondly because customers have been really hesitant to either initiate the works 'cause they didn't have guarantees that there is the workforce available and accessibility to the site. Now it seems to be better situation in that regard. That is the growing part. The spares we have continued to sell well throughout the normal spares.
This kind of modification parts and modification works that has been the lagging part.
Perfect. Thank you so much.
Our next question comes from Nick Housden with RBC Capital Markets. Please go ahead.
Yes. Hi. Thank you for taking my question. There was only one left for me that hasn't been answered. Obviously the balance sheet has strengthened quite nicely in the past few quarters, so I guess that maybe starts to lead into a conversation about capital allocation, and whether, you know, you're maybe thinking a bit differently about either M&A or returning more capital to shareholders in sort of the medium term. If you could just give us some thoughts on that would be helpful. Thank you.
Yeah. I think you're right and based on the kind of updated strategy work already late last year, we did sort of indicate that we will post-integration move into a more growth-oriented strategy and obviously the organic growth we have in the backlog and with the market outlook expect that to continue. Really the sort of element where we think we can, you know, be a bit sort of reactive is on the sort of non-organic growth. That will be something that we've already been obviously looking at and would certainly expect that we will see some activities.
We seem to be so busy on the divestment side, but I think it's really time for us to move back into the sort of other end of the M&A path. Obviously the market is, as I'm sure you well know, so active, so there are opportunities. It's then the sort of balance of finding the right opportunities at the right price for Metso Outotec.
Great. Thank you very much.
We with this one we are just following what we said when we announced this combination of Metso and Outotec. We said that year and a half into the new company, provided that cash flow is strong and reduction of net debt, which we have done now, and then we can move into next phase, which includes then more M&A, and this is exactly where we are now at this moment.
Thanks. Very clear.
Our next question comes from Tomi Railo with DNB. Please go ahead.
Yeah. Hi, this is Tomi Railo from DNB. Thanks for taking my question. Just wondering if you could comment how the year has started in terms of customer decision-making, order activity, and if you can talk a little bit about the pipeline. That's the first question.
Yeah. Nothing really major to comment on that one as we don't sort of guide it, but I would say that no change from end of last year. Last year, naturally, big part of Asia has been celebrating their New Year, so some slowdown because of that one, but that is over by now and then but.
So far, it looks like a continuation where we ended last year.
Still trying to get the feeling, how much exactly did you receive or achieve synergies in the fourth quarter? Eva mentioned EUR 20 million plus. You had guided EUR 29 million. Did you achieve less than you expected? Also for 2022, trying still to get the number, P&L number for 2022 from synergies and maybe also from your business specific actions. What do you think you can achieve in 2022, after?
If I remember right, Tomi, the exact number we had at end of September was EUR 116 million. Then during the fourth quarter, we grew that to EUR 142. That was kind of the EUR 20+ million I was referring to earlier. Now it was EUR 116 million. I think it was EUR 116 million. You please do check that, if you want to get the million exact.
As said, sort of, as we look into 2022, that's the sort of by the end of 2022 we would expect to be at a level that is EUR 142 million sort of lower in a cost level. Obviously, as then, you know, with no other changes, so to say.
Obviously then the P&L figure you will eventually see is obviously then will always be a net number of pluses and minuses, but that would be the tailwind we have and obviously it's an important tailwind because there are some headwinds as we all well know. Hopefully they're sort of eventually at least there are some signs that the logistics availability would start to ease out and that would then most likely also have some impact then on prices because now of course it's the lack of availability is really pushing prices there. So that's at least one area that we'll be following closely. Did you have a follow-up, Tomi, now?
Was there something else?
Just on the business specific.
Okay. Business specific. We have obviously during the year implemented still some changes in the footprint area that are benefiting. We are continuing. We have some investments ongoing as we speak, for example, in India that will allow us to sort of support growth with what we think is a sort of competitive cost structure. And those would be the big ones. During the year, quite a lot has been done on the consumable side, and that's obviously we need to evaluate going forward all the time.
We haven't given an exact number, but certainly that work continues and there is still opportunities where we can fight for some additional efficiency, for like we said earlier, for instance, in some of the indirect costs that while the integration period ends, not all sort of areas where we were able to address in the time span. There's still areas we are working on, for example, in IT or in other indirect areas. But that I would think kind of any sort of normal company would be focusing on, especially in this type of environment. Maybe nothing specific. I think the footprint ones are really the ones to note.
