Good afternoon, good morning, everyone. This is Juha from Metso's Investor Relations, and I wanna welcome you all to this conference call, where we discuss our third quarter 2023 results, which were published earlier this morning. As always, we'll start with a short presentation by our President and CEO, Pekka Vauramo, and CFO, Eeva Sipilä, and after that, we'll be taking questions. Since it's a busy day for all of us, we try and limit this call to 60 minutes, and please help us out by only asking 2 questions max each. With these words, I'll be handing over to Pekka to start the presentation. Please go ahead.
Thanks. Thanks, Juha, and welcome to this call. A few comments about the quarter itself. We saw stable activity in mining, and as we communicated, soft in the Aggregates. The sales development as such was flat over the quarter. But the margins were holding reasonably well. Well, and we continued to improve from third quarter last year, and the adjusted EBITDA margin was 16.1%. We also upgraded the financial target to the adjusted EBITDA target to 17%, or in fact, exceeding 17% over the cycle.
When we look at the numbers, I mean, both top lines, orders, and sales, we have a minor negative currency impact on them, about 4%, as you see in the tables attached with the report. Nevertheless, orders received decline with actual currencies -10%, sales being flat or 1% growth. Adjusted EBITDA came to EUR 2,213 million, which is EUR 11 million above last year and 5% improvement from last year, and 16.1% versus 15.5% in terms of the margin. Eeva will soon go through the numbers below that one more in detail.
When we look at our segments, Aggregates orders came down to EUR 269 million, so quite a drop from year before altogether, in terms of equipment, 30% decline, and while Services declined 9%. So mix improved to some extent here. Europe continued to be soft, and we saw further softness in North America, and we also need to remember that there's seasonality here, which is right at this moment, the highest throughout the year, this time of the year. Also worthwhile to note that we see some improvement both in India and in China.
In China, particularly, the super quarries continue to be active and we are getting nice orders from that segment. Sales came down by about 50-something million to EUR 308 million, and this was because of lower backlog and was quite expected. Services share improved slightly because of smaller decline in Services side. Good execution, adjusted EBITDA EUR 53 million, compared with the previous, with much higher volume, EUR 57 million, and margin performance 17.3% versus 15.7%. Good execution with much lower volumes is the conclusion out of Aggregates performance in the quarter.
Then, on Minerals side, we saw orders decline, though the market was stable, and we have very high proposal activity, but the proposals are not converting at the pace we would like them to see converting into orders. And it's obvious reasons for that one. It's the funding, interest rates and other uncertainties that we have again around us affecting the decision-making. Services continues to hold better, in particular modifications and upgrades that activity is back in that area. We see some decline in consumable side, but altogether service is holding better than the equipment side.
Sales, altogether, exceeded 11% last year's, exceeding slightly EUR 1 billion. Services, 5% growth and a minor decline in the mix. Services share being 60% from the last year's third quarter. Adjusted EBITDA margin, we saw an increase to 17.2% versus 16.8%, and EUR 174 million was the adjusted EBITDA for Minerals segment. And that is mainly from the deliveries and higher margin, gross margin as such. But these are the quarters in short, and Eeva, if you open up the financials more in detail.
Thank you, Pekka, and good morning, good afternoon to everyone on my behalf as well. Indeed, continuing on what our CEO already mentioned, maybe a comment regarding adjusted EBITDA on the group items. So, while the sort of operative run rate in that row should be some EUR 5 million-EUR 10 million cost in a quarter, we this year have indeed had some one-off related items. So, now in this quarter, we were at EUR 15 million, and that obviously visible in the numbers. Then regarding the year-to-date operating profit comparison, I would like to remind everyone that the 2022 figure of EUR 306 million includes the EUR 150 million charge to wind down our business in Russia.
