Earnings Call: Q1 2021

Apr 23, 2021

Good afternoon and good morning, ladies and gentlemen. It's Juha Rauhin from MetsoDOTEX Investor Relations. And I want to welcome you all to this conference call where we discuss Metso Odotec's Q1 2021 results, which were published a couple of hours ago. The results will be presented by our President and CEO, Pekka Vauramo and CFO, Eeva Sipila. And after the presentation, we'll have time for Q and A. Please note that we try to limit The length of this event to 60 minutes because we have our Annual General Meeting of Shareholders beginning in 90 minutes from now. And the result presentation includes disclaimer discussing forward looking statements as well as information relating to different numbers that you can find from our result and presentation. But with these remarks, I'll hand over to President and CEO, Pekka Vaurum. Pekka, please go ahead. Thank you, Juha, and welcome to this call. Yes, we came up with our results a few hours ago. And when we look at the Q1 of the year, we guided of the market of improving activity and we truly saw the Increased activity and improved activity throughout the quarter, though our segments behaved somewhat differently as the Dynamics is different between the segments. So it's quite natural. We also saw improved profitability in our aggregates And in Minerals, when we compare to Q1 of last year. We've been working So on Metals turnaround, and we've now completed the reorganizing part of the Metals business. It is now in four Business lines, we still continue to work on turnaround. And we're really focused right now in completing the euros 15,000,000 cost out program from the operations. In our integration work, we reached €83,000,000 run rate in cost synergies, And that is well in line with our objective to achieve €120,000,000 by the end of this year of run rate of cost synergies. And we launched a planet positive label and approach, which will be the all encompassing umbrella for our sustainability approach, and I'll come back to that one a little bit later on. But this really shortly summarizes the Q1 of the year. The group numbers, first orders, 1.1 €1,000,000,000 slightly more than a year before. Sales €925,000,000 which is slightly below the sales figure in last year. Both of these numbers, there's two things. 1, we still have COVID with us, And that's pressing our top line numbers. And then secondly, we continue to have on top line a negative currency impact, Impact of several percentage in these numbers. So it's important that we keep those ones in mind when we look at the numbers. Then improved profitability. Adjusted EBITDA reached €115,000,000 which is 12.4 percent of sales. And a year ago, the comparable numbers being €95,000,000 10%. So clear improvement in margin level. Our EBIT, €91,000,000 or 9.8 percent of sales during the Q1 and earnings per share, €0.08 We continued to deliver Solid cash flow during the quarter, and that amounted to €165,000,000 As already said, I mean, COVID is still around us. And like we have said before in many of our businesses, especially in our services side. We continue to see restrictions on mobility as long as the vaccination program It's so well advanced in our key markets that we can see restrictions being Lifted and companies will allow then external visitors accessing the sites. So this is still with us, even though step by step in to a lesser degree. But it's also affecting the decision making, especially anything that's more complicated Tends to get pushed forward. And this is also consequence of which is positive business wise positive. It's because metal prices are so high and demand on aggregates is increasing and improving all the time. So customers do not want to shut down the operations for service and maintenance. They want to continue to operate and produce healthy cash flows. Our own operations until recently have been running without any major disruptions. We, of course, Heard today that India will now, because of COVID, Dedicate all the oxygen supplies for medical purposes and for relieving The situation and oxygen shortage in the hospitals. And extent of this one is not fully known to us for us in India, but it will mean some delays in our Indian in our supplies to our Indian market. Then vaccinations will definitely gradually open the domestic travel and And shortly then also international travel, but only when the program has progressed to a level that we see restrictions Being lifted in our everyday life, we can see fully the Service business recovering from COVID. Very strong performance in our Aggregates segment, which already started end of last year. We had like we had communicated earlier In November, December time, we saw activity level increasing the pre COVID levels and really hitting some record order levels at the end of the year. And this good order condition and market environment continued into the Q1. And we saw strong organic growth, mainly driven by equipment there and Europe being really the strongest market followed by North America. China was on high level, but Flat market during the Q1, but the pipeline is good in China as well. India continues to be depressed because of primarily because of the COVID at this point in time. Sales, we started to see increase in sales as Well, of course, these orders that we are now booking, they will be delivered then during the coming next two quarters. But we already saw an increase in our sales level and organic growth being 13%. And this is also a good development, but very strong improvement in our EBITDA level. Margin clearly more than doubled from 6.6% to 14.11%. And This is, of course, partially comes from the volume, but it also does come from internal actions. We do have stand alone improvement programs that our aggregates has implemented well and executed well during the past several months. So good improvement there. And near term also So looks very much