Metso Oyj (OUKPF) Q3 2023 Earnings Call Transcript

Metso Oyj (OTCPK:OUKPF) Q3 2023 Earnings Name Transcript October 27, 2023 6:00 AM ET

Firm Contributors

Juha Rouhiainen – VP, IR

Pekka Vauramo – President & CEO

Eeva Sipila – CFO

Convention Name Contributors

Klas Bergelind – Citi

Max Yates – Morgan Stanley

Antti Kansanen – SEB

Christian Hinderaker – Goldman Sachs

Andrew Wilson – JPMorgan

Mikael Doepel – Nordea

Tomi Railo – DNB

Vlad Sergievskiy – Barclays

Elliott Robinson – Financial institution of America

Tom Skogman – Carnegie

Juha Rouhiainen

Good afternoon and good morning, everybody. That is Juha from Metso’s Investor Relations. And I need to welcome you all to this convention name the place we talk about our third quarter 2023 outcomes, which have been printed earlier this morning. As all the time, we are going to begin with a brief presentation by our President and CEO, Pekka Vauramo and CFO, Eeva Sipila and after that we’ll be taking questions. And since it is a busy day for all of us, we try to restrict this name to 60 minutes and please assist us out by solely asking two questions max every.

With these phrases, I will be handing over to Pekka to start out the presentation. Please go forward.

Pekka Vauramo

Thanks. Thanks, Juha, and welcome to this name. Just a few feedback in regards to the quarter itself. We noticed steady exercise in mining and as we communicated tender within the aggregates. The gross sales improvement, as such, was flat over the quarter. However the margins have been holding fairly nicely. And we continued to enhance from third quarter final yr and the adjusted EBITA margin was 16.1%. We additionally upgraded the monetary goal to adjusted EBITA goal to 17% or the truth is, exceeding 17% over the cycle. Then after we have a look at the numbers, I imply, each topline orders and gross sales, we have now a minor forex, adverse forex affect on time about 4% as you see within the tables connected with the report however however orders acquired declined with precise currencies minus 10%, gross sales being flat or 1% development.

Adjusted EBITA got here to EUR213 million, which is EUR11 million above final yr and 5% enchancment from final yr and 16.1% versus 15.5% in phrases of the margin, and Eeva will quickly, quickly undergo the numbers under that yet one more intimately.

Once we have a look at our segments, Aggregates orders got here right down to EUR269 million, so fairly a drop from a yr earlier than, altogether when it comes to tools, 30% decline and whereas companies declined 9%. So combine improved to some extent right here. And Europe continued to be softened, and we noticed additional softness in North America. And we additionally must keep in mind that, there’s seasonality right here, which is correct at this second the very best all year long, this time of the yr. Additionally worthwhile to notice that, we see some enchancment each in India and in China. In China, significantly the Tremendous Quarries. Tremendous Quarries proceed to be lively, and we’re getting good orders from that section. Gross sales got here down by about EUR50-something million to EUR308 million, and this was due to decrease backlog and was fairly anticipated. Companies share improved barely due to a smaller decline in companies aspect. Good execution, adjusted EBITA EUR53 million in contrast with the earlier with a lot larger quantity, EUR57 million, and margin efficiency 17.3% versus 15.7%. And good execution with a lot decrease volumes is the conclusion out of Aggregates efficiency in 1 / 4.

Then on Mineral aspect, we noticed orders decline, although the market was steady, and we have now very excessive proposal exercise, however the proposals are usually not changing on the tempo we wish them to see changing into orders, and it is apparent causes for that one. It is the funding, rates of interest, and different uncertainties that we have now, once more, round us affecting the choice making.

Companies continues to carry higher, particularly modifications and upgrades that actions again in that space. We see some decline in consumable aspect, however altogether companies holding higher than the tools aspect.

Gross sales altogether exceeded 11% final yr, exceeding barely EUR1 billion. Companies 5% development and minor decline within the blended companies share being 60% from the final yr’s third quarter.

Adjusted EBITA margin, we noticed a rise to 17.2% versus 16.8%, and EUR174 million was the adjusted EBITA for Minerals section. And that’s primarily from the deliveries and better margin, gross margin as such. However these are the quarters briefly, and Eeva, for those who open-up the financials extra intimately.

Eeva Sipila

Thanks, Pekka, and good morning, good afternoon to everybody on my behalf as nicely. Certainly, persevering with on what Arsi already talked about, possibly a remark relating to adjusted EBITA on the group objects. So while the kind of operative run fee in that row needs to be some EUR5 million to EUR10 million prices in 1 / 4, we this yr have certainly had some one-off associated objects. So now on this quarter, we have been at EUR15 million, and that is clearly seen within the numbers. Then relating to the year-to-date working revenue comparability, I want to remind everybody that ’22 determine of EUR306 million consists of the EUR150 million cost to wind down our enterprise in Russia. Nonetheless, even excluding that, our working revenue exceeding EUR600 million year-to-date this yr is a big enchancment.

