Earnings call transcript: Metso Q1 2025 sees stable EPS amid sales decline

Metso Oyj, with a market capitalization of $8.6 billion, reported its first-quarter earnings for 2025, showing stability in earnings per share (EPS) despite a decline in sales. The company posted an EPS of €0.14, aligning closely with market expectations, while revenue forecasts were not met. The stock price reacted positively, rising by 4.08% to €9.19, reflecting investor confidence in the company’s operational strategies and future outlook. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, with analysts maintaining a strong buy consensus.

Key Takeaways

• Metso’s Q1 2025 EPS remained stable at €0.14, with a slight decline in sales.
• The company’s stock rose by 4.08% post-earnings announcement.
• Metso’s order growth reached 4%, marking the highest quarter recently.
• The firm continues to focus on sustainability and operational efficiency.
• The U.S. market accounts for 15% of Metso’s sales, with stable demand.

Company Performance

Metso’s performance in Q1 2025 highlighted resilience in a challenging market environment. The company managed to maintain its EPS at €0.14, despite a 4% year-over-year decline in sales. This stability was supported by a 4% growth in orders, showcasing strong demand for its products. With a healthy current ratio of 1.54 and operating with moderate debt levels, the company’s strategic focus on sustainability and operational efficiency continues to drive positive results. InvestingPro data reveals that Metso has consistently raised its dividend for six consecutive years, currently offering an attractive 4.3% yield.

Financial Highlights

• Revenue: Not meeting forecast of 1.25 billion USD, with a 4% decline YoY.
• Earnings per share: €0.14, stable compared to previous periods.
• Adjusted EBITDA margin: 16.5%, with adjusted EBITDA close to €200 million.
• Cash flow from operations improved by 25%, reaching approximately €200 million.

Market Reaction

Following the earnings announcement, Metso’s stock experienced a 4.08% increase, trading at €9.19. This positive market reaction reflects investor optimism regarding the company’s strategic initiatives and its ability to navigate through market uncertainties. The stock’s performance is noteworthy as it approaches its 52-week high of €11.95, indicating strong market confidence.

Outlook & Guidance

Looking ahead, Metso anticipates stable activity levels over the next six months, despite potential global economic uncertainties and tariff impacts. The company remains focused on margin resilience and operational efficiency, with plans to finalize its ongoing strategy process by Q3 2025. Metso also announced a Capital Markets Day scheduled for October 2nd, which is expected to provide further insights into its future strategies. InvestingPro subscribers can access detailed financial health scores and 7 additional exclusive ProTips that provide deeper insights into Metso’s market position and growth potential. The company’s strong EBITDA of $917.43M and P/E ratio of 15.67x suggest solid fundamentals supporting its growth trajectory.

Executive Commentary

CEO Sami Takaluama emphasized the company’s strong management agenda, stating, "We have a very strong management agenda and culture regarding margin resilience." He also reassured stakeholders about the minimal direct impact of tariffs, saying, "We are not expecting material direct impact of these tariffs now announced." These statements underscore Metso’s proactive approach to managing external challenges.

Risks and Challenges

• Tariff-related uncertainties could impact global operations.
• Declining sales highlight potential market saturation concerns.
• Sustainability initiatives not meeting growth targets pose strategic challenges.
• Economic uncertainties may affect future order intake.
• Inventory reduction efforts must continue to ensure operational efficiency.

Q&A

During the earnings call, analysts inquired about potential order pushbacks and customer hesitations due to tariff uncertainties. Metso reported no significant order delays, with strong order intake in the Aggregates segment, possibly driven by pre-buying activities. The company noted minimal pricing pressure, indicating stable market conditions.

Metso’s Q1 2025 performance demonstrates its resilience and strategic focus, positioning it well for future growth despite external challenges.

Full transcript - Metso Oyj (METSO) Q1 2025:

Juha, IR Representative, Metso: All right. Good afternoon, good morning, everyone. It’s Juha from Metzos IR. And I want to welcome you all to this conference call where we discuss our first quarter twenty twenty five results, which were published earlier this morning. Results will be presented this time by our President and CEO, Sami Takaluama.

