Earnings Call: Q2 2020

Aug 5, 2020

Good afternoon or good morning, everybody. This is Juha from Metso Autotech Investor Relations. And with me are our President and CEO, Pekka Vauramo and CFO, Eeva Sipila. It is our pleasure to present today Metso Autotech's first half year report, which was out this morning. And as you have probably seen, the numbers we are presenting today are somewhat unusual. There are IFRS numbers, there are pro form a combined figures and then also legacy Metso Minerals and Autotech segment numbers. Our half year report includes more information on accounting principles, And Eeva will also provide some insight on those as well in her presentation. After the presentation, we'll have the Q and A, and we'll try to limit the length of this call to 60 minutes. With these words, we are ready to start, and I'll hand over to Pekka. Please go ahead. Okay. Thank you, Juha, and welcome from my behalf as well to this 2nd quarter results briefing. We did preannounce our results just over a week ago. So those numbers are known and unchanged as such. And we can say that The overall performance during this quarter, which was exceptional in many ways, both external reasons and internal reasons, We can be very satisfied on our performance. It was exceptional, of course, because of the COVID '19, but it was exceptional also because we closed the Metso Autotech transaction and the Nelles was A spin off was also made at the same time and Nelas continues now as an independent company. COVID-nineteen caused many things in all of our lives and businesses, including Metso and Ottek, I'll talk about Metso and Ototech separately still because second quarter, we operated as 2 separate companies and competing companies. We only closed the transaction on the last day of Q2. But customer service and customer communication was challenged in many ways. There were travel restrictions, there were lockdowns of various degree in different countries where we operate. And we've been very innovative in creating new ways of communicating or taking virtual means of communicating with our customers even in complicated technical issues and matters and develop some new tools to provide backup training and do our sales work and marketing work. Really good progress in this front. The integration plan that we had nearly 12 months' time to do, we started it right away on 1st July, and we are well up to speed with that one. There's some updates at the end of the presentation on that one, and we also announced some new targets on the synergies. The numbers as such, orders For Metso Autotech combined, euros 976,000,000 sales, euros 1,047,000,000 euros both are considering the times that we live, they are good solid numbers. Our businesses were affected on when it comes to orders in different ways. I'll come back to that one a bit later. But good execution of our order book is visible in our sales number. That good execution is also visible Our profit numbers, but even more so, I would highlight here that we were very fast and decisive When we did put both temporary and some permanent cost saving measures in place, we were so fast that we did hit Almost the 100% run rate on 1st April. We started the actions second half of March, and that is visible in our results now. We also have now the balance sheet, opening balance sheet for And there are some of the balance sheet items, Eeva will go through them more in detail. But then On COVID, particularly, the impact was, of course, negative, But maybe not as negative on our business as many of the other companies have reported. Yes, we suffered lockdowns and travel restrictions, and that affected our way of working with customers, our means of serving customers and changed some of the things as it limited our mobility, both sales and service workforce. Aggregates equipment was most affected. We've said in previous communication that between second half of March and first half of April, the order intake It was 0, if not even negative, because there were some cancellations as well. But the activity order activity has picked up Very nicely towards end of the June and currently we are at about 75% level of activity order activity in there and we can expect That trend to continue provided, of course, that the COVID situation doesn't get much more severe than where we are at this moment globally and in our main markets for that one. We noticed also that decision making On bigger projects, whether capital equipment, greenfields or more complicated Service upgrades and modifications has slowed down, and that is visible in some parts of the business and some segments and their order intake, particularly in metals to some extent in Odotec's Minerals Processing. However, the mining equipment market, which is typically Metso Minerals business, that has been very active and we have booked several smaller Orders primarily from brownfield, some of them are coming from greenfield, so they are parts of greenfield projects that we have won. And this is what we were also indicating throughout the quarter that as far as Metso Minerals is concerned, we really don't See the slowdown in mining, and that really was the case during the second quarter. Despite of some difficulties, we saw very good and strong demand for spare parts and consumables throughout the quarter and really had good results in this part and that, of course, supported our results. We, of course, know that these restrictions, They will continue into the 2nd quarter even though number of closed mines is getting smaller and smaller, and we were not really that severely impacted By mine closures, as such, only small percentage of mines, in fact, of total were closed, And the shutdown periods have been reasonably short from 2 to 4 to 6 weeks. That's the normal rate. Some, of course, for other reasons