Internet monetary bills proceed a couple of million up sequentially at EUR23 million. Our efficient tax fee for the 9 months rounded as much as 26%. As such, on the stage we’d count on for the total yr as nicely on this kind of ’25, ’26 bracket.

Our earnings per share for persevering with operations have been EUR0.14 for the third quarter, and year-to-date we’re at EUR0.49. Following the transfer of the two earlier metals companies into discontinued operations, we now have a barely constructive consequence there resulting in earnings per share together with discontinued operations to be EUR0.01 larger, i.e. EUR0.15 for the quarter.

Then transferring on to our stability sheet, whole belongings are up some EUR50 million from the tip of June and roughly EUR200 million from the start of the yr. From June, so sequentially, we did see an additional small lower in intangibles mixed with some additional improve in plant and tools following ongoing CapEx tasks. However in any other case, the modifications are in working capital objects and liquid funds, and I am going to say a couple of phrases on them within the subsequent slides. However earlier than that, simply noting that the online debt on the finish of September stood at EUR815 million, so turning down as anticipated.

And certainly, taking a look at money move from operations, it did enhance within the third quarter each sequentially in addition to year-over-year, amounting to EUR161 million. The development now comes from clearly much less money being tied in internet working capital and therefore our profitability turning into extra seen. While we did not fairly get to our goal of internet working capital to show right into a launch, we did flip the tide as anticipated.

The subsequent slide supplies a bit extra element on our working capital objects. So on the finish of September, internet working capital was EUR926 million. At first of the yr, it was some EUR600 million, whereas on the finish of June, it was on a quite related stage at barely under EUR900 million then, and decrease than the September quantity solely on account of larger payables deducting on the overall.

Now, this quite flat sequential improvement clearly supported the quarterly money move as you noticed from the earlier slide. Nevertheless, with the gross sales development slowing down, the proportion calculated over 12-month quarterly averages rose to 14%, which is clearly on the excessive aspect. And we do count on this to return down. The suitable-hand chart reveals the objects in absolute euros, and there in comparison with finish of June, we’re down on all objects. This comparability to the start of the yr nonetheless reveals a development in inventories. However we are going to proceed working to enhance our money move era by releasing capital tied in working capital as mentioned beforehand. And the market atmosphere will count on to allow us to proceed on that path.

Shifting then to my remaining slide, just some factors on our monetary place, little or no change from our final quarterly name. We did agree on an extension of 1 yr on an current time period mortgage with certainly one of our banks to enhance our maturity construction. In any other case, actually no modifications, our dedicated amenities are ample. After which trying on the desk, liquid funds are steady in comparison with the earlier quarter whereas the online debt is down, which then brings our gearing on the finish of September right down to 32.6% and debt to capital to simply under 30%.

And with that, handing again over to you, Pekka.

Pekka Vauramo

Okay. Thanks. Thanks, Eeva. Sure, we upgraded the monetary goal, as I already stated, to 17%. And the improve relies however to the truth that over the rolling 12-month interval, we have now exceeded the earlier goal, 15%. And we really feel that there’s room for additional enchancment of the margin. With the divestments progressing, we can have a really centered portfolio having two segments, Aggregates and Minerals, going ahead, two segments which might be very synergistic and the enterprise mannequin in each segments, which is extra de-risked evaluating with the earlier full portfolio that we had in Metso.

Additional development alternatives in service, which we’re tackling each by natural and inorganic development. After which the third factor, we constantly see alternatives for additional efficiency enhancements. And likewise when trying again, I imply, in no way we had excellent execution in any of the previous quarters — quarter. So we see additional potential there now by the centered portfolio, plus additionally kind of a extra cautious view on tasks than what we have now had previously.

The opposite targets that we have now stay unchanged, i.e. the dividend coverage stays the identical. Our purpose is to take care of investment-grade score after which on sustainability, which they dedicated to our motion plan to assist the 1.5 diploma max world warming goal by 2030. So these are the targets, new targets we’re going ahead and we really feel that the potential out there may be, and that is why the improve was made.

On ESG aspect, within the third quarter, we continued to ship planet-positive merchandise more and more to our clients. The gross sales grew by 34%. That is the rolling 12-month interval and reached EUR1.5 billion in that interval. And you may see that the expansion has been pretty regular over the earlier quarters. And we really feel that there’s additional potential to develop in that one. And naturally, all our R&D and new product improvement goes in observe to growing new planet-positive choices. We work additionally with our suppliers. We’ve got dedicated to kind of improve engagement with the science-based targets with our suppliers. And at the moment, we have now 24% of our provider spend dedicated to science-based targets. And we proceed to develop that fee as we transfer on.