Nevertheless, even excluding that, our operating profit exceeding EUR 600 million year to date this year is a significant improvement. Net financial expenses continue a few million up sequentially at EUR 23 million. Our effective tax rate for the nine months rounded up to 26%, as such at a level we would expect to afford a full year as well in this sort of 25%-26% bracket. Our earnings per share for continuing operations were EUR 0.14 for the third quarter, and year to date, we are at EUR 0.49. Following the move of the two previous metals businesses into discontinued operations, we now have a slightly positive result there, leading to earnings per share, including discontinued operations, to be EUR 0.01 higher, i.e., EUR 0.15 for the quarter.
Then moving on to our balance sheet, total assets are up some EUR 50 million from the end of June and roughly EUR 200 million from the beginning of the year. From June, so sequentially, we did see a further small decrease in intangibles, combined with some further increase in plant and equipment following ongoing CapEx projects. But otherwise, the changes are in working capital items and liquid funds, and I'll say a few words on them in the next slides. But before that, just noting that the net debt at the end of September stood at EUR 815 million, so turning down as expected.
Indeed, looking at cash flow from operations, it did improve in the third quarter, both sequentially as well as year over year, amounting to EUR 161 million. The improvement now comes from clearly less cash being tied in net working capital, and hence our profitability becoming more visible. While we didn't quite get to our target of net working capital to turn into a release, we did turn the tide as expected. The next slide provides a bit more detail on our working capital items. So at the end of September, net working capital was EUR 926 million.
At the start of the year, it was some EUR 600 million, while at the end of June, it was on a rather similar level at slightly below EUR 900 million then, and lower than the September number, only due to higher payables deducting on the total. Now, this rather flat sequential development obviously supported the quarterly cash flow, as you saw from the previous slide. However, with the sales growth slowing down, the percentage calculated over twelve-month quarterly averages rose to 14%, which is clearly on the high side, and we do expect this to come down. The right-hand chart shows the items in absolute euros, and there, compared to end of June, we are down on all items.
This comparison to the beginning of the year still shows a growth in inventories. But we will continue working to improve our cash flow generation by releasing capital tied in working capital, as discussed previously, and the market environment will you expect to enable us to continue on that path. Moving then to my final slide, just a few points on our financial position. Very little change from our last quarterly call. We did agree on an extension of 1 year on an existing term loan with one of our banks to improve our maturity structure. Otherwise, really no changes. Our committed facilities are ample.
And then looking at the table, liquid funds are stable compared to the previous quarter, while the net debt is down, which then brings our gearing at the end of September down to 32.6% and debt to capital to just below 30%. And with that, handing back over to you, Pek.
Okay, thank you. Thank you, Eva. Yes, we upgraded the financial target, as I already said, set to 17%, and the upgrade is based on the other hand, to the fact that over the 12-month period, we have exceeded the previous target, 15%, 15%, and we feel that there is room for further improvement of the margin. With the divestments progressing, we will have a very focused portfolio, having two segments, Aggregates and Minerals going forward.
Two segments that are very synergistic and the business model in both segments, which is more de-risked, comparing with the previous full portfolio that we had in Metso. Further growth opportunities in service, which we will and are tackling both through organic and inorganic growth. And then the third thing, we continuously see opportunities for further performance improvements. Also when looking back, I mean, by no means we had perfect execution in any of the preceding quarters, so we see further potential there now through the focused portfolio, plus also sort of more cautious view on projects than what we have had in the past.
The other targets that we have remain unchanged. i.e., the dividend policy remains the same, same. Our aim is to maintain Investment Grade Rating, and then on sustainability, we stay committed to our action plan to support the 1.5 degree max global warming target by 2030. So those are the targets, new targets we are going forward, and, we feel that the potential out there is, and that's why the upgrade was made. On ESG side, in the third quarter, we continued to deliver Planet Positive products increasingly to our customers. The sales grew by 34%.
This is the rolling twelve-month period and reached EUR 1.5 billion in that period, and you can see that the growth has been fairly steady over the previous quarters. We feel that there is further potential to grow in that one, and naturally, all our R&D and new product development goes in practice to developing new Planet Positive offerings. We work also with our suppliers.