encouraging in aggregate side. In our Minerals, we saw a decline in orders. Here already, I mean, currency impact is a major, 1 6%. That translates on that order level to about €40,000,000 alone. And our Minerals and Metals, both businesses are characterized by lumpiness of orders. And we did not have any large Orders but had a steady flow of small and medium sized orders during the quarter, which in fact is better for Us than really the lumpy big orders in many respect. Risk wise, they are easier to handle for us, and there's many positives about the Smaller orders. Sales, slight organic growth, I mean, currency impact there as well. There as well Services share being 68%, so mix somewhat improved in that one. Services primarily suffering from logistical challenges, not only the Suez Canal thing, but there's other things shortage container continues and very slow handling of ships globally. But very delighted to see Margin improved with the lower sales, and this is really coming mainly from synergies. So 2 thirds of the margin improvement Comes from Synergies. And then onethree is the mix improvement Our services grew to 68% of the sales. Metals segment, where we are working On turnaround, orders grew from last year to 101,000,000. Sales Declined by about €10,000,000 This is more about timing of deliveries. If you recall, we booked several large Orders end of last year, they were split orders split between Minerals and Metals. But in both segments, in Metals and Minerals, It will take into second half before we start really those projects getting into delivery phase and when we are able to recognize More top line volume out of these ones. At this moment, we are recognizing the engineering part and there the volumes are our lower ones. Metals also, which was heavily at loss At the end of last year and in last year altogether, it's getting closer to breakeven situation. And we expect We expect the turnaround program to kick in during the second half of the year. And €15,000,000 is our target on cutting the cost. And then like I said, we've reorganized The business into 4 business lines, business lines that are as self contained as they can be. And aim of this one is Really for each business line to show and prove out that they can turn around the business and have a realistic plan to reach the targeted 10% EBITDA level, as we have communicated earlier on. And at this moment, I mean, I'll leave it for Eeva to go through the finance So I will come back then later on with the strategy and other things. Thank you, Pekka, and good morning, good afternoon to everyone on my behalf as well. We're still starting the 1st 2 quarters of 2021 with some complexity in our numbers due to the closing of Mesotec transaction taking place midyear on June 30, 2020. The actual Q1 figures are obviously straightforward, as is any sequential comparison Or comparison to year end in the case of, for example, balance sheet numbers. But you need to be careful on the comparison to the 20 21st Under IFRS, that year over year comparison is only to the Metso Minerals numbers. So for operationally better I recommend using still the illustrative combined figures of 20 of the Q1 2020. Earlier words of caution still apply, namely that they do combine the history of 2 separate companies. So they are, as their name says, illustrative. I'll start with the operational performance and have here our Q1 actuals as well as the illustrative combined quarter of last year. And we have a cleared recycling out of the comparison period post its move into discontinued operations late last year. Pekka already raised the key numbers from here. So I would just note that when Comparing really the sales of SEK 925,000,000 to last year, exchange rates more than explained a 2% drop as their impact was a negative 4%. So organically, sales were up by 2%. Sales in the quarter are really impacted by the COVID-nineteen effect On really on order intake during last year's Q2, Q3, we have sort of lower less Timing wise, less of the backlog coming in the 1st months of this year. And then obviously, as Pekka already noted, the Challenges on mobility affecting our service crews on-site continues. The other figure I would raise to your attention is gross profit margin. In the quarter, it was 28.4 Now the second half of last year was impacted quite a bit by PPA adjustments, the order backlog related PPA FX gross profit. So that does explain the big improvement from the 26.6% that we recorded for the full of last year. However, as such, this level of 28.4% is a healthy one and does also demonstrate that we have progressed in the many business improvement actions We have been working on and discussing with you previously. Moving forward then to a few comments On the rest of the P and L, so on one slide further. Net financial expenses were SEK 7,000,000 for the quarter. We have lowered as planned the cost of debt. And we're at the end of the quarter, we were at 1.16% of average interest rate for our overall debt. Then regarding taxes, we have also progressed well on the synergy front, consolidating our legal structure to optimize in this area. And the ETR is at 25% for the quarter. And whilst we are early in the year, I am Expecting the full year to be around this same level. Earnings per share for continued operations were EUR 0.08 And then including discontinued operations, EPS was EUR0.07 Moving to the balance sheet. So overall, A slight increase in total assets from the beginning of the year to SEK 5,600,000,000 but nothing really Specific to highlight, I have the net working capital components as well as a few details on our cash and debt position on further slides. So I'll actually Revert to them then. Cash flow from operations was healthy in the quarter, totaling €165,000,000 Now we had good contribution from the profitability and also then to note that the change in net working capital was a €30,000,000 positive. Now considering