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Investing.com -- Shares of Metso (OTC:MXTOF) (HEX:MEO1V) climbed 3.3% as the market reacted to its first-quarter earnings report. The company’s order intake surpassed consensus expectations by 5%, although sales fell short by 4%.
Despite this, the figures indicated a healthy order intake, particularly in the Aggregates division, which saw a 13% increase compared to consensus forecasts.
Metso reported first-quarter orders of €1,413 million, sales of €1,173 million, and adjusted EBITA of €193 million. While sales declined 4% organically, the group’s book-to-bill ratio stood at 1.20x, and the backlog increased by 7% YoY and 5% sequentially. The adjusted EBITA margin remained flat YoY at 16.5%, slightly ahead of consensus by 10 basis points.
In the Aggregates division, the company experienced organic order growth for the first time since the fourth quarter of 2022. Equipment orders rose by 16%, though service orders saw a 2% decrease. The division’s book-to-bill ratio was a strong 1.30x, but sales declined by 4% organically. Adjusted EBITA for Aggregates was €49 million, aligning with consensus, while the margin dipped by 100 basis points YoY due to a lower share of services in the mix.
The Minerals division also showed positive momentum, with a 3% YoY organic growth in order intake to €1,013 million, which was 3% ahead of consensus. Equipment orders in this division increased by 10%, but service orders dipped by 2%. The company noted a robust pipeline of potential equipment orders, despite slow customer decision-making and an absence of large orders in the quarter.
The backlog grew by 8% YoY and 4% sequentially, with a book-to-bill of 1.17x. Although the adjusted EBITA of €153 million missed expectations by 5%, the margin of 17.7% outperformed by 30 basis points.
Free cash flow (FCF) showed significant improvement, rising to €119 million from €62 million in the first quarter of the previous year, achieving a conversion ratio of 100%. The increase was primarily due to a smaller outflow related to net working capital (NWC).
Metso’s outlook remains stable, with expectations that market activity in both Minerals and Aggregates will continue at the current level. However, the company did caution that tariff-related turbulence could potentially affect global economic growth and market activity.
RBC analysts commented on Metso’s performance, stating, "Positive overall. Order intake was healthy in both divisions, driving good growth in the backlog. Meanwhile, this was the second quarter in a row in which cash conversion – long a source of disappointment at Metso – has been strong.
With its exposure to the mining capex upcycle and its better-than-appreciated quality, we continue to view Metso as well positioned on a multi-year basis. Its shares are currently trading on a 2025 EV/EBITA of 9.6x, a discount of 25% to our wider coverage, which we see as too cheap."
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