We have co-committed to sort of increase engagement with the Science Based Targets with our suppliers, and currently we have 24% of our supplier spend committed to Science Based Targets, and we continue to grow that rate as we move on. We also do a very good work in cutting the emissions in our own operations, and the baseline year comparison is minus 65% now as we speak, and we are on track to meet the 2030 net zero goal.
It's noteworthy also that the battery metals Minerals are really playing major role now in our test work, which is some sort of proxy of what do we have ahead of us. Ahead of us, we are really busy. About half of our test work currently goes into battery Minerals, and then if we add another metal relevant for electrification, copper, onto that one, that covers almost all of the test work than what we do in our labs at this moment.
We also feel that employee engagement is important for our business and success of our business, and we are at all-time high in our survey, which we repeat quarterly basis, and we are with our benchmark group, international benchmark group, within the top 5% of the companies in terms of the employee engagement. Then the market outlook, we expect market activity to remain at the current level in both Minerals and Aggregates. With these ones, we can move on to the Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Klas Bergelind from Citi. Please go ahead.
Yes, hi, Pekka, Klas at Citi. So my first one is on Aggregates. You're not changing your guide further down, and it's a six-month guide, and it was a big, sharp drop in equipment orders. So should we read this as when you go through the year, Pekka, and you think about, you know, North America infra stimulus, you talked a bit about India there, in terms of sort of, structural growth. Does it mean that this is implicitly saying, again, sort of six months behind us being weak, are we sort of bottoming and maybe improving six months out, according to you, on the aggregate side? I'll start there.
Yeah. As I said, I mean, we are seasonally at the low point right now, and we still expecting the season to be next spring, which means that we should see ordering activity increasing towards end of fourth quarter and specifically in early first quarter. So, before that, we really cannot say which way we're going, but at this moment, we see that the season will be there next spring, and that would mean that at least seasonally, we are bottoming around now.
That's good to hear. Then on the margin in Aggregates, solid, given the sales decline, and obviously, you have the temporary workforce reduction, you have moved the business from supplying a lot of or delivering a lot of solution to more product. You've sort of streamlined this business. McCloskey have been a good integration. So let's say that sales next year, when we just push through the current order weakness, maybe falls at least 10%, which looks to be the case now. Like, how should we think about the trough margin versus history? This is a business that typically trough that low double digits. Is it more sort of a mid-teens margin we should think of, Pekka, as we look into 2024?
Yeah. We, of course, have many actions in place and further actions will be initiated in order to protect the margins and as such, I mean, we don't guide the margins, as you know well, Klas.
Yeah.
And don't want to get into that part now either. But for sure, I mean, we need volume in order to keep the margins improving, and current order intake is not supporting that one. So that's where I would like to leave it.
Thank you.
The next question comes from Max, from Morgan Stanley. Please go ahead.
Thank you. Good afternoon. I just wanted to ask about the new margin target of above 17%. I think when you had the 15% target, you sort of quite helpfully gave us the, how you were thinking about the individual divisions. I think it was kind of around 20% for Minerals, mid-teens for Aggregates. Could you just sort of help us understand a little bit how you're thinking about those divisions? And I guess maybe as an extension to that, this is a sort of above 17% through-cycle margin target. So I guess this isn't you saying, "This is kind of where we think the peak is," this is just across the cycle. So maybe if you could just clarify sort of some of those points, that'd be helpful.
Sure, Max. Indeed, we haven't really changed our view on the Minerals potential, so that towards 20% direction is still, we think, a very, very good indication, and hence, we didn't indeed specifically note on it. I think, also, referring to what Pekka just mentioned on aggregate, we believe structurally, I made a step change in that business. Whilst currently, obviously, it's challenged by lower volumes, we think the sort of potential is clearly in the teens areas as well.
The sort of combination of these two will result in that group target of 17% over the cycle, and quite rightly so. This is not the sort of peak, peak, peak margin. This is as guidance for you on our ambition to sort of further move the business. Despite the sort of, you know, short-term challenges we see in the external market environment, we do fundamentally believe that this business, over the cycle, can deliver better margins, and hence, that's how the board's thinking behind the target setting.