we are ramping up our supply chain for the growth that It's visible in our order intake and hence building on that It's a work in progress. So I really would say that this was a positive and good achievement really from the organization. Then looking at the net working capital a bit more in detail. At the end of the first quarter, The net working capital totaled €353,000,000 And the sort of big elements Tier, really SEK 1,100,000,000 of inventories, slightly up from the year end, while then both AR and AP being just short of SEK 600,000,000. And advances received Stood at SEK 177,000,000 My final slide captures a few highlights on our financial Position, liquid funds at the end of March totaled SEK 516,000,000. And this is despite that we made an early payment on SEK 100,000,000 term loan From liquid assets in the quarter. The repayment brought our net debt down to SEK 675,000,000. We have, at the end of the quarter, SEK 790,000,000 of committed and undrawn facilities. But as we are Now approaching end of April, it is worthwhile mentioning that SEK 100,000,000 of that mature in a few days. So we will be moving forward with SEK 690,000,000 of committed and undrawn facilities. We raised extra facilities last spring amidst early COVID-nineteen times, But currently, we see no reason to renew the expiring portion. We have more than sufficient facilities for our operations with what remains. And with that, I would hand it back over to you, Pekka. So thank you. Thank you, Eeva. And I'll move on to the integration at this moment. So we reached on synergy cost side run rate of €83,000,000 at the end of the quarter. And the year end target for us is €120,000,000 and we are well on track reaching that €120,000,000 €20,000,000 At this moment, the synergies that we've been able to realize, 3 quarters of them are really coming From the organization restructuring it, reducing the overlaps and reorganizing our market area network and business support functions altogether. The rest, they come from Facilities, IT and Procurement. And IT and Procurement are items that will continue. And there are still some tail ends of the organization that we are working with. But like I said, we are well on track to reach €120,000,000 by the end of the year. And clearly, when look at our results, this is now visible. And like I commented earlier on, so twothree of the Minerals Margin improvement really came from synergies. And at this moment, they are cost synergies rather than revenue synergies. Then first time we are opening our revenue synergies, which by nature come in slower in pace because the first joint pitch we were able to start to prepare only on a merger date or after that. And then they go into our order books and come through order books into invoiced sales Or recognized revenue later on. At this moment, we have €11,000,000 of revenue synergies That we have realized that there's about €60,000,000 in our order backlog. And this is a number that we'll continue then to follow and communicate Back to the market. We also need to understand the €60,000,000 how it reads is that at this moment, for example, a big part of the revenue synergies, they are not really additional sales, but they are products that have been, in fact, replaced by in house supplies. Take, for example, pumps, which previously Odotec had acquired from external suppliers. But now since we have pumps in house are being sourced from in house. So they're not really adding to the top line, but full margin is internalized of those such products. Then we estimate that the costs relating to the merger will be €70,000,000 pretax. And this is down from €100,000,000 that we Originally estimated. And at this moment, we stand at about €40,000,000 on this line. So this work continues well. In the cost side, revenue synergies, our target is to reach €150,000,000 by the end of Next year and there, of course, the market environment does affect on speed how we can clock Revenues from NGS. But many interesting sort of businesses there ahead of us also in that regard. Then during the quarter, we were also listed as number 8 on 100 World's Most Sustainable Companies. So it is a great achievement from the organization. This is recognition of the past when being listed on and placed high on such a list. But we want to stay high on all ratings when it comes to sustainability. And sustainability, it is one of the top priorities in our strategy as well. We did launch a planet positive label just recently, a few weeks ago. And that is the label that sort of highlights our commitment to limiting the global warming with our actions to 1.5 degree. So our 1.5 degree journey as we call it in house. We do have science based targets defined and approved for that journey. And we are tracking those, and we'll start to also communicate those in the market once we have all the Measurement in such a shape that we can communicate them on quarterly basis. Already now, our ecological handprint is significantly bigger than footprint. But this doesn't mean that we wouldn't work on our footprint. We have taken already actions. For example, we have changed our Electricity into renewable energy in all places where we can. And this alone has reduced Our CO2 footprint by 60% already. But we continue to work further on that one. We are making changes in our logistics, which cuts our footprint in logistics by about 30%. So these are major steps that we are taking in order to reduce even the footprint from where we are today. But far bigger potential We have on our handprint, that means what we can do together with our customers through our offering and through our technologies. And this is what the Planet Positive is. And we will give the Planet Positive label to these products and technologies that truly are contributing to 1.5 degree journey. And we all know sustainability It's really value to our customers. And with sustainability, it's not only about