And after his presentation, we’ll be having the Q and A session. And we try and limit the length of this call to sixty minutes because right after this call, we will be having our annual general meeting of shareholders. But before I hand over to Sami, we also have in this room our incoming CFO, Pasi Ciklingen. And Pasi, if you can introduce yourself briefly before we go into the results.

Pasi Ciklingen, Incoming CFO, Metso: Thank you, Juha, and good day, everyone. Pleased to meet you over this media. From my side, very much looking forward to join Metso next week, becoming part of the team, becoming part of the journey. Also looking forward to engage with many of you in different ways and forms, and I look forward meeting you face to face during during the coming period. Thank you.

Juha, IR Representative, Metso: Alright. Thanks, Pasi. And welcome to Metso next week. But now let’s go into the results, and and I’ll be handing over to Sami. Please go ahead.

Sami Takaluama, President and CEO, Metso: Thank you, Johan, and good afternoon to to everybody. Let’s let’s walk through them. The results, quarter one twenty five from from our perspective, market activity was very much in line with our expectations. We saw order growth in equipment side in both our customer segments, minerals and aggregates. And in the quarter, we delivered a result which was solid adjusted EBITDA margin of 16 and a half.

Also, continued our actions regarding the the cash flow, and the results were also delivered. So we had a good good cash flow from operations close to 200,000,000 for the first quarter of the year. Looking more from the from the key figures point of view, orders grow growth was in the whole group 4%, and that was then delivering actually the highest quarter for for a quite a good time from the order order perspective. Sales did decline from from last year similar way to 4%. This was heavily linked for the timing of the orders that we actually did not get one one year ago from the capital side and the the deliveries then did not happen in in this quarter because of that.

As mentioned, adjusted EBITA, a bit under 200,000,000, but relatively keeping the keeping the solid 16.5 as a year ago and, of course, improving then also from the q four previous year. Earnings per share from continuing operations, €14 cents in the q one. And as mentioned, cash flow from operations close to 200,000,000, and and that is the improvement of 25% compared to the previous year. Then looking to segments starting from the aggregate, the orders received was 400,000,000, an improvement of 35,000,000 from the previous year. And this was thanks to the seasonal uptick that we did see happening actually from both of our large aggregate markets, US or North America and then also Europe.

This was also supported the growth growth of the acquisition that we did last year. Sales point of view, close to flat, but few millions more than a year ago, and that was also then, of course, supported by the by the acquisition that we had in our books in the q one. Services share declined a little bit from the 36% that we had down to 33% now in the q one. Adjusted EBITDA, 49,000,000, 3 million less. And in the in the margin percentage point of view, then 16, which is still very good and and solid for the for the lower ish volume of the of the sales that we have in the aggregate.

Good cost control continues. We have a very high resilience for the aggregate segment from the profitability point of view going forward. Then let’s go for the minerals side where orders went over 1,000,000,000 by 13,000,000. And as many of you have noticed, we did not announce large orders in in the q one with the same same magnitude as as we did for the q three and q four. So q one, the order growth came from the small equipment orders and the very small projects, and it was definitely driven by the the copper and gold customers.

So equipment orders went actually up by by 10% in the period. Sales, on the other hand, 866 below that the previous year number that was visible for both services and the equipment side. Services share of the sales in the minerals segment is now 67, so close to the same level as it was a year before. And here, the the sales volumes were impacted by the by the order intake that did not happen roughly one year ago, so the backlog was was not to be realized in in this quarter. Adjusted EBITDA, 153,000,000, giving the margin of 17.7.

That’s the same same storyline here that very resilient margin for several quarters now if you look the average there and growth from the q four seventeen point zero. So here, we have a good cost control and also gaining the operational efficiency in in many places. Then I think it’s worth to to spend some time to to discuss about the tariff implications as we see them. First, the US is accounting approximately 15% of our sales in 2024. So that’s the that’s the magnitude of the business that we currently see in the in the highest impact of the tariffs.