have continued to their own shutdowns, but not necessarily because of COVID. So this is where we are. We still see and feel the impact of it. It's not at all over The signs of COVID getting into 2nd wave, but like I said, I mean, we as such don't forecast where COVID We are just concerned about what the impact on our business is. When looking at the Segments, these are now segments as we would have reported them as a Metso or as Autotech and First Metso Minerals, including all our Equipment businesses, capital equipment businesses and services relating to Minerals businesses. So orders up by 8% and there was McCloskey contribution 11% on that one. So slight drop in organic Terms service continued to increase its share slightly by 1%. Sales up 2%, and this was about delivering the backlog, good execution There, McCloskey contributed there as well, and service continued to grow. And adjusted EBITDA improved to €121,000,000 That's a margin of 60 more than 16% and clear improvement from year ago. And I would say that we are in Minerals on Our record levels maybe during the super cycle, we have been somewhere roughly on this level. But in this cycle, this is clearly the best margin that we have delivered. Solid execution, margins held very, very well, and I want to sort of repeat that fast And really, comprehensive cost cutting actions that we implemented from the beginning of the quarter are visible in the result. Then Autotek's Minerals Processing, the order line It's a decline that is declined for 2 reasons. 1 is, of course, the COVID and absence of bigger projects in this quarter. But at the same time, there were some bookings in the Q2 of last year of bigger projects And that, of course, makes the comparison look this way as it is. So, 2 impacts There's a strong quarter in the back of it and the issues with bigger projects. Good execution of order backlog Sales growth by 9% and EBIT improvement from 10.8 to 12.3%. And there, again, good execution and cost saving actions that were implemented during the quarter. And then Metals Refining, Here, really, the absence of projects is more severe. We see that orders received €55,000,000 versus €145,000,000 a year ago. There is something in the pipeline, but here clearly, it's visible That uncertainty of the economic environment has delayed decision making, and we were not able to book anything that was probably in other conditions would have been during the quarter. Sales also declined due to lower backlog And profit level stayed on low level. Now the adjusted EBIT being €1,000,000 and it was €5,000,000 a year ago. So cost saving actions were really initiated here, both temporary and permanent Actions that were taken during the quarter, and they, of course, are visible in these numbers. But needless to say, the profit level needs to be improved in this business, and we are addressing it as a part of our integration and churning work. And these numbers are now for businesses that we are continuing. There are discontinued businesses that are out of these numbers. They reported separately. And now I'll hand it over to Eeva on and she will go through the financials more in detail. Good morning. Good afternoon to all on my behalf as well. As Juha introduced in the beginning, the first Metso Autotech quarterly report, it does require focus from all of you reading it. We have at our hands an exceptional report, which we hope provides different readers what they're looking for, but it does mean that the amount of information makes it slightly complex. So I will aim to walk you through the main highlights of the information available so that you know what to use going forward and also what to expect going forward? There are 2 key things that differentiate the Metsoeotec transaction from the vast number of M and A cases And their reporting you have all seen. Firstly, despite the legal structure continuing to be Autotech, This transaction is a so called reverse acquisition under IFRS 3. This has implications on the official IFRS figures The second item to note is the date of closing, I. E. June 30, which is the last day of the reporting period, not as typically would be the case of being the 1st day of the quarter. Now these two key things do explain to a large extent what you see in the report. So firstly, the official IFRS figures are those of Metso Minerals As during the quarter, both companies operated as independent groups. All IFRS historical figures we will be using going forward And finally, Metso accounting principles are what applies to all the reporting. So what you see on this slide is a short summary of the IFRS income statement for Metso Autotech, I. E, the performance of Metso Minerals. As you as we know, there is today immediate interest on how the Q2 went for both companies During the time, they were separate entities. So Pekka presented already earlier the separate financial information of Mezzo Minerals and Autotech segments. Based on the accounting principles of the businesses as they had existed during the quarter. This is additional voluntary which hopefully serves the purpose of fitting with your existing financial models on the separate companies. Now going forward, you will be building models on Metso Odotec. And to support you in that purpose, we have provided a third set of numbers today, namely form a financials. Typically used to illustrate how the business would have looked had the 2 companies been operating as 1, in our case, since the beginning of 2019 and based on Mezzo accounting policies. This slide shows you the bridge from the historical separate figures into Mezzo Autotech pro form a figures. There are several adjustments that then take place, not least that all the transaction costs of the merger are deducted from the Q2 for earlier quarters and included as costs in 2019, which