emissions, It's about energy use as such depending almost regardless of what the source of energy is. It's about emissions. It's about water efficiency, very relevant for mining industry. It's about safety and circular business models. And we are putting more emphasis on this area, and we have just recently published the 1st TCFD Task Force on Climate Related Financial disclosures. And that is now available there. So planet positive is our label for our products, and we want to make it easy for our customers as well to select the most sustainable offerings from our range. Our market outlook, we repeat the same outlook what We had for this one, we do see further continued improvement in market activity. And of course, the COVID situation. We'll add some color into this one as we move on. We know that 3rd wave is on its way. Maybe 4th way we'll hit some of the countries. But we, of course, continue to monitor the situation. And so far, we see the environment improving as we move on. Thank you. I think we are ready for the questions now. Yes. Thank you. Pekka and Eeva. Operator, we can open the lines please. Our first question comes from Magnus Krupa from UBS. Please go ahead. Hi, Pekka. Juha Magnus here from UBS. A couple of questions from me. First, another solid quarter on aggregates, obviously notably on the margin side. Just wondering how we should think about the seasonality there for the rest of the year given the strong start. And obviously, a very strong print on 14%, if you can I mean, Given your additional aspirations on growth on the aftermarket side, I would you believe you can have had another maybe 200 to 300 basis points perhaps from higher mix of aftermarket? So is it possible that we can see even better margins in this business long term than the 15? Yes. Our aggregate does have a seasonality. The strongest seasons Our first, second and parts of 3rd quarter, 4th quarter is the slowest quarter normally. Normally, when it comes to Sales line. Biggest market is for aggregates is in the Northern Hemisphere. And therefore, the summertime, springtime, early fall, That is the most active time in that market. We saw increase in sales. I think it was 13% from last year in the Q1. Though comparison is somewhat difficult because we already saw reduction Strong reduction in the month of March last year in aggregates. Then we do have a very strong order intake months now Behind us in and I'm sure also a few one of them ahead of us. And the increase in sales really hasn't realized yet from the increased order backlog. So we will see Healthy sales numbers during the coming months. And of course, that does have potential to improve the results as well. We have taken also quite a strong action to manage our dealer network with our distribution management organization, and we are really paying attention to managing the performance of dealers and managing the performance so that They are actively promoting all our product lines, not only capital equipment, but Also services and spare parts and wear parts. And there, we can expect to see Improvement during the coming quarters. Got it. And Should we see this as a normalized margin for the Q1? It sounds quite strong in the context of your 15% target. Yes, we are working towards the 15% target for the aggregate segment. And like I said, I mean, we really haven't seen All the orders coming in through on the top line yet, and we have actions in place, still Improvement actions in house and then more active approach towards our dealers and distributors on the aftermarket side. So the potential is there. Perfect. That's very good. Also similarly on Metso. Obviously, Oxford had a very good margin print there in the context of the lower volumes. Is there anything specific you can highlight there on The ability side, what drove the step up since Q4 of its engineering hour utilization also? And should we expect this Profitability to gradually move up also in this business here. Was that on Minerals or? Metals. Metals side. Yes, we had good strong order intake in Metals at the end of the year. We do have Interesting things in the pipeline that did not materialize in the Q1, but I'm sure we will see something Happening in the Q2 and Q3 of the year. Those orders that we booked at the end of the year, we They will hit the sales line in the second half of the year, and we'll see the volume increasing. And there at then at the same time, We see also the cost impact or the impact of saving actions in our SG and A side. So We will see our numbers firming up in our Metals business. Okay. But nothing particular to highlight on Sequential step up in profitability there? No, nothing in particular. Okay. Got it. Got it. And then just finally, you mentioned some logistic issues in the quarter. Did you see any inbound supply chain bottlenecks as well? And where did you see those in that case? Yes. Some of them were inbound, some of them were really internal issues. We are making changes in our supply footprint. We are making also changes in our warehouse footprint. And these are causing Some sort of bottlenecks and shortages. These are normally short lived shortages and regional, but we have several moving parts at this moment. So therefore, we are Slightly suffering from it, but the future will look much better in that regard. Then global logistics Shortage of containers, containers being in wrong part of the world. That is an unfortunate thing that is happening. We are using more airfreight than we would like to use. Some of the cost we are carrying already today. We have also converted some of the freight into between Asia and Europe to Railways rather than ships, and that tends to be more expensive than ship. But it's more reliable at this moment, and And the container shortage is not affecting that one so heavily. Got it. Thank you so much. Thank you. Our next question comes from Klas Bergelind from Citi. Please go ahead. Yes. Hi, Pekka