We additionally do an excellent work in reducing the emissions in our personal operations. And the baseline yr comparability is minus 65% now as we converse. And we’re on monitor to fulfill the 2030 internet zero objective. It is noteworthy additionally that the battery metals, Minerals are actually enjoying a serious function now in our check work, which is a few kind of proxy of what do we have now forward of us. Forward of us, we’re actually busy. Busy about half of our check work at the moment goes into battery minerals. After which if we add one other metallic related for electrification, copper, onto that one which covers nearly all the check work, then what we do in our labs at this second.

And we additionally really feel that worker engagement is necessary for our enterprise and success of our enterprise. And we’re at all-time excessive in our survey, which we repeat quarterly foundation, quarterly foundation and we’re with our benchmark group, worldwide benchmark group, throughout the prime 5% of the businesses when it comes to the worker engagement. Then the market outlook, we count on market exercise to stay on the present stage in each Minerals and Aggregates.

And with these ones, we are able to transfer on to the Q&A.

Query-and-Reply Session

Operator

[Operator Instructions] The subsequent query comes from Klas Bergelind from Citi. Please go forward.

Klas Bergelind

Sure. Hello, Pekka and Eeva. Klas from Citi. So, my first one is on aggregates. You might be, you are not altering your information additional down, and it is a six-month information then it was an enormous sharp drop in tools orders. So, ought to we learn this as if you undergo the yr, Pekka and you consider in North America infra stimulus, you talked a bit about India there when it comes to kind of structural development, does it imply that that is implicitly saying once more kind of six months behind us being weak, are we kind of bottoming and possibly enhancing at six months out in accordance with you on the aggregates aspect. I am going to cease there.

Pekka Vauramo

Yeah. As I stated, we’re seasonally on the low level proper now. And we’re nonetheless anticipating the season to be subsequent spring, which implies that we should always see ordering exercise rising in the direction of finish of fourth quarter and particularly in early first quarter. So earlier than that, we actually can not say which method we’re going. However at this second, we see that the season shall be there subsequent spring. And that will imply that no less than seasonally, we’re bottoming floor now.

Klas Bergelind

That is good to listen to. Then on the margin in aggregates, strong given the gross sales decline. And clearly, you have got the momentary workforce discount. You’ve moved the enterprise from supplying quite a lot of or delivering quite a lot of resolution to extra product. You have kind of streamlined this enterprise. McCloskey have been an excellent integration. So as an example that gross sales subsequent yr, after we simply push by the present order weak point, possibly falls no less than 10%, which appears to be like to be the case now. Like, how ought to we take into consideration the trough margin versus historical past? It is a enterprise that sometimes drove that low double-digit. Is it extra of a mid-teens margin we should always consider, Pekka, as we glance into 2024?

Pekka Vauramo

Yeah. We, in fact, have many actions in place. And additional actions shall be initiated as a way to shield the margins. And as such, I imply, we do not information the margins, as nicely, Klas. And I do not need to get into that half now both. However for certain, I imply, we’d like quantity as a way to maintain the margins enhancing. And present order consumption is just not supporting that one. In order that’s the place I want to depart it.

Klas Bergelind

Thanks.

Operator

The subsequent query comes from Max from Morgan Stanley. Please go forward.

Max Yates

Thanks. Good afternoon. I simply wished to ask in regards to the, the brand new margin goal of above 17%. I believe if you had the 15% goal, you kind of fairly helpfully gave us the, the way you’re desirous about the person divisions. I believe it is type of round 20% for Minerals, mid-teens for Aggregates. May you simply kind of assist us perceive just a little bit the way you’re desirous about these divisions? And I assume possibly as an extension to that, this can be a kind of above 17% by cycle margin goal. So, I assume, this is not you saying that is type of the place we predict the height is, that is simply throughout the cycle. So, possibly for those who might simply make clear kind of a few of these factors. That may be useful.

Eeva Sipila

Positive, Max. So certainly, we’ve not actually modified our view on the Minerals potential. In order that in the direction of 20% course continues to be, we predict, an excellent indication. And therefore, we did not certainly particularly notice on it. I believe additionally referring to what Pekka simply talked about on Aggregates. So certainly, we have now a — we consider structurally made a step change in that enterprise. And while at the moment, clearly, it is challenged by decrease volumes, we predict the kind of potential is clearly within the teenagers areas as nicely. After which the kind of mixture of those two will lead to that group goal of 17% over the cycle. And fairly rightly so, this isn’t the kind of peak margin. That is as steerage for you on our ambition to kind of additional transfer the enterprise. Regardless of the kind of short-term challenges we see within the exterior market atmosphere, we do essentially consider that this enterprise over the cycle can ship higher margins. And therefore, that is how the Board’s pondering behind the goal setting.