improves the January, June 2020 pro formas, But weakens the 2019 performance compared to the separate historical figures. Now for those of you used to reading pro form a financials, This should be very familiar, of course. Moving on to the balance sheet. So here, thanks to the transaction closing on the date of the balance sheet, Namely June 30. This means that the IFRS balance sheet is for the whole of Metso Autotech. Full and final, giving an up to date view on the assets and liabilities of the new Metso Autotech. The goodwill created from the Autotech PPA was €495,000,000 doubling the Mezzo Autotech goodwill to €1,046,000,000 Additional intangible assets from the transaction relate mainly to allocating value in the PPA to customers and technology of Autotec. Ottotec had limited property, plant and equipment assets. So the growth on the row from the beginning of the year is very small. On the inventory side, Oototec added some €200,000,000 plus, but we saw a significant reduction of inventory on the Metso So Minerals side, thanks to the focused actions on reducing working capital. It is good to note that especially our aggregates business is That working capital tends to tie up in growth and in periods of negative organic growth as we have seen due to COVID-nineteen, The business releases working capital. Similar development in receivables where the reduction in Metso Minerals helped compensate for the growth coming from the inclusion of Autotech receivables. Liquid funds at the end of June The businesses that Autotech announced to be for sale in late 2019 as discontinued operations. And we target to exit those businesses sooner than later, hopefully before the end of this year. Equity was boosted by €899,000,000 from the purchase consideration of Ottotec Based on the share price of June 30, interest bearing liabilities include the transfer of the previous Ottotec hybrid from equity into As you may have noted, this hybrid was called immediately after closing and is already paid back by a normal term loan. The call has a significant positive impact on the financing costs that we will see going forward. The total assets of Metso Ototec were €5,575,000,000 at the end of June. Moving then to the cash flow. So again, as the company is operated separately during the quarter and the 1st 6 months, the cash flows are reported separately. As I already mentioned, the Mezzo Minerals cash flow from operating activities was strong in the first half as well as in the second quarter, Thanks to good profitability and a significant positive impact from a change in net working capital. Total cash from operating activities was €303,000,000 for the first half. Odotec cash flow on the other hand was negatively affected by projects as work in progress that tied capital, resulting negative cash flow from operating activities of €75,000,000 for the same period. Dividends are not visible on this table, But you see them in the full report. The Mezzo dividend paid in June Is there illustrated to the extent of the share of Metso Minerals. Then moving forward, just a breakdown Of the net working capital as this is a key KPI internally for In running the operations, this graph basically illustrates the buildup of the net working capital at Metso Autotech at the end of June, totaling €459,000,000 Final slide from my side is a summary of our key financial metrics as well as a few points on the Metso Autotech financial position. On top of the liquid funds of €528,000,000 on our balance sheet, we have €790,000,000 of committed and undrawn revolving credit facilities. This compares to a net debt of €913,000,000 Our gearing at the end of June was 45.5% and our debt to capital 31.3%. As mentioned already earlier, we have refinanced the Autotech Hybrid and we also have financing in place to refinance the Autotech bond maturing in September. Both transactions have a positive impact on the financing costs compared to the starting point. We will obviously continue to work to further strengthen the financial position and our maturity structure going forward. With that, hopefully, a clarifying financial section, I hand it back to our President and CEO to discuss the ongoing integration. So Pekka, please. On the integration front, I already mentioned that we started day 1, July 1, the integration work following a planning period of approximately 12 months. So we have plenty of time to plan. This one as we went through all the antitrust processes in 20 or so different legislations during the 1st year following the announcement of the transaction. So we have today also in a separate announcement announced that we will revise our synergy targets and especially the implementation timetable. And this is really following the thorough planning that we have Dan, on this one and the organization that we have established already day 1 to really Execute these ones and follow through these ones and govern the synergy work and integration work for us. So we have updated the synergy targets now to €120,000,000 cost synergies. Initially, it was 100 1,000,000 mark, so €20,000,000 more synergies, but more importantly so, we have revised the Time table, we said first that during the 3 years, we will achieve NOK 100,000,000. Now we say that During the 1st year and a half, meaning until end of 2021, we will reach the 120,000,000 Mark of Synagis. And furthermore, we've said that €50,000,000 run rate, this is really both numbers are run rates. We will hit the run rate of €50,000,000 at the end of this year 2020. Revenue surenity target, we keep unchanged. That is also unchanged when it comes to time frame. Sunnazi revenue target, of course, depends on market environment. And Currently, as we know, there's uncertainty on that one, but the number as such holds. We're estimating that the one off costs will remain the