and Iva. It's Klas at Citi. The first question I had was on cash flow. So This is the Q2. It looks like underlying capital turns are improving. You don't have any major large orders in there. So it looks like an Underlying improvement to cash flow. Iva, can you talk a little bit about the self help program looking at the supply chain? Are we now seeing Early signs of this regional setup starting to impact cash flow positively. And what can we expect ahead? That's my first one. Sure, Klas. So well, I think we had a smooth quarter in many ways. And But perhaps so in a way to your question, I think that sort of The setup work that we just have plants running all over the world. But I would perhaps caution a bit that As we see now, the aggregates growth ramping up. So that is a business that does tie capital In a growth phase. And of course, now with some of the logistics bottlenecks that we need Sort of assume we'll unfortunately be with us a bit longer than hoped. So we are, of course, balancing kind of availability and inventories And where to have what and now really the recent news on India is unfortunately also negative in the That we do need to sort of look at alternative sources. And again, that will cause some so I think a very strong start, but I would perhaps caution a bit that we will sort of see more work in progress and then really dependent on the Global logistics flows that how quickly this sort of post COVID unbalances will ease out That are we able to kind of rely on sort of tighter turnover or not? But obviously, sort of the whilst they're causing some headache in the short term when we are reducing the number of distribution centers, reducing the number of sites, It all is, in the long term, sort of builds for better, more efficient working capital management. And that, of course, Will sort of come through in the sort of medium term and is visible already? Yes. No, that's very clear. I think when we compare it with Sandvik, they started their Supply chain program in 2013 and then it took 2 to 3 years until they started to see a Improvement in inventory turns even under stronger growth. I guess it's a medium term ambition rather than anything short term. Then on the my second one is on the guidance. So given that aggregates will likely flat line into the Q2 of a seasonally Strong first quarter, Pekka. That would suggest that you see stronger sequential demand on the mining side to push the overall guide higher. I know you don't guide on orders, you guide on market. But is that how we should interpret the outlook, stronger mining from here than aggregates into the second We have a solid, good, strong and strengthening proposal pipeline. And then, of course, it So it depends how successful we are in turning that to orders and then, of course, also timing of the actual orders and decisions that customers will take. But This improving market environment, our guidance, it applies to all our businesses equally to Minerals as aggregates and Metals. Okay, good. My final one is on the green agenda and your handprint And how we can drive quickly replacement. So it's pretty clear underground with battery electric, but it's less Clear mid and downstream. And I know that aggregates have several dual powered products of different sizes and some even fully electric. But can we also see conversions to electric on the mining side? I get the water efficiency, the safety aspect of ESG for you, but I'm trying to think if Electric equipment can play a role for MedSutortec on a broader scale? Well, electric equipment is not really what Where we see the potential. Most of our equipment, I mean, you pinpointed aggregates, That's an exception. But most of it's already electric and has been electric for tens of years already. We have other areas. We have technologies that can contribute to lower emissions with our customers. We are working on things like Separating the nonvaluable part early on in the process that we don't have to push the nonvaluable part of the ore through the entire process. And that means reduction in energy usage, reduction in water Yes. It's we are looking into ways to have separate water flows for different parts of the process so that we can recirculate the water better. And those are the type of activities. And just one example, which we have a new product line within our consumables. And it's not connected with the rest of Metso other than synergistically, yes. It's a rubber truck body. What this does is that it reduces the empty weight of a vehicle by 9% Average depends a little bit on size of dump trucks. And this 9% translates either 9% lower fuel reduction because of the lower weight or 9% higher productivity, which means, again, that fuel cost per moved ton is 9% lower. And if fuel is if 9% less fuel is burnt, it means that 9% less Emissions are produced. So these are the type of things that we are offering and launching into the market as we speak. And those are more of All the things that we do develop rather than electrification as such. Thank you. Thank you. Our next question comes from Arthur Amatavarenko from Credit Suisse. Please go ahead. Justin, it's Arsen from Credit Suisse. Thank you very much for taking my questions. My first one is around services in Minerals Business. It's great to hear them coming back to some growth. But still there is it seems like a lot of that miners have been postponing a lot Services, I guess, do you expect that at some point this year there should be a considerable catch up in postponed Services considering the very high level of production, which miners are running at the moment. I think that we are already seeing first signs of that one. We have where we saw the reduction because of COVID was in shutdown services. It was in upgrades and modifications. And those are the businesses where currently the proposals have increased recently by more than 100%. So double amount of proposals Out there, and