Max Yates

Okay. I understand I’ve solely acquired yet one more query. So I am going to stick with money. May you — after we have a look at that working capital chart that you simply confirmed of kind of working capital to gross sales gone from 9% on the finish of final yr as much as about 14%, I imply, might you assist us with type of how you consider that evolving type of by the tip of 2024? The place might realistically that quantity come right down to primarily based on the actions you take? It appears to be like such as you’ve had some kind of early progress, however that will actually be useful to know type of no less than roughly the right way to body working capital in subsequent yr’s money assumptions. Thanks.

Eeva Sipila

Positive. So I believe the kind of extra kind of appropriate stage for us could be kind of 10%, 11%, one thing in that area. I believe the 9% is a troublesome mark maybe, however clearly that is on the excessive aspect. What we have seen, not essentially absolutely surprisingly, as we have began to handle working capital and cut back buffer shares, the primary affect you see is definitely in payables. And naturally, on the calculation of internet working capital, it’s really adverse when the minus will get smaller. However that is type of the place it comes by into kind of earlier than it then impacts inventories. I believe we have performed wonderful work on the gathering, regardless of kind of having robust development within the earlier quarters on gross sales. And now the main focus actually on stock payables course will assist. Clearly, we’re seeing much less inflationary stress. So issues coming in are additionally supporting on that. So, in fact, your query on ’24 would require kind of crystal ball on inflation and plenty of different issues that I believe there’s completely different views on the market nonetheless, however positively kind of our actions on the stock aspect proceed. After which it’s going to rely a bit on additionally on the kind of development projections in ’24 the place absolutely the numbers. And however once more, if we get gross sales development, clearly then the kind of share is helped as nicely. In order that’s possibly what I can assist you with, Max, at present.

Max Yates

Okay, that is nice. Thanks.

Operator

The subsequent query comes from Antti Kansanen from SEB. Please go forward.

Antti Kansanen

Hello guys. It is Antti from SEB. Two questions for me as nicely. I am going to begin with Minerals and a query on pricing, as a result of I assume, we noticed some adverse impacts on the consumable aspect and maybe in some tools as nicely from pass-through prices or type of metallic costs. So, did you see development on quantity phrases in consumables? And likewise, is this type of pressuring additionally the companies that you’ve extra dynamic costs within the sense that if we glance ahead, will pricing be a headwind on your orders in totality?

Pekka Vauramo

Yeah, consumables, sure, we have now launched, as we have now earlier advised that we have now launched indexes. And naturally, we see these indexes going up and down because the inputs do change. And we’re seeing a few of that one occurring now. However the indexes are there to guard our margin largely. So sure, a headwind when it comes to pricing, however ought to shield our margins on the similar time. However apart from that, I imply, I do not see but any pricing stress or affect in our Minerals enterprise at this second.

Antti Kansanen

And did the demand for consumables develop on quantity phrases? Was the adverse development solely by pricing?

Pekka Vauramo

They didn’t develop. They, the truth is, declined.

Antti Kansanen

Okay. Good. After which the second query was extra on the combination aspect and the US enterprise. And I assume this has been a distributor-driven market. So now that we transfer into late This autumn, early Q1 for the summer time season ordering, how do you see the stock ranges among the many sellers? Is it a clear slate after the weak second half? Or is there type of a menace that even when it is an lively market, the ordering may be a bit compromised due to stock ranges?

Pekka Vauramo

Yeah, the inventories are nonetheless excessive, possibly marginally down if one takes a very constructive view on that one, however nonetheless on excessive stage. That features additionally the rental fleet, which is in use absolutely in use, I’d say, and rental fleet, which is owned by the seller. So we predict this rental fleet beginning to convert to owned machines. And will that occur, then it might additionally then provoke extra lively ordering on the similar time. However as an example, I imply, it is all the time troublesome to say what is going on to occur in at present’s world.

Antti Kansanen

All proper, thanks.

Operator

The subsequent query comes from Christian Hinderaker from Goldman Sachs. Please go forward.

Christian Hinderaker

Sure. Hiya, Pekka, Eeva, Juha, thanks for taking my questions. My first is on Aggregates and simply coming again on the revised outlook and a few of the feedback, I assume, round stock ranges. I simply need to perceive, as a result of on the second quarter, you talked a couple of slower tempo of rental fleet conversion buying on account of excessive price of capital and financing prices, which I believe you’ve got talked about proceed to be excessive and a kind of headwind to development extra broadly within the statements. I simply need to perceive what offers you then confidence that early subsequent yr that that may change, as I believe you’ve got simply commented to when it comes to fleet conversion and the sale of used tools?