same, €100,000,000 Most of that We can expect during the 1st year and a half, meaning before end of 2021. And we will follow this one and update the market on our progress on quarterly basis. First update We'll be on quarter 3 results announcement 3 months later from now. So those are the targets that we are now focused on delivering in addition to, of course, making sure that we continue to win orders in the marketplace and do our utmost to avoid the merger dip. Integration work is really progressing at high speed despite of holidays. Many of our people do not have holidays This year, because of this, we see that it's important that we maintain and utilize this momentum. What we have now gained ahead of day 1, and we still have that momentum on. We have moved fast. We have appointed already more than 1200 people into new We are ready with 4 layers of organization and these are The levels of management that we need to execute the integration work and the synergies. As an example, we have gone from combined 23 market areas in Metso Minerals and Autotech earlier to 8 market area organizations, and that gives you an idea that what kind of potential we have there in synergies when it comes to this kind of numbers. Office locations, this is now offices really. Really, we had coined 190, and we will decreased the number of locations to 150, so net reduction of 40 office locations, just as an example what this Work means in these areas that are the first steps of integration. And we have started with the new management team, The strategy work, which we will then update markets once our Board has reviewed that work in Later on in this year and when we're planning to have a Capital Markets Day in November, date haven't been set because we really don't know what kind of world we live in at that moment, but most likely, it will be a virtual one, and we'll announce the date in due course for that one. Then our outlook, even though there is Uncertainty relating to COVID-nineteen and possible worsening of the situation. We still, at this moment, we see that the market activity would remain at the current level. And like I said, yes, we are following, of course, the virus situation and its impact with the tools and means that we have on to the market. So with this one, it's time for Q and A, And thanks for listening. Thank you. Our first question comes from Klas Denend, Citi. Please go ahead. Yes. Hi, Pekka Novak with Charts from Citi. So first, I just want to ask on the synergies, Sorry, which is good to see. So I will look a bit further out, Pekka, and ask about 2021. If you talk about the scope to generate More savings beyond the synergies. I'm thinking about the design of the product standardization and so forth. Thanks. Yes, we do have, of course, and things like standardizing and Merging the overlapping product lines, those are the things that we count as a synergy savings as well. We do have also other that we called before merger standalone improvements. And now the numbers that we communicated, They are just poor synergy numbers. We have other actions that will improve, for example, supply chain and supply footprint in Metso side. We have started that work and there's further potential in that area. And there are also Some certain stand alone improvements in Autotech's side that are separate from these synergy targets that we do have. And I'm sure when we work on these things, we will be able to identify additional things. So here is the reason why I'm asking. Obviously, if you look at aggregates, it's very standardized Equipment that you manufacture and if you look at other equipment manufacturers in mining like Epiroc and Sandvik, they have similar equipment. If you look at Metso and Autotech on the mining side is more pre engineered and so forth. And I'm just interested in the gross margin upside beyond the 120 In terms of the ability to standardize also on the mining side, it's very interesting to sort of not that you have to put a number to it. I understand that that's difficult, Pekka. But if you could talk about the way you could scale the business across the different verticals? I think we have examples in both companies, Autotech and Metso, on profitability improvement on those businesses and product lines where we have been able to pre engineer products. And pre engineered products, It means that we can manufacture bigger parts in controlled environment in either in our own factories or suppliers' plants. We it does have a product structure. It does have a costing ahead of and there's very little uncertainty on the costing side of it. And that is clearly a direction that we will head in our new strategy. What it does and what is even more important in many cases is that when product is pre engineered, it opens up different possibilities in the service side. The spare parts are designed at the same time. Same time when the product is designed, the spare parts are well defined. They do have A spare part number, we can take stocking decisions, make availability decisions to customers, establish pricing for them and take this kind of actions. And this is clearly a direction where we will be heading in most of our businesses And in all of our businesses where we can, there are parts that will require continuously engineering order by order, but our aim is to minimize that part of the engineering and do it upfront. Okay. No, that's good to hear. Then I had a question on the Autotech side and the backlog. And obviously, we don't see any increased provisions. So I guess, So far so good. But just Filip and you, Pekka, do you feel good about execution out of the backlog so far? I mean people on this call obviously Curious whether you need to increase provisions, taking it right down and so forth on the Autotech side. Yes. We are comfortable where we stand at this moment