Thank you.
Our next question comes from Vladimir Sergievskiy with Bank of America. Please go ahead.
Yes, good afternoon. Thanks for squeezing my two questions. Hopefully two straightforward ones. First of all, book value of provisions, you have increased about EUR 40 million during Q4, which if I'm not mistaken, one of the biggest quarterly increases since the combination with Outotec. Basically questions here, what drove this increase? Is it linked to any specific projects? And secondly, did this increase actually went through the P&L impacting the P&L? That's on provisions. Then second one related to your progress on Saudi Smelter project. How is the ramp-up going? When do you expect to have more visibility on how this ramp-up process completes? And when do you expect some potential discussions on the liquidated damages related to this project? Thank you very much.
Yeah. On the provisions, it's actually more an accounting treatment as changes you've seen a rather substantial decrease in discontinued operations because of the length of the process in divesting the energy business, which was started already during the Outotec times. We've had to apply certain IFRS rules and move some of the sort of book values between the rows and out of discontinued operations back into other asset rows. That really explains. There is no P&L impact. Obviously there is. It always changes it between a quarter as projects advance, but that's the sort of bigger, so more sort of accounting issue related change. Then Pekka, maybe you can comment on the Saudi.
That's right. There, the ramp up is ongoing. We're following the plan that we had for the ramp up. We are on a level which is about half of the maximum power level and capacity of the furnace. No major issues so far. So far, what is typical for ilmenite smelting in general is that it takes a long while to learn to operate, and every furnace is an individual as such, and so is this furnace. We're expecting to hear something of the progress by the end of second quarter. That's what it looks like currently.
That is provided that we are able to progress with the ramp up as planned. Before that, I don't think we hear anything major out of it.
It's very clear. Thank you very much.
Our next question comes from Tom Skogman with Carnegie. Please go ahead.
Yes, this is Tom. Could you specify how large these business-specific savings were in 2021?
Sorry, can you repeat? How big?
Can you quantify how large the business-specific savings were in 2021?
We haven't quantified that number. We gave some general comments in the Capital Markets Day in November 2020. That's kind of what we have detailed on that.
Okay. How large share of the order book is scheduled to be delivered this year, and what was the number one year ago?
I mentioned earlier that for this year it's a bit more than three quarters of the backlog. Now, I unfortunately don't remember what it was a year ago, but this would be what we're looking for 2022. Between 75%-80%.
Okay. Yeah. I just wonder how much is it up, of course, you know, year on year that you will deliver this year. That's the critical number to.
I don't think it's percentage-wise.
Yeah, I was gonna say, yeah.
Too much of a difference.
It, it-
'cause we booked two big orders right at the end of the quarter.
'Cause usually the percentage doesn't change that much, but it's obviously the underlying figure has changed quite a bit. We're talking about a much bigger number in euro terms now than a year back. That's where the main impact comes from when you turn it into euros.
Could you please specify the discontinued operation? What should we expect going forward? What will you move some metal businesses there? Is this all now coming from businesses that are being divested and that end? What should we expect going forward?
Yeah. What we have in the discontinued operations is the metal recycling business where we have announced just before the year-end our plan to divest and said that we expect that to happen during the first half. When that happens, then it will move out of that. Then only thing remaining is the energy business that was part of the discontinued operations coming from Outotec's, and that business is still for sale. We obviously hope to move forward on that divestment as well. That would kind of then empty what is in the discontinued operations currently.
Depending on the outcome of the strategic review in metals, that may obviously lead to conclusions. While we are in a process of reviewing, there is no change to what is continuing operations and what not. We continue to report the metals business as a separate segment without the hydro business, of course, that moves to minerals, but it will be reported as today in when it comes to Q1.
Okay, thank you.
At this time, we have no further questions. I will now hand back to our speakers for a final remark.
All right, we are 12 minutes past the hour, so it's good time to wrap up this call. Thanks for your questions and discussion. Our next scheduled disclosure will take place April twenty-first. Then we'll announce our January March results and have our annual general meeting on the same day. Thanks for this, and looking forward to speak to you all soon. Bye-bye.