Okay. I realize I've only got one more question, so I'll, I'll, I'll stick to, I'll stick to cash. Could you do—when we look at that working capital chart that you showed of, of sort of working capital to sales, gone from 9%, at the end of last year, up to about 14%. I mean, could you help us with kind of how you think about that evolving, kind of by the end of 2024? Where, where could realistically that, that number come down to based on the actions you're taking? It looks like you've had some sort of early progress, but that would really be helpful to understand, kind of at least roughly, how to frame working capital in next year's cash assumptions. Thank you.
For sure. So, I think the sort of more sort of correct level for us would be sort of 10%-11%, something in that region. I think the 9% is a tough mark, perhaps, but clearly this is on the high side. What we've seen, not necessarily fully surprisingly, as we've started to address working capital and reduce buffer stocks, the first impact you see is actually in payables. Of course, on the calculation of Net Working Capital, it is actually negative when the minus gets smaller. But that's kind of where it comes through into sort of before it then impacts inventories.
I think we've done excellent work on the collection, despite sort of having a strong growth in the earlier quarters on sales and now the focus really on inventory, payables direction will help. Obviously, we're seeing less inflationary pressure, so things coming in are also supporting on that. So, of course, your question on 2024 would require a sort of crystal ball on inflation and many other things that I think there's different views out there still. But, but definitely sort of for our activities on the inventory side continue, and then it will depend a bit on also on the sort of growth projections in 2024, where the absolute numbers in. But again, if we get sales growth, obviously then the sort of percentage is helped as well. So, that's maybe what I can help you with, Max, today.
Okay, that's great. Thank you.
The next question comes from Antti Kansanen from SEB. Please go ahead.
Hi, guys, it's Antti from SEB. Two questions from me as well. I'll start with Minerals and a question on pricing, because I guess we saw some negative impacts on the consumable side and perhaps in some equipment as well from pass-through costs or kind of metal prices. So, did you see growth on volume terms in consumables? And also, is this kind of pressuring also the businesses that you have more dynamic prices in, in the sense that if we look forward, will pricing be a headwind for your orders in totality?
Yeah, consumables, yes, we have introduced, as we have earlier told, that we have introduced indexes, and of course, we see these indexes going up and down, up and down as the inputs do change. And we are seeing some of that one happening now. But indexes are there to protect our margin mostly, so yes, a headwind in terms of pricing but should protect our margins at the same time. But other than that, I mean, I mean, I don't see yet any pricing pressure or impact in our Minerals business at this moment.
Did the demand for consumables grow on volume terms? Was kind of the negative growth only by pricing?
No, they did not grow. In fact, they declined.
Okay. Good. And then the second question was more on the aggregate side and the U.S. business, and I guess this has been a distributor-driven market. So now that we move into late Q4, early Q1 for the summer season ordering, how do you see the inventory levels among the dealers? Is it a clean slate after the weak second half, or is there kind of a threat that even if it's an active market, the ordering might be a bit compromised because of inventory levels?
Yeah. The inventories are still high, maybe marginally down if one takes a really positive view on that one, but still on high level. High level, that includes also the rental fleet, rental fleet, which is in use, fully in use, I would say, and rental fleet, which is owned by the dealers. So, we are expecting this rental fleet starting to convert to owned machines, and should that happen, then it would also then initiate more active ordering at the same time. But let's say, I mean, it's always difficult to say what's gonna happen in today's world.
All right. Thank you.
The next question comes from Christian Hinderaker from Goldman Sachs. Please go ahead.
Yes, hello, Pekka, Eeva, Juha. Thanks for taking my questions. My first is on Aggregates and just coming back on the revised outlook and some of the comments, I guess, around inventory levels. I just want to understand, 'cause at the second quarter, you talked about a slower pace of rental fleet conversion to purchasing as a result of higher cost of capital and financing costs, which I think you've mentioned continue to be high and a sort of headwind to growth more broadly in the statements. Just want to understand what gives you then confidence that early next year that can change, as I think you've just commented to, in terms of fleet conversion and the sale of used equipment.