it takes some time before they turn into orders and sales. But that is something that we believe is to come. Great. Thank you. My second question is about Niro's EBIT and revenue. I think in the report And that you see some order backlog some postponements in the order backlog. Can you maybe help us quantify how much impact on revenue and EBIT it had? And also Do you expect some catch up of those deliveries later this year? Well, it's actually not any delays or Spoilman, it's how originally the sort of order intake was built. So I think it's just kind of That they kind of start creating revenue perhaps a bit later than Sometimes you and your colleagues consider and hence really sort of if you look at the sort of The COVID impacted order intake of Q2, Q3 last year, then it obviously is Kind of what we see now in Q1 and Q2 coming through. So in that sense, not sort of The only area where we have sort of some challenges is really at the sort of end of some of the projects that we're Well into execution before COVID, but then some final tails would require some sort of final sort of work at the sites with rather large crews. And of course, Those have been postponed. But really, this is just the sort of how the backlog is built and at that timing. Understood. That's very clear. Thank you. And my last question is around cost synergies. I think you've already achieved 70 End of your targeted range and in the past you mentioned that after the 2 companies are merged you will have a much better visibility on What are the inefficiencies you could tackle like let's say, Ultratech having an overly heavy Europe and developed market headcounts? So I guess, Have you done any more work on this? And do you think potentially there could be more savings to be generated sorry, synergies to be generated? Yes. We have not really revisited the total yet at this moment. We still have some work to do to get to 120 by the end of the year. And we know that, for example, procurement side will be Challenged because of the inflationary environment that we see, and we needed to divert some of the procurement actions to such areas where there's no raw material a component in costing side. But we are Well off when it comes to reaching this EUR120 1,000,000 and then of course, Anything beyond that one will have to be later on. We are generating new items all the time, but also some of the older Items do prove out to be not as quite effective as we thought in the beginning. So this is where we are at this moment. Understood. Thank you very much for answering our questions. Thank you. Our next question comes from Antti Kanskinen From SEB. Please go ahead. Yes. Hi, it's Antti from SEB. A few quick questions from my side. First coming back to the planet positive portfolio and Pekka you mentioned few examples. But where do you think where you are seeing the most differentiation to your mining Equipment competitors there and where do you also see the biggest interest from clients today? And are your clients Today realizing the value of it, which would be reflected on, let's say, pricing and margins you can receive from that offering today? Yes. I think this is a developing scenario with the sustainability. I mean, there's no company who wouldn't talk about sustainability in today's world. Yet we truly need to See, companies taking actions. This requires investments from it requires investments from us in the product development. It does require additional investments from our customers, truly, truly to get serious about the sustainability. So that's why it is a sort of developing scenario what we have ahead of us. But we do have several technologies where we are Head of Competition. We have them in our mineral side. We have do have them in our metal side. Metalsight specifically has several of them starting from flash smelting and the later development Of that one to many other areas, areas where we can already today highlight clear energy cost and emission savings to our customers. And then the new products that I explained that we are developing. We have almost in all our R and D projects, we do have Sustainability targets that we need to do as a part of the project when we develop the products. I mean, Be it then through productivity, be it then through better use of energy or Fuel, it has so many different dimensions in this regard. And I just would like to remind that we do Invest about €100,000,000 annually on R and D. And it is in this part of the value chain where we are the biggest number in this business. Okay. And how would you expect this demand to kind of develop? Does it need a kind of a greenfield cycle to get the solutions out there? Or is there a kind of Strong retrofit or modernization demand already placed for existing mines today? It is both, both and. Both and when we develop things, we are, of course, very much focusing on something which is faster cycle business than just the greenfields There are several years out there. We want to turn them into products and aftermarket products and services very fast. Okay, very clear. And the second question would be on the Mineral Services side. And you mentioned that the proposals for Different types of field service activities has doubled, but at the same time kind of the downtime is currently very costly for your mining clients due to the high prices. So how do you think that they will kind of balance out between more demand for field services, but at the same time not wanting to shut down production or curtail it in any ways? Yes. Of course, the longer mines operate without certain maintenance, the more sort of uncertainty they have in their planning. And at one point, you just have to take the shutdown. So it will come to an end at one point. And then of course, many operations, they plan on having shutdowns Seasonally, whenever it is a be then a holiday break or whatever, they normally extend Those shutdowns then and perform