Eeva Sipila

Yeah, Christian, I believe the principle pondering for us is de facto the underlying exercise, development exercise on the infrastructure aspect continues lively, and we have not actually seen the tip buyer exercise sluggish. And I believe projections for ‘24 are additionally fairly constructive. In order that then kind of rental fleet will get older and fewer environment friendly, there tends to be a pure curiosity then to maneuver that ahead after which purchase new ones in. However in fact, at this level, like Pekka talked about, relies on assumptions because the season actually begins warming up then kind of in November, early December to kind of be there then for the following constructing season. However that is, as I stated, the kind of underlying kind of dynamics would assist a extra constructive view.

Christian Hinderaker

Okay. Thanks. Perhaps simply my second query then. to know, I believe the steerage on central prices was round EUR5 million to EUR10 million on the final quarter, and I believe we got here out at EUR15 million. I simply surprise what dynamics have been at play there? Thanks.

Eeva Sipila

Sure, certainly, we kind of had some lucky one-offs, the kind of issues that we weren’t in a position to absolutely correctly predict that kind of EUR5 million to EUR10 million continues to be an excellent proxy for the kind of underlying operative stage that objects that we see repeating from quarter to 1 / 4 after which objects kind of falling on prime of that then clearly type of elevate the bar. I’d nonetheless proceed to be a bit extra constructive going ahead, however clearly — we have kind of yr has been a difficult one.

Christian Hinderaker

Thanks.

Operator

The subsequent query comes from Andrew Wilson from JPMorgan. Please go forward.

Andrew Wilson

Hello guys and thanks for taking my questions. I believe they’re on the identical topic, so possibly we’ll ask them collectively. Simply the commentary round, I assume, slower buyer decision-making on the seller aspect. Can I simply ask, is that each one varieties of clients or is it particularly both the makers or the juniors? Do you assume this pertains to financing challenges or is it simply broad uncertainty? I recognize that that may be fairly a different reply. I assume, secondly, on the identical topic, what, if something, you’ve got seen altering when it comes to the pricing atmosphere round a few of these tasks? Are they sufficiently nicely superior that there is not actually a pricing dialogue or there is not actually a young dialogue at this stage? And likewise when it comes to the place we take into consideration if they’re sufficiently superior, does that lock you in on the earlier elevated costs or do you see clients come again and attempt to enhance but? That may be actually useful.

Pekka Vauramo

Okay. Thanks. Thanks for the query. I’d say that, sure, financing is a matter and extra so for the juniors. Whereas, I imply, the latest discussions and communications with the key ones, they’re pretty assured that they are going to improve their CapEx spending in ’24. So fairly an reverse view from kind of main mining corporations evaluating with the juniors. Then close to discussions, fairly many feasibility research are being redone at this second. In order that’s one thing that we see. And that is additionally fairly often these feasibilities are run by EPC/EPCM corporations and our communication with them confirms this truth. Many kind of tasks are being kind of re-scoped. Some persons are taking a look at completely different type of execution of the mission. Some larger capability, some decrease capability or numerous choices are being studied. I believe that is the secret quite than kind of pricing dialogue.

Andrew Wilson

That is very useful. Thanks.

Operator

The subsequent query comes from Mikael Doepel from Nordea. Please go forward.

Mikael Doepel

Sure, thanks. Thanks and good afternoon. Firstly, on, on Minerals. Once I have a look at your order consumption in Q3 and in comparison with Q2 for the brand new tools enterprise, I can see it’s really down sequentially despite the fact that I believe you really did not have massive orders booked in Q2, however you probably did have in Q3. So, the underlying enterprise of smaller to mid-size tasks appears to have clearly grow to be smaller. So, I am simply questioning, have you ever seen any change available in the market there general? Has this type of hesitation grow to be extra broad-based and spreading into the smaller tasks as nicely or how do you see that market at the moment?

Pekka Vauramo

Nicely, in fact, there may be softness available in the market, and despite the fact that two greater ones got here by through the quarter, however I believe we have been additionally commenting earlier within the second quarter that the small exercise round small orders was on all-time excessive stage, generally deliver this earlier, earlier this yr. So, possibly that is extra of a return of these small orders to regular stage. Then however, we do see rising exercise in our companies aspect in modifications and upgrades, and generally it is a very positive line whether or not this can be a new tools order or whether or not it is a modification and likewise such and we kind of account it as a modification, if it requires engineering modifications within the current course of and associated modifications on the usual tools that we ship plus work then referring to overseeing the meeting.

Mikael Doepel

Proper. Proper. So, you would not say that you’ve seen any type of elevated ranges of cancellations or something like that. The pipeline nonetheless appears to be like good general.