Yeah, Christian, I think the main thinking for us is really the underlying activity. Construction activity on the infrastructure side continues active, and we haven't really seen the end customer activity slow. And I think projections for 2024 are also reasonably positive. So as that then sort of rental fleet gets older and less efficient, there it tends to be a natural sort of interest then to move that forward and then buy new ones in. But of course, this at this point, like Pekka mentioned, is based on assumptions as the season really starts warming up, then sort of in November, early o r early December to sort of be there then for the next building season. But that's, as said, the sort of underlying ex- sort of dynamics would support a more positive view.
Very clear. Thank you, Eeva. Maybe just my second question then. Interested to understand, I think the guidance on central costs was around EUR 5-EUR 10 million at the last quarter, and I think we came at it at EUR 15 million. I just wonder what, what dynamics were at play there. Thank you.
Yes, indeed, we sort of had some fortunate one-offs, the type of things that we weren't able to fully properly predict. That sort of EUR 5 million-EUR 10 million is still a good proxy for the sort of underlying operative level that items that we see repeating from quarter to a quarter. And then items sort of falling on top of that, then obviously kind of raise the bar. Would still continue to be a bit more of positive going forward, but obviously we've sort of this year has been a, it has been a challenging one.
Thank you.
The next question comes from Andrew Wilson from JP Morgan. Please go ahead.
Hi, Gentlemen. Thank you for taking my questions. Two, I think, they're on the same subject, so maybe ask them together. Just the commentary around, I guess, slower customer decision-making on the Minerals side. Can I ask, is that all types of customers, or is it specifically either the majors or the juniors? And do you think this relates to financing challenges, or is it just broad uncertainty? Appreciating that might be quite a varied answer. And I guess secondly, on the same subject, what, if anything, you're seeing changing in terms of the pricing environment around some of those projects? Are they sufficiently well advanced that there isn't really a pricing discussion or there isn't a tender discussion at this stage?
And also in terms of when we think about if they are sufficiently advanced, does that lock you in onto the previously agreed prices, or do you see customers come back and try to renegotiate? That'd be really helpful. Thank you.
Okay, thanks. Thanks for that question. I would say that, yes, financing is an issue and more so for the juniors. While, I mean, the recent discussions and communications with the major ones, they are fairly confident that they will increase their CapEx spending in 2024. So quite an opposite view from sort of major mining companies comparing with the juniors. Then, with regards to discussions, quite many feasibility studies are being redone at this moment. So that's something that we see, and that's also very often these feasibilities are run by EPC, EPCm companies, and our communication with them confirms this fact.
Many, many sort of projects are being sort of re-scoped. Some people are looking at different kind of execution of the project, some higher capacity, some lower capacity, or various options are being studied. I think that's the name of the game, rather than sort of pricing discussion.
That's very helpful. Thank you.
The next question comes from Mikael Doepel from Nordea. Please go ahead.
Yes, thank you. Thank you and good afternoon. Firstly, on, on Minerals, when I look at your order intake in Q3 and compare it to Q2 for the new equipment business, I can see that it is actually down sequentially, even though I think you actually didn't have any big orders booked in, in Q2, but you did have in Q3. So the underlying business of smaller to mid-sized projects seems to have clearly become smaller. So I'm just wondering, you know, have you seen any change in the market there overall? Has this kind of hesitation become more broad-based and spreading to the smaller projects as well? Or, or how do you see, how do you see that market currently?
Yeah. Well, of course, there is softness in the market and even though two bigger ones came through during the quarter. But I think we were also commenting earlier in the second quarter that the small activity around small orders was on all-time high level sometime this spring earlier this year. So maybe this is more of a return of those small orders to normal level. Then on the other hand, we do see increasing activity in our Services side, in modifications and upgrades, and sometimes it's a very fine line whether this is a new equipment order or whether it's a modification as such.
When we, we sort of account it as a modification if it requires engineering changes in the existing process and related modifications on the standard equipment that we deliver, plus a work then relating to overseeing the assembly.
Right. Right. So you wouldn't say that you have seen any kind of, you know, increased levels of cancellations or anything like that? The pipeline still looks, looks good overall.