with all of these issues. And like I said, I mean, executing the backlog is really the name of the game there right now because of of new bigger greenfields. But at the same time, the brownfield activity is still active even though anything that is bigger or more complicated To contract or to offer takes more time for decision. But there are parts of business that are running very smoothly and some parts are even compensating those more complicated parts at this moment. And I'm referring here The service in service side, the spare parts business and consumables business. Okay. My final one is on is actually on service. And so if the FX is around 5%, then you're growing Minerals Service around 6% in the quarter and that's really solid. Could you describe the spares, wears And the contract business, how each developed through the quarter, because the exit rate must be growth in low double digit If I back it out, so if you could talk both on mining and aggregates across the verticals would be really interesting. Aggregate side, naturally, I mean, we saw a dramatic drop in order intake. We saw roughly half of the drop in aggregate service. So it is more Resilient also in the aggregate side, but there was a drop during the COVID days. At this moment, We do have some follow ups where we follow utilization digitally of our machines, And we have returned on daily utilization to pre COVID levels now in aggregate side for those parts that we are measuring. And that is, of course, an indication that service will return to more normal levels and consumables We will return and probably has returned to pre COVID levels already in the aggregates. New equipment still It's a little bit down from that one. Where we saw a reduction in services was really the labor component we call professional services, and that was because of restrictions. That, on the other hand, is lower margin business. And at the same time, customers seem to continue to secure and wanting to secure their solid, seamless operation without breakdowns. And they have ordered spare parts, they have ordered wear parts, Probably slightly more than what they would have in normal conditions. We also need to make note on metal prices At this moment, metal prices have recovered very well. They are all of them are on pre COVID levels or higher and some even clearly higher like gold, for example, and that is boosting all kinds of activities in gold mines. Thank you. Thank you. Our next question comes from Magnus Kruber, UBS. Please go ahead. Hi, Pekka Eva. Juha Magnus here with UBS. A couple of ones for me. So first, on the mining, could you talk a little bit about the quotation activity you saw Through the quarter and ideally how July has started, please? Yes. Like I said, I mean, there's some slowdown of bigger packages, but we are very happy to equally offer smaller equipment and Smaller packages. So backlog, we have a good solid backlog, but decision making on anything bigger is lower at this moment. But good activity on sort of smaller orders, which we, in fact, make them Even more than big packages. And is it fair to say that July is better than June? Well, July is a vacation month in many parts, and therefore, it's a difficult month to compare with the June. But if we stay within a quarter, we can say that May was better than April and June was better than May. Okay, perfect. That's very clear. And on the short term cost savings, I think you commented around €20,000,000 for Q2. Did you realize that or did you claim above? And also if you had any comments around what Autotech might have achieved there because they were a little bit scarce in their comments there Prior to the closure. Yes, Magnus. So we had the €20,000,000 target and we were very much in line with that target. As Pekka mentioned, we Had a quick start and basically we're running from the beginning of the quarter on that speed and that obviously Had a clear positive impact on the Metso Minerals numbers. On the Autotech side, sort of similar temporary Costing measures were in place for approximately €10,000,000 for the quarter. Okay, perfect. That's very useful. Also, could you talk a little bit about what sort of specific COVID related costs you incurred in the quarter? Well, I think the majority of the costs are obviously related to safety, having some Extra cost around making sure that well to get people safely home and then also Moving between sites, various protective measures and these type of things. Then obviously, there were some costs related Securing deliveries that we were late with some deliveries due to the lockdowns and then to catch up. We had to sort of Work either overtime or then have a sort of speedier logistics. Overall, the logistics situation improved during Quarter quite significantly, it was very difficult in April when the when so much of the sort of global logistical network Basically, it was coming down by the day, but luckily then things calmed down and improved. So towards the end of the quarter, it was kind of more standard, but took a lot of attention. And I think there the team Did a fantastic job on really securing solid execution. Okay, perfect. Could you sort of quantify that a little bit, how that stacks up against the savings, so we can sort of understand what the net effect was here? Well, the net effect It was clearly positive, I mean, overwhelmingly. So it's quite difficult to put an exact number on the cost, To be honest, we will sometimes be have some logistical hassle with deliveries also in normal circumstances. So But yes, as you see from the quarterly numbers, so definitely 16 plus percentage point Adjusted EBITA would not have happened without a net contribution on the savings in Metso Minerals. Indeed, absolutely. And can you just as a final follow-up on that, what kind of savings do you think you