these things. We will see some rebound of those things coming. Okay. And then last for me is the ordering level in aggregates what you've seen since the market started to recover late last year. If you reflect on kind of historical levels in Metso and McCloskey, are we where are we right now? Is the market Clearly, overshooting after a very poor 2020 or are we in a levels that can be sustained over the cycle? How should we think about this? Yes. Now of course, what we see now is there is a little bit of rebound from things that customers didn't do in last year Because of COVID, then we do see a reaction on current market environment, which is boosted by the stimulus packages. And And the stimulus packages, I don't think they are really yet available physically, but There are promises and forecasts out there. And when these funds truly become available, then we do see what the real impact Of them is and will be. But the GDP growth figures and forecasts, they are very Strong and robust globally now. Now and that normally tends to support investments in aggregates. All right. Thank you very much. Thank you. Our next question comes from Madi Singh from Bank of America. Please go ahead. Yes, hi. Thanks for taking my question. Just one question On the mineral order trends, again, I know that you don't look at Sandvik and Epiroc orders And then compared to yours. But just in terms of understanding, if we have to think about the value chain, How long would it take for you to have a similar drop through to your books in terms of order received Compared to Sandvik and EBITDA, because Sandvik actually had a very strong quarter again in Q1. So I'm just wondering around that when we expect to see such a strong order growth for Minerals? Yes. Well, I would say we had a strong growth in the 4th quarter. Our Order line has much more lumpiness than some of our other peers, peers do have. And that, of course, means that There are ups and downs on our order line. Order line by nature, if I recall reading Sandvik's numbers through, they specifically said that they had three orders Exceeding SEK 200,000,000, which is €20,000,000 in rough terms. And I think we had Our order backlog consists primarily on, say, 15 10,000,000 to 20,000,000 Orders normally and, say, up to 25,000,000, those are the normal orders. And then when we have the lumpy orders, they are instead sort of 40 plus million orders. So the profile is different, a smaller number of orders, a bit more lumpy. But typically in terms of the time lag, if you were to say, think around that side. I remember in the previous quarter you said it should be around couple of quarters lag. But generally, When do you see the similar trends appearing? Is it longer than 2 quarters? Could it be 3, 4 quarters? Or it's just Really, this quarter, which is soft. Maybe we get more I think when we look at the cyclicality, we come a little later. And I think Still, it holds that we are 2 to 3 quarters late, but whether it translates then to order activity, it really depends on timing. Timing of single bigger orders more or less than anything else. Okay. And then one question on the synergy side, Revenue synergies, especially you mentioned that so far the synergies we have seen have only come from in sourcing. So I just want to understand your guidance of €150,000,000 in revenue synergy, whether that is based on only in sourcing Or if that also includes potential new revenue as well? Yes. I mean, for us, in order to get to €150,000,000 level, we would have to see some orders Where we truly some bigger orders, some potentially greenfields or major brownfields, where we really can start to Fill in the complete offering what we have now available from Metso Autotech. We will definitely see that happening. Yes. Okay. Thank you. Thank you. Our next question comes from William Mackey Kepler Cheuvreux. Please go ahead. Yes. Good afternoon. Thank you for taking the questions. First question would really be perhaps standing back against this upswing in your end markets in mining. Can we go back to your ambitions for the 20% operating profitability and just talk around some of the levers that need to fall into place to reach the 20% margin goal. So within the framework of our thinking when that is a realistic Possibility. And then also, I guess, more conceptually, but you've talked about the lag Between sort of early cycle orders and late in the mining industry. But we're looking at your service business in mining. From your experience of past cycles, could you share what sort of lag there typically is between an upturn in the mining Segment and an upturn in your service growth. And the last question is relating specifically to the synergies and cost savings in Minerals. Could you perhaps just frame or split out when we look at the step up in profitability, how much is volume related or mix related? And how much Specifically, it's the benefits of the integration. Thank you. Yes. A broad question. Maybe I'll start with one and Eeva will sort of Then continue from that one. I think what we need to remember that we are still suffering from COVID and the pandemic. And our top line is Not really what we were sort of seeing when we looked at the merger in the in 1st place. So we would have to see us coming out of these restrictions. I think that is truly one sort of requirement that we do have. And then, of course, the integration and the synergy cost part of it, That is something that we are working with and confident that we will get there. But Eeva, can you continue from that one? Yes. So William, maybe just to sort of kind of Brief answer in a brief way on what does it take to get to 20% on Obviously, synergies play an important part of that. We're well on our way. But as Pekka mentioned, so of course, there's way to go. Then obviously, we need to progress also on the business specific improvement measures, which when it comes to Minerals, Very much around