We really don't see cancellations happening.
Okay. Thank you. Secondly, coming back to the question about cash flow and working capital, so maybe a question to Eeva. So just wondering, into Q4, what is your base assumption there? I mean, you have tied up still quite a lot of cash. Would you expect to be able to release something already in Q4 of this year, or is that-- Shouldn't we expect that to happen yet, but rather into perhaps next year?
Yeah, well, I would say that, and I commented earlier, they were kind of targeting, so and, not to have further capital tied in the business, then it... We were perhaps sort of a bit lower in sales than, and IE deliveries than planned. And that sort of obviously then if it doesn't go out, it stays in inventory, then you could of course argue it would have moved to AR. But that was really a bit the sort of the area where we need to work on.
As such, the actions are in place, and I think the focus really for on our side is on moving, sort of moving the backlog, moving things from inventory into, in through sales, out. And certainly, we hope to have a somewhat better deliveries because the order backlog we have in the business. And then that would enable us to sort of further improve on the cash flow. That's the sort of focus now for Q4.
Okay. Perfect. Thank you very much.
The next question comes from Tomi Railo from DNB. Please go ahead.
Hi, Pekka, Eeva, and Juha. It's Tomi from DNB. I would appreciate if you could share some say high-level thoughts into 2024. We have seen order intake coming down now a couple of quarters, including Services. Order backlog is down year-over-year. How do you feel going into next year, and is there a possible need for capacity adjustments?
Yeah, of course, there is a lot of uncertainty out there, and very much confirms the recent events in the global scene that world is going from crisis to another, and in between, there's great uncertainty, and this seems to be repeating itself, the same pattern and forecasting is difficult. But we of course internally see the high proposals activity. We see high activity in the test work that we do in our labs. We do hear majors increasing capital expenditure in next year. Juniors, that activity is currently down.
These are the sort of factors that we see right now ahead of us. Of course, when it gets closer to the end of the year, we'll start to see some and have some more visibility that how firm these things are and what shape world is at that moment. Certainly, I mean, it will take into next year before we would see improvement of the situation. I think that's overall fair to say at this moment, and then how strongly it then happens or if it happens at all then remains to be seen.
Only, Tomi, we are more positive on the order intake based on really on what we see in the pipeline. But of course, for your modeling, it's good to appreciate that we've had a sort of two quarters of somewhat lower orders, so that does, of course, impact next year's sales and that's maybe good to take into account. And then we'll see how, as said, sort of what we come out with in Q4 and how sort of short-lived that then is.
But of course, orders next year will not help sort of first half sales in the same way as you can appreciate that orders that would have come now.
All right. Thank you.
The next question comes from Vlad Sergievskiy from Barclays. Please go ahead.
Yes, thank you very much for taking my questions. Can I start with double-checking with you on two numbers? First of all, in the P&L, other operating expense line was quite negative, EUR 29 million, presumably put pressure on your margin. What was behind that line? And second would be on cash flow statement and other item lines, which was like negative EUR 47 million, and that's probably put quite a bit of pressure on your cash conversion in the quarter. And again, trying to understand what's behind that line as well.
All right. Well, let me just pick the numbers you're looking at, so I can see sort of the... I think the sort of the other operating income, of course, is a combo in a way that what doesn't go into sales and marketing or admin or R&D ends up in other. So it's by nature a bit of a lumpy item. We're actually sort of down on that year-over-year, so I don't see it as a sort of adding pressure per se. It was a few EUR million up versus the third quarter last year, but year to date, it's actually significantly below.
So, I wouldn't perhaps read too much into that. And then your other number was on the cash flow, EUR 47 million. The other items, indeed, on. And it comes to the sort of what we have under adjustments, and these are basically then items when we start from the profit row that we sort of deduct or add back into way to get to sort of the operative result there.
I can check if there was anything special a lot on that, but, but again, these, unfortunately, these others tend to be the sort of what doesn't ideally fit in what is outlined specifically, then they end up in other, and it's it then a mixed bag.