Pekka Vauramo

We actually do not see cancellations occurring.

Mikael Doepel

Okay, thanks. After which secondly, coming again to the query about money move and, and dealing capital, so possibly a query to Eeva. So, I am simply questioning into This autumn, what’s your base assumption there? I imply you have got tied up nonetheless numerous money. Would you count on to have the ability to launch one thing already in This autumn of this yr or is that — ought to we count on that to occur but however quite than into maybe subsequent yr?

Eeva Sipila

Yeah, nicely, I’d say that, and I commented earlier that we’re type of focusing on so to not have additional capital tied within the enterprise than we did. We have been maybe a kind of a bit decrease in gross sales and that i.e. deliveries than deliberate and that kind of clearly, then if it would not exit, it stays in stock. Then you can, in fact, argue it might have moved to AR, however that was actually a little bit of kind of the realm the place we have to work. And as such, the actions are in place. And I believe the main focus actually for on our aspect is on transferring — is kind of transferring the backlog, transferring issues from stock into — by gross sales out. And definitely, we hope to have a considerably higher deliveries, as a result of the order backlog we have now within the enterprise. After which that will allow us to kind of additional enhance on the money move. That is the kind of focus now for This autumn.

Mikael Doepel

Okay, excellent. Thanks very a lot.

Operator

The subsequent query comes from Tomi Railo from DNB. Please go forward.

Tomi Railo

Hello, Pekka, Eeva. It is Tomi from DNB. I’d recognize for those who might share some, say, high-level ideas into ’24. We’ve got seen order consumption coming down now a few quarters, together with companies. Order backlog is down year-on-year. How do you’re feeling going into subsequent yr? And is there a doable want for capability changes?

Pekka Vauramo

Yeah, in fact, there may be quite a lot of uncertainty on the market and really a lot confirms the latest occasions. Occasions within the world scene that world goes from disaster to a different, and in between there’s nice uncertainty. And this appears to be repeating itself, the identical sample and forecasting is troublesome. However we, in fact, internally, we see the excessive proposals exercise. We see excessive exercise of the check work that we do in our labs. We do hear majors rising capital expenditure in subsequent yr. Juniors, that exercise is at the moment down. However these are the kind of components that we see proper now forward of us. And naturally, when it will get nearer to the tip of the yr, we’ll begin to see some and have some extra visibility that how agency these items are and what form the world is at that second. However definitely, I imply, it’s going to take into subsequent yr earlier than we’d see enchancment of the state of affairs. I believe that is general truthful to say at this second. After which how strongly it then occurs, or if it occurs in any respect, then stays to be seen.

Eeva Sipila

Hey, Tomi, we’re extra constructive on the order consumption primarily based on actually on what we see within the pipeline. However in fact, on your modeling, it is good to understand that now we have had two quarters of considerably decrease orders. In order that does, in fact, affect subsequent yr’s gross sales. And which may be good to keep in mind. After which we’ll see how, as I stated, kind of what we come out with in This autumn and the way kind of short-lived that’s. However in fact, orders subsequent yr is not going to assist kind of first half gross sales in the identical method as you may recognize that orders that will have come now.

Tomi Railo

Right. Thanks.

Operator

The subsequent query comes from Vlad Sergievskiy from Barclays. Please go forward.

Vlad Sergievskiy

Yeah, thanks very a lot for taking my questions. Can I begin with double checking with you on two numbers? Initially, within the P&L, different working expense line was [indiscernible] EUR29 million, presumably put stress in your margin, what was behind that line? And second could be on money move assertion, and different merchandise line, which was like adverse EUR47 million. And that is most likely put fairly a little bit of stress in your money conversion within the quarter. And once more, attempting to know what’s behind that line as nicely.

Eeva Sipila

All proper. Nicely, let me simply decide the numbers you are taking a look at. So I can see kind of the — I believe the kind of, the opposite working revenue, in fact, is a combo in a method that what would not go and enters a gross sales and advertising admin or R&D leads to different. So it is by nature a little bit of a lumpy merchandise. We’re really kind of down on that year-over-year. So I do not see it as a kind of including stress per se. It was a couple of thousands and thousands up in versus the third quarter final yr. However year-to-date, it is really considerably under. So I would not maybe learn an excessive amount of into that. After which your different quantity was on the money move EUR47 million. The opposite objects certainly on — and it involves the kind of what relates and beneath what we have now beneath changes. And these are principally then objects after we begin from the revenue row that we kind of deduct or add again into technique to get to kind of the operative consequence there. I can verify if there was something particular, Vlad, on that. However once more, these — sadly, these others are typically the kind of what would not ideally slot in what is printed particularly, then they find yourself in different, and it is then a blended bag.