the sort of consumables footprint and the logistical footprint. And as you heard earlier, so they're moving forward. But of course, we're still in a sort of phase where there's also some sort of headache coming from the sort of many changes. And then maybe on top of those ones, then clearly, whilst if you just look at The sort of sales mix in the quarter, you might sort of miss a bit of the challenge. But reality, of course, is that our sort of this the COVID pandemic has this is the 1st cycle where we see sort of, relatively speaking, aftermarket more hit. And really sort of we would need to see a sort of recovery to sort of more normal operating conditions in our aftermarket business where we really can We can really sort of leverage the overall sort of wide offering that we have to our customers. And that really is tied to the sort of overall sort of pandemic situation improving. And then maybe a final point that's worthwhile always reminding is around productization, standardization. We talked a lot about sort of Derisking and also sort of making our products more easier to produce And also sort of easier to use, easier to sell. So in all those four areas, we need to Move forward. And I think the challenge answering also your question on the cycle is that I don't think Any of us have seen a cycle like this, which is not a normal economic recovery. In any traditional mining cycle, you would see the To market aside jump up first, and that would be kind of driving the recovery and then only later on CapEx. And here we are. So the recovery from pandemic is actually very much capital driven, be it even on the aggregate side. It's really driven by capital. And hence, maybe the earlier laws sort of Apply, maybe they don't. And I think at least we're a bit hesitant to sort of give very clear indications that it's 1 quarter, 2 quarter, 3 quarters. I think this is just we have to sort of accept that there is a bit more uncertainty around than due to the fact that This is not a traditional GDP sort of drop cycle. Thank you. Thank you very much for the color. There's one other follow-up also which relates to the materiality of the disposal of aluminum. How should we treat that? Is that material within the Q2 figures? Well, we will see a positive Cash flow impact from it, I would say that then on sort of as such, of course, relatively small business, so the Bigger chunk in the discontinued operations from an asset point of view is around the recycling business. And then from the sort of From the sort of business performance point of view, the weakest business is the energy business. So aluminum kind of doesn't rank out Very material in either of those. But of course, there was a good divestment. We hope that both the buyer and us Our happy NN2 and the SOAR business will sort of develop better in the new hands. Thank you so much. Thank you. Our next question comes from Robert Davies from Morgan Stanley. Please go ahead. Yes. Thank you for taking my question. Most of them have been answered, to be honest. There was only one left, Which was just around the aggregates business. And you mentioned India, some of the disruptions related to COVID. Just be interested Could you give us any more color in terms of the order cadence as you went through this is the 1st segmented months of the year? What was the You started to see any drop off in the order rates already out of India in the aggregate side? And can you just remind us the exposure to India in aggregate? Thank you. Yes. India is one of our 4th 4 big markets for aggregates equipment. We do not Open up the market specific figures as such. But if I say that Europe has performed very well, the best performing Market at this moment, North America close to it. China has been on high level since China exited the COVID last year already. And India, we yet to see have to see the recovery. Okay. Thank you. Thank you. The next Our next question comes from Nick Houston from RBC. Please go ahead. Yes. Hi. Thank you for taking my question again. Most of them have been answered, but something I would be I'm curious to hear your thoughts on is the order pipeline in minerals and specifically If you could give us any sense of how big this pipeline is, maybe if not with specific figures than relative to what you've seen historically? And then if you could give any context on maybe the typical conversion rates that you've seen historically, That would also be very helpful. Thanks. Of course, difficult to give such insight on our Pipeline and then also the pipeline dynamics at a time when there's still uncertainty On COVID, it's also difficult to assess primarily because It's a little difficult to forecast how long the projects are in the pipeline before they are either Orders are placed or they are removed from the pipeline. So it is we are living, like Eeva explained, a little bit Different cycle than what we normally would be with the COVID. But anything ever to add? Yes. Maybe just To say that it is brownfield driven, definitely kind of what the sort of what I would sort of expect to And so sort of be feasible in the next sort of couple of quarters and more really on the small, medium sized end. So that's And then as I said, the sort of regional differences are very much related to the sort of COVID situation. So again, We have big differences on in between some of the mining countries currently. And that impact is difficult just to know exactly how long that will be with us. Okay. Thanks very much. Thank you. There appears to be no further questions registered. So I will now hand over back to the speakers. All right, ladies and gentlemen, it is 34 minutes past the hour and we need to wrap up here. It seems all the questions have been answered. So that's good. Our AGM will start momentarily and our second quarter results will be published on August 4. So thanks for this session and looking forward to speaking with all of you very soon.