Understood. Thank you very much, Eva. And, and very quick one, on your service orders. Obviously, you're reporting down 60% year-over-year in Minerals versus a very high level last year. What happened to average prices year-over-year on service? If we can come up with an average price. Was it flat? Was it still up? Trying to understand what happened to service volumes again, if we can try to kind of pinpoint that.
Yeah, I think partly is, depends a bit on what part of the service. There was areas of service where volumes continued to grow. Then we had areas where volumes were down, and Pekka mentioned earlier in the call that in the consumables area, we did see some destocking activity from customers on be it Aggregates or Minerals. And then, of course, we had a sort of negative impact from volume. Very hard to give an average price on, from sort of, for everything we do.
Overall, I think sort of pricing has held quite well, apart from the areas where again, as mentioned earlier in the call, where there's clear indexes tied to certain raw materials, and as you well know, the prices of steel and steel scrap, for instance, have been coming down, which of course I think is inherently good, but it affects the top line, not as such, the margin.
Okay, that's very clear. Thank you very much.
The next question comes from Elliott Robinson, from Bank of America. Please go ahead.
So hey, guys. First question for me is quite quick. So the EUR 150 million charge taken from Russia in Q2 last year, you've still got EUR 64 million of that left, and you had a similar amount in Q2. How should we think about the utilization of that going forward? Or is there a chance that you're gonna have to reassess that charge at one point? Thank you, and then I'll come back with the second one.
Yeah, it's certainly something we have evaluated, but due to the uncertainty with, before we sort of have a legally, a legally sort of firm settlement agreements in place for all deals, obviously, we prefer to keep the provision untouched. As time evolves, those things will obviously mature and move forward and then, in every quarter, we do need to take a look on that, and certainly at the year-end also together with our auditors. That will be reassessed.
But, but it's obviously a flux situation and, and the somewhat difficult to exactly predict the sort of outcome, and hence we've preferred to sort of keep it intact until we sort of have real concrete evidence that that things will move forward. There are certain settlements are also tied to activities that will only evolve over time. That whilst we have exited, we have to sort of wait what how the customer operations evolve.
Okay, then. Okay. Yeah, that makes a bit of sense. And then the other bit would just be on the pipeline of large orders, although I appreciate it's kind of been touched on a little bit. Do you expect to see a sort of catch-up effect on these orders where you've seen slow decision-making? Or, or do you think there needs to be a catalyst for there to be this catch-up in large orders? And is it the case where you think this is just gonna be all pushed out to the right, or, or, yeah, I mean, certainly, will we see a catch-up?
Yeah. The big orders make our order intake always lumpy, and these lumps they tend to come not evenly. That's why it is lumpy, I think. But the most difficult thing really is to forecast timing of them. We know that certain things will move ahead at one point, but always difficult to say when that happens. I believe same will happen as before, that then everyone wants to go ahead at the same time at one point with these bigger ones. But that's all I can say at this moment. They haven't disappeared anywhere.
So, do you expect that catch-up to be around the time where you see interest rates coming down? Do you reckon that's gonna be a factor, or do you think it will just be the fact that a lot of miners will just decide to get a move on?
Well, of course, I do hope that they would move on. I mean, we all know that the world needs more metals and this is the sort of positive driver that we do have. But the financial frame and uncertainty in the world is so great at this moment that interest rates stabilizing or starting to go down would definitely help making these decisions. I mean, mining as such, I mean, it's a cash flow-wise, starting a new mine, it's a very heavy exercise, and interest rates is adding always to the difficulties.
Okay. Thank you for that. That's great. Cheers!
The next question comes from Tom Skogman from Carnegie. Please go ahead.
Good afternoon. I would like to tune in on your consumables business, as I remember that it has historically been quite cyclical, especially at times when input costs, like, you know, steel prices come down. What do you see at the moment? Have you already seen, you know, a down cycle in consumables, or should we kind of factor in a sharp decline in consumables orders the next two quarters?