Vlad Sergievskiy

Understood. Thanks very a lot. And really fast one in your service orders. Clearly, you are reporting down 6% year-over-year in minerals versus a really excessive stage final yr. What occurred to common costs year-over-year on service, if we are able to give you a mean worth? Was it flat? Was it nonetheless up? Attempting to know what occurred to service volumes once more, if we are able to attempt to type of pinpoint that?

Eeva Sipila

Yeah, I believe partly, it relies upon a bit on what a part of the service. There was areas of service the place volumes continued to develop. Then we had areas the place volumes have been down. And Pekka talked about earlier within the name that within the consumables space, we did see some destocking exercise from clients on, be it aggregates or minerals. After which, in fact, we had a kind of affect on — adverse affect from quantity. Very arduous to offer a mean worth on from kind of — for the whole lot we do. General, I believe kind of pricing has held fairly nicely aside from the areas the place, once more, as talked about earlier within the name, the place there’s clear indexes tied to sure uncooked supplies. And as you nicely know, the costs of metal and metal scrap, for example, have been coming down, which, in fact, I believe is inherently good. Nevertheless it impacts the highest line, not as such the margin.

Vlad Sergievskiy

Okay, that is very clear. Thanks very a lot.

Operator

The subsequent query comes from Elliott Robinson from Financial institution of America. Please go forward.

Elliott Robinson

So hey guys. First query for me is sort of fast. So the EUR150 million cost taken from Russia in Q2 final yr, you continue to have EUR64 million of that left. We had an analogous quantity in Q2. How ought to we take into consideration the utilization of that going ahead? Or is there an opportunity that you will need to reassess that cost at one level? Thanks. And I am going to come again with the second.

Eeva Sipila

Yeah, it is definitely one thing we have now evaluated. However as a result of uncertainty with the — earlier than we kind of have legally kind of agency settlement agreements in place for all offers, clearly, we desire to maintain the availability untouched. However as time evolves, these issues will clearly mature and transfer ahead. After which — so in each quarter, we do want to have a look on that. And definitely on the year-end additionally, along with our auditors. In order that shall be reassessed. Nevertheless it’s clearly a flux state of affairs. And it is considerably troublesome to precisely predict the kind of consequence. And therefore, we desire to kind of maintain it intact till we kind of have actual concrete proof that issues will transfer ahead. There are specific — sure settlements are additionally tied to actions that may solely evolve over time. That was — we have now exited. We’ve got to kind of wait what — how the shopper operations evolve.

Elliott Robinson

Okay. Yeah, that is sensible. After which the opposite bit would simply be on the pipeline of huge orders, though, I recognize it is type of been touched on just a little bit. Do you count on to see a kind of catch-up impact on these orders the place you’ve got seen sluggish resolution making? Or do you assume there must be a catalyst for that to be this catch-up in giant orders? And is it the case the place you assume that is going to be all pushed out to the fitting? Or yeah, I imply, definitely, will we see a catch up?

Pekka Vauramo

Yeah. The massive orders make this — make our order consumption all the time lumpy. And these lumps, they have an inclination to return not evenly. That is why it’s lumpy, I believe. However essentially the most troublesome factor actually is to forecast timing of them. We all know that sure issues will transfer forward at one level, however all the time troublesome to say when that occurs. I consider similar will occur as earlier than, that then everybody desires to go forward on the similar time at one level with these greater ones. However that is all I can say at this second. They have not disappeared wherever.

Elliott Robinson

Okay. In order that’s — so do you count on that catch as much as be across the time the place you see rates of interest coming down? Do you reckon that is going to be an element or do you assume it’s going to simply be the truth that quite a lot of miners will simply determine to get a transfer on?

Pekka Vauramo

Nicely, in fact, I do hope that they’d transfer on. Everyone knows that the world wants extra metals, and that is the kind of constructive driver that we do have. However the monetary body and uncertainty on the earth is so nice at this second that rates of interest stabilizing or beginning to go down would positively assist making these choices. I imply, mining as such, I imply, it is a money move clever beginning a brand new mine. It is a very, very heavy train. And rates of interest is including all the time to the difficulties.

Elliott Robinson

Okay, thanks. That is nice. Cheers.

Operator

The subsequent query comes from Tom Skogman from Carnegie. Please go forward.

Tom Skogman

Good afternoon. I would prefer to zoom in in your consumables enterprise, as I keep in mind that it has traditionally been fairly cyclical, particularly at occasions when enter prices like metal costs come down. What do you see in the meanwhile? Have you ever already seen a down cycle in consumables? Or ought to we type of think about a pointy decline in consumables orders the following two quarters?