will achieve short term in Q3? Well, as we have now moved to the integration phase, so the temporary COVID related actions have actually ceased, We need to have the organization now fully focused on the integration and delivering the synergies. So you should sort of assume That whether then integration or obviously sort of reacting to the market level as well needs to be part of the Synergy target would be difficult for us to run various cost cutting measures. It's all now a part of the overall synergy. To make sure that we have the right size organization in Metso Autotech for the current market environment. Absolutely. Very clear. Thank you so much. Thank you. Our next question comes from Alexandre Verghe, Bank of America. Please go ahead. Thanks very much. Good afternoon, everybody. Thanks very much for taking my questions. I trust everybody is well. I guess 2 quickly, if I could, please. Free cash flow performance, I think, has been very strong in Metso. You obviously talked a little bit about your working I wondered if you could talk a little bit about the sustainability of that performance. I appreciate the comment that I agree. It's turned off cash in reducing and declining, but it would be helpful to understand how we can think about H2 and obviously ongoing, What sort of levels are you aiming at in terms of net working capital performance, for example, longer term? And then second question on the outlook. I appreciate that that's an overarching market outlook encompassing a whole host of various different nuances. I wonder perhaps you could give us a little bit of a nuance on mining versus aggregates versus recycling, for example, just to help us with the nature of that outlook in the near term. Thank you. Okay. Sure, Alex. So on the Free cash flow, so yes, I did note the aggregate specifically that we had a very positive cash contribution from the aggregate side. Now that we are back on, as Pekka mentioned, that the kind of exit rate from end of June was roughly 75% of normal, and We expect that to continue as we say in the outlook. So that obviously does mean that we will be ramping up activity towards the end of the year. So I'm expecting then A more sort of native development from a cash point of view than in the Q4 at least as Then hopefully, we would sort of be building up for a better high season in 2021. In And the rest of the business, it's more perhaps stable. I mean, obviously, this type of Positive development in accounts receivable doesn't come without hard work in these circumstances. So it is a daily struggle. We would hope that things would sort of be stable. Inventory obviously will be impacted by if there will be sort of abrupt Lockdowns again in some of the key supplying regions. So we need to be a bit attentive on that and difficult maybe You know exactly, but I think net net will sort of we will certainly be Continuing the improvement actions we have on the supply side on the sort of overall long term inventory targets in the businesses and then That then having then the counter impact from the sort of hopefully upcoming growth in Aggregates. So certainly, the first half was exceptional in what you And not something you should expect for the second half. And then obviously on the Autotech businesses, the order intake Those have an impact on the cash flow generation. We do expect to see deliveries to ramp up in projects Execution and then also release some cash from the work in progress. But at the same time, of course, advances are very much related to how the order intake will develop in the second half. And then you had a question on the outlook, but you want to take that, yes? Yes. On the outlook, what goes beyond what we said and a little bit opening up, how it looks like. In the aggregates, like I said, I mean, we've seen a good improvement from beginning of second quarter to the end of Quarter end, and we are expecting that development to continue. This is, of course, subject to COVID, worsening of COVID and things like that. But we know that construction activity is, In fact, booming in China. We are making, I would say, record months, month by month in China in our aggregates business right now. Though China is not the biggest market, so it Doesn't sort of mean that we can turn around the business because of that one. U. S. Construction activity is, other than commercial buildings, it's on very active level, in fact. So infrastructure and housing is on good level and those are some of the drivers for aggregates volumes and aggregates pricing as well. So if that continues, we can expect that there will be a proper season for aggregates equipment next year, which we missed. We all, including our competitors, they missed that season for this year. So this is how I see the aggregates business going at this moment, but like I said, subject to Many, many things. Mining side and our Minerals business, altogether highly dependent on Metal prices at this moment, like I said, metal prices have recovered. They are on pre COVID levels. Uncertainty is affecting major decisions. I've already said that one. And we haven't seen that one sort of going away. And Many of customers have taken decisions to reduce their CapEx, and this seems to be affecting the Greenfields. Of course, the continued good levels in metal prices will slowly This could happen and that would be, of course, positive for the business. Metal prices, they are, to some extent, driving also our metals business, but there's also other things In Metals business, things like smelter capacity, refining capacity and treatment charges. And for some of the metals, the Forecast for treatment charges are, in fact, very positive. And if they come through, that also could mean that We could see some orders and order activity in metal side, which we clearly need at this moment