Yeah, I think customers will continue to buy consumables as long as they continue producing, and there's very few mine shutdowns. In fact, only one major one that I'm aware at this moment. The consumption will be there, and I'm quite sure that we continue to be competitive and serve customers well in future as well. I don't see decline coming unless there is a dramatic drop in metal prices. Some of the metal prices have come down recently, but it's not a dramatic drop. As such, I think operating mines mostly continue still very profitable at this level.
All right. Thank you. My second question is on your new margin target. You're climbing the quality ladder, and profitability has improved a lot. But given that you have come up from, like, a level of an 11%-12% EBITDA margin in 2020, I think there are still investors and analysts that, that are scared that in a really weak scenario, the margin level could come down a lot. But in your view, given the big changes to the company and the divestment, what could be like, you know, in a, in a really negative scenario, like a margin level, that you would feel comfortable that you would always reach?
Yeah, that is a good question, but I mean, I don't give you a definite answer to that one. But if you think about the past, with a lot of EPC projects being executed, and when a downturn hits, what companies with projects and project profile at the downturn, what do they report on their actuals on running rate basis? It's in fact projects that are delayed or projects that do have difficulties. And then, of course, the financial numbers during that period, when everything else is down, they are very sad to read and sad history as such.
By de-risking our business model, what we have now done, yes, some legacy is left, but we will, we'll deal with them very, very soon now. The last piece is, pieces... We don't foresee that kind of situation at all for us right now with the current, current two segments that we understand well, and we understand well what's in the order books now. I would leave it there. We are, we are, we are different now, so also the future should be different for us in that regard.
Okay. Thank you.
The next question comes from Antti Kansanen from SEB. Please go ahead.
Thanks for the follow-up. It's kind of regarding how do you see the Aggregates profitability and the financial targets? 'Cause, 'cause if we take kind of a more normalized group costs and think about the 20% would be reachable on Minerals side, it doesn't kind of leave much upside to aggregate, if, if, if any. And now if you look at your Q3 numbers, you defended your margins quite well, despite sales dropping. So, how should we think about where we are now in the cycle regarding Aggregates margins, and what's kind of a realistic in a more muted market development than, let's say, a weaker U.S. market? So could you talk a little bit more about that one?
Yeah, of course, we are executing currently the order book, which we still have there. The new order intake, you have seen the numbers, but what they are, we are expecting the seasonality on minimum level, the seasonality to boost the order intake. But, of course, we need to see European market to come back in order to continue improving the margin. And should that not happen, I mean, then, of course, we see some erosion of the margin. But there as well, I mean, we are quite different structurally in our Aggregates business.
What we used to be, we used to serve more of a one segment of customers, more of the high-end customers. Now we have offering more widely spread to different segments of the market. We have different types of offerings in place, and our sort of coverage of the market with multiple distribution channels is different. And we've been able to do it without too heavy additional costs in the aggregate side. So I think we should see much better performance in Aggregates as well, even during this sort of a downturn going forward. We are more recession-proof there as well.
Okay. And then the second, more short-term question, I mean, on the Minerals seasonality, we've seen a couple of Q4s when you have got the nail, kind of suddenly a lot of these equipment deals booked, and there's been kind of a peak in order intakes. Are these kind of like one-offs, or do you think that there's a certain seasonality that clients get a bit more active on the last weeks of the year? And then on the other hand, on the Services side, we saw an extremely active Q1 this year. So is there some type of a early year seasonality, if you could remind us?
Yeah. I don't believe in year-end seasonality on bigger orders as such. Of course, year-end can be a deadline for executing something, but I think it's more of random than anything else. Services side, same way. Maybe some of the Life Cycle contracts that we have, they may have their anniversary in the beginning of the year, so that might be a reason why it boosts. Why we could see some boost in the first quarter. But also that one shouldn't be so strong that it would make it stand out too much.
Okay. Very clear. Thanks.
All right, thanks, everybody, for your questions, and, and thanks for being efficient, today. This concludes our third quarter results conference call. Next, the results announcement will only be in February next year, but before that, we're looking forward to meet many of you in person and, and in particular, have a good weekend, when you get there. Thanks and goodbye.