Pekka Vauramo

Yeah. I believe in consumables, clients will proceed to purchase consumables so long as they proceed producing it. And there is only a few mine shutdowns. In actual fact, just one main one which I am conscious of at this second. So the consumption shall be there. And I am fairly certain that we proceed to be aggressive and serve clients nicely in future as nicely. So I do not see a decline coming except there’s a dramatic drop in metallic costs. Costs — a few of the metallic costs have come down just lately, nevertheless it’s not a dramatic drop. As such, I believe working mines largely proceed nonetheless very worthwhile at this stage.

Tom Skogman

All proper, thanks. My second query is in your new margin goal. You are climbing the standard ladder and profitability has improved loads. However given that you’ve come up from like a stage of an 11% EBITA margin in 2020, I believe there are nonetheless buyers and analysts which might be scared at in a very weak situation, the margin stage might come down loads. However in your view, given the massive modifications to the corporate and the divestment, what may very well be like in a very adverse situation, like a margin stage that you’d really feel comfy that you’d all the time attain?

Pekka Vauramo

Yeah, that could be a good query. However I imply, if I simply — and I do not offer you a particular reply to that one. But when you consider the previous with quite a lot of EPC tasks being executed, and when a downturn hits, what corporations with tasks and mission profile on the downturn, what do they report on their actuals on working fee foundation? It is the truth is tasks which might be delayed or tasks that do have difficulties. After which, in fact, the monetary numbers throughout that interval, when the whole lot else is down, they’re very unhappy to learn and unhappy historical past as such. And by de-risking our enterprise mannequin, what we have now now performed, sure, some legacies left, however we are going to cope with them very quickly now. Now the final piece is, so we do not foresee that type of state of affairs in any respect for us proper now with the present two segments that we perceive nicely, and we perceive nicely what’s within the order books now. So I would depart it there. We’re completely different now, so additionally the long run needs to be completely different for us in that regard.

Tom Skogman

Okay, thanks.

Operator

The subsequent query comes from Antti Kansanen from SEB. Please go forward.

Antti Kansanen

Thanks for the follow-up. It is type of relating to how do you see the aggregates profitability and the monetary targets, as a result of if we take type of a extra normalized group prices, I take into consideration the 20% could be reachable on Mineral aspect. It would not type of lead a lot upside to Aggregates, if any. And now for those who have a look at your Q3 numbers, you defended your margins fairly nicely, however [sales dropping] (ph). So how ought to we take into consideration the place we are actually within the cycle relating to aggregates margins? And what’s type of a sensible in a extra muted market improvement than, as an example, a weaker US market? So might you speak just a little bit extra about that one?

Pekka Vauramo

Yeah, in fact, we’re executing at the moment the order e-book, which we nonetheless have there. The brand new order consumption, you have got seen the numbers, however what they’re, we predict the seasonality on minimal stage, the seasonality to spice up the order consumption. However in fact, we have to see European market to return again as a way to proceed enhancing the margin. And will that not occur, I imply, then in fact, we see some erosion of the margin. However there as nicely, I imply, we’re fairly a special structurally in our aggregates enterprise, what we was. We used to serve extra of a one section of consumers, extra of the high-end clients. Now we have now providing extra broadly unfold to completely different segments of the market. We’ve got various kinds of order of choices in place and our kind of protection of the market with a number of distribution channels is completely different. And we have been in a position to do it with out too heavy further prices within the Combination aspect. So I believe we should always see a lot better efficiency in Aggregates as nicely, even through the low — throughout this kind of a downturn going ahead. We’re extra recession proof there as nicely.

Antti Kansanen

Okay. After which a second extra short-term query. I imply, on the Mineral seasonality, we have seen a few Q4s the place you’ve got the nail, type of a abruptly quite a lot of this tools offers booked and there is been type of a peak so as intakes. Are these type of like one-offs? Or do you assume that there is a sure seasonality that purchasers get a bit extra lively on the final weeks of the yr? After which however, on the companies aspect, we noticed an especially lively Q1 this yr. So is there some kind of early yr seasonality, for those who might remind us?

Pekka Vauramo

Yeah. I do not consider in year-end seasonality on greater orders as such. After all, year-end generally is a deadline for executing one thing, however I believe it is extra of a random than anything. Companies aspect, similar method, possibly a few of the lifecycle contracts that we have now, they might have their anniversary at first of the yr. In order that may be a cause why we might see some enhance within the first quarter, but additionally that one should not be so robust that it might make it stand out an excessive amount of.

Antti Kansanen

Okay, very clear. Thanks.

Juha Rouhiainen

All proper. Thanks everyone on your questions and thanks for being environment friendly at present. This concludes our third quarter outcomes convention name. Subsequent outcomes announcement will solely be in February subsequent yr. However earlier than that, we’re trying ahead to fulfill a lot of you in particular person and particularly, have an excellent weekend if you get there. Thanks and goodbye.