for us. So but everything is subject to COVID not really getting to higher levels or a global second wave that would, of course, wipe out many of these things, what I just said here. But this is where we stand. And our conclusion is that the act Given the COVID on where we are today, we are expecting similar outlook in the market. Okay. Thanks very much. Thank you. Our next question comes from Atento Cukarenko, Credit Suisse. Please go ahead. Good morning and thank you for taking my questions. My first one is around aggregate. Thank you very much for providing the exit run rate for June. I just wanted to kindly confirm if you've seen any further improvement in July August From that run rate and also if you could maybe elaborate a bit in terms of the regional differences which you saw in the quarter in that business, please? On the aggregates, we have seen slight improvement or the improvement continuing in aggregates side. We do see the China impact. We had some bigger surprisingly bigger orders that we booked in June in China. So that was very encouraging to see that happening. And when we earlier on, like about a year ago, That the query regulations in China are changing. Now those changes are really visible. They are developing superqueries, As we and as they call it there and the super quarries, they are the most modern quarries in the world that they are building and they need equipment in those quarries. And that is taking place and happening there, and it's visible for in our business right now. Right. Thank you very much. And my second question is around the Almanac smelter project. Could you maybe talk a little bit about What's the recent progress there? What's the new time line for finalizing the project? And whether your assessment after the merger Is in line with what you are thinking about this project and associated costs while doing the due diligence? Well, I think if I start from answering your last question, so our view is very similar. Now as we did quite a lot of work around the due diligence phase on the project. On the execution, so COVID-nineteen has slowed down the project. Obviously, site work Also in this project as every other project in the world has been affected. So we're now looking into The work continuing well into 2021. Thank you. And my last question is around disposal process of the assets indicated for disposal from Odotec business. You may be elaborate a bit on potential buyers or potential type of a buyer who might be In those assets and also whether you'll have to make any contributions from your side towards mitigating the losses in those businesses. Thank you. Well, I wouldn't want to go to the details of the discussions we're having with various interested parties. What I said earlier that we target to exit by the end of the year, So that's what we're working towards. And then We are sort of assessing, of course, those businesses as all the other businesses in a way to ensure that we have Right setup for the market situation And that's basically sort of what there is to say obviously, then subject to also the one then what the Well, how the discussions proceed with the buyer candidates. Thank you very much. Thank you for taking my questions. Thank you. Our next question comes from Tommy Rajlow, BNP. Please go ahead. Yes. Good afternoon. This is Tomek from BNB. Just a question on the mining equipment orders. How much were they and Well, I think as we're moving into new segment reporting, it probably doesn't make sense to comment Very much details on the sort of old historical numbers. We had a few What Pekka referred to as brownfield and product type of debottlenecking projects, But in the sort of €10,000,000 €20,000,000 magnitude, so that really sort of reflecting the market situation. Very important orders and good orders for our business, But really sort of coming from many small orders rather than sort of any bigger ones. And then maybe as you have been talking about the greenfields, now you booked some orders and I think Kepeka said that Actions of Greenfields. Have you now emptied in a way the pipeline of Greenfields? No, it's not at all that we have emptied. There's plenty of proposals out there. But because of the restrictions, uncertainty and some CapEx cuts, These are the easiest ones for many customers to postpone. And then also further preparation seems to be more complicated under this So we just need to live through this one and provided that the metal prices continue to be On favorable level, these projects are still very solid projects that our customers have at hand. So I'm not expecting them to disappear. Thank you. And the 3rd and final question, if you can just Comment a little bit on the run rate of core synergies, for example. Is it fair to assume to have of the Targeted run rate for this year and the time for us and for you to achieve the full cost, I think, by the end of 'twenty one. Well, those are the numbers that we announced. They are run rates, run rates, SEK 50,000,000 at the end of the year. We are confident that we will Get there, so we have 5 months' time to that one and that one. And we can expect I mean, we are right now accelerating the work now that we have the organization that will drive the synergy work in place. And I would say that you can expect Fairly sort of a straight line from here to that €50,000,000 run rate. And same applies for next year. I mean, the next 12 months from €50,000,000 to €120,000,000 run rate. We're confident that we will get that one. Thank you. Thank you. Our next question comes from Felix Henriquesen, Nordea. Please go ahead. Hi, Pekka Niewa. A question on the cost synergy update. So you're saying that the procurement Will represent about 25% of the total cost synergies compared to 40% previously. So could you perhaps explain the reasoning behind this and also provide a bit more color on where you expect to achieve the cost synergies on the supply chain and procurement side of things. Thank you. Well, I think the main change on procurement It is the fact that obviously when the original number was given last summer, we didn't know about COVID-nineteen. So the volumes obviously impact the procurement savings and hence We focused on ensuring that we have enough activities on the items that are not volume related, so the Other cost savings. And well, I think Pekka referred to already the sort of organizational Structure and Facilities and these type of things that are sort of directly related to the combination. The supply footprint work that has been ongoing in Metso continues also as Pekka mentioned earlier in a From our point of view, a bit you could call it standalone in a sense that it's, of course, not related to the combination. And we will be sort of reporting on the progress of that as things move ahead. We've made certain announcements earlier in the year and are working with And they're obviously sort of that's what we have to sort of say concretely on those. There is obviously some lead time in when one is making changes to supply footprint. Okay. Thanks. And then perhaps a follow-up related to the backlog and Odotec side of things. So Could you provide an update on the delivery schedules of the large modern and Baikal Mining Company projects in light of the COVID-nineteen and open up a bit that where are we in terms of delivering those projects from the backlog. Thanks. There have been some slight delays with some of the activities in both of those, but nothing major as such. And as you see From the Minerals Processing segment report, the sales have continued to grow and that Thank you. Our next question comes from Mr. Robert Morgan Stanley. Sir, please introduce yourself before asking your question. Hi, it's Robert from Orbisani. Just a couple of questions. One was on the consolidation of your service network and how much scope you think you've got for doing that. I was just particularly interested from your service engineers on the ground, do you sort of cross train them in servicing Metso and Autotech bits Kit and do you have kind of scope, I guess, going forward to reduce the headcount within that service business? And then the second one was just following up a little bit on, you mentioned about remote aftermarket and diagnostic work. How many of your customers are actually up taking that as an option And where do you see the sort of medium term scope for doing remote service work across the different segments? Thank you. Okay. Yes, of course, consolidation of service network is an issue that we Look like the consolidation for us means that we will consolidate warehouses, we will consolidate locations. We will be fairly cautious with the headcount Reductions in that area, we will do where we have excess labor in those areas. But at this moment, we really haven't been able to identify So many really in the frontline service workforce. I think they are people that we do need in our business, but it's more in the back office side and admin side that we do plus in the logistics side where we have that one. Then on the remote aftermarket, we have Had in the aggregate side, we have, for example, visibility on mobile crushing unit, local tracks Hours and we are tracking those hours. We have been tracking for many, many years. And it's been very interesting information now during the COVID days to see how those Hours have developed. Of course, the population of those machines, I think it's, by the way, more than 1,000. So there's already some statistical importance with that one, but the population will change from year to year And some of the customers are not keeping the connection open and alive, but the ones who are keeping it alive and when we compare 2 previous years to this year, we can see that we are already We have already exceeded the utilization hours at this moment from 2 previous years, while we were at very, very low level in April in particular. And we have seen steady increase from April. And like I said, I mean, we are currently already higher than we were last year and year before, which is very positive. Then in the mining side, We have more than 100 pieces of equipment that we are monitoring. It's been Disappointingly slow ramp up into that one. We hope that these days have shown that remote monitoring does have value. And we will be pushing this one going ahead. We noticed also that it's not the pandemic time when it's time to establish remote monitoring and remote maintenance. One needs to prepare for this kind of times between the call them between the pandemics, assuming that there will be one of these also sometime at later stage, and I'm sure that some of the customers will see this happening. We have some other digital tools like more professional way of communicating with customers. We've developed Mezzo response app, where we are restoring all the communication, technical communication between the two organizations, and this is really to aim to replace WhatsApps and SMSes with some person to person communication means. So these are the kind of things and tools that we have developed and identified the need for during the pandemic. Thank you. Thank you. We have no further questions. Dear speakers, back to you for the conclusion. All right. We are a couple of minutes past the hour, so it's time to wrap up this second quarter and half year results conference call. We thank you for participating and asking questions. We will be back with Q3 results late October, and those will be reported according to the official Metso Odotec structure. So again, new set of numbers in the following report. With that, thanks again, and enjoy your summer. Bye bye. Thank you. Thank you.