We have local US manufacturing, but it’s very limited to to mainly aggregate equipment, the three brands that we we sell in The US, and then we have a few smaller product lines manufacturing in in US. But from the business volume point of view, obviously, a lot of the products need to be imported to the country. Mitigation of the tariff impacts has been ongoing since they were announced. In price increases and and surcharges, they are in place. Every quote for The US customers is is having terms and conditions aligned for the tariff situation.

And at the same time, we are looking the the Metso’s sourcing and supply chains to to look for where the minimized actions can be created. Worthwhile mentioning here that China based supply to The US, we have already earlier done the actions, and and we have significantly minimized those supply lanes throughout the last two years. And we also feel that we have very global supply chain, and our extensive geographical footprint provides us quite a good amount of flexibility to support the deliveries from multiple countries and not only one. And as a consequence of all of these together, our view is that we, Metso, we are not expecting material direct impact of these tariffs now announced, and the main impact will come from the increased uncertainty and volatility that the whole global economy is facing, and then that is causing some customer hesitance to move forward with the project and the orders. From the group financial part, most of the lines have already been been discussed here.

So so adjusted EBITA below 200, but relatively 16 and a half. Operating profit, hundred and 70,000,000 compared to hundred and 88 that it was one year ago. And the profit from the period for the continuing operations, hundred and fourteen compared to the hundred and 24. And, of course, all of this was driven from the sales volumes that were lower than than year before. Earnings per share, €14 cents compared to the €15 cents last year.

And if if looking the balance sheet, so the main main message here is that during the quarter, we were able to reduce by by roughly 100,000,000 of the indebtedness, and that was as as targeted and planned. And that was, of course, heavily driven by the cash flow elements and and the work that we have been doing now for the inventory normalization that continued. And we have also good control and the management system for for other elements in the cash flow balance sheet, and that created then our our net cash flow from operating activities to be this close to 200,000,000 in the in the first quarter. Normally, the first quarter is is quite challenging, so so we are we are happy of this result. And from the financial position point of view, our ratings, they are very stable from the outlook point of view.

And average interest rate of our loans, they are now 3.7% level. And we have done some some activities to to further strengthen this this position that we have. And then finally, we look for the sustainability outlook and the management agenda. Management outlook. Sustainability side, we have a mixed progress.

Our sustainability offering, the Metso Plus, where we have a clear target that we want this portfolio to to grow faster than the overall sales of the group. So we were not successful for that one in the q one, Double digit below the target, actually. And the main reason here is that we had the cycle thing things when certain equipment orders or project deliveries did not happen in the q one, especially when we looked our our battery metal deliveries. So that was creating the situation to be not on the targeted level on the Metso Plus one. When we look our own actions, what we do, our net zero target until 2030.

So that is progressing well and in in light of in line of the road map. So we are currently on a on a 71% reduction from the 2019 level. And in the q one, we closed 10 energy saving projects around the company to further continue this this journey. In the logistics, we had an ambitious target to reach the the 20% less level by 2025 compared to 2019. Where we are now is halfway of that.

So 10% we have been able to reduce. And, obviously, this this year being the the year that the target to be reached, so so it it seems quite unrealistic. And this is, of course, something that we are not happy, but this is cooperation with our partners in the logistic and the road map that they have for offering more green transport lines for the ocean and and and road is taking longer time than than ’25. But then when we look our suppliers, they play a big role of the whole value chain sustainability. Our target was to reach 30% level at the end of this year of our suppliers to be part of science based emission targets, and there we are above the target clearly.

We are now at 34.1, and we will continue this journey also going forward. From the market outlook, we see that both segments, minerals and aggregates, they will remain in the current activity level now going forward. But we also want to make a a comment here that tariff related turbulence could potentially affect the global economic growth and then also affect the market activity. And this is something that we will, of course, observe very, very carefully and then take the actions if if needed. Final page for this briefing is the management short term agenda.

So market potential is out there, and our target is to maximize the potential that we can take from this current market. We continue the normalizing our inventory levels. As said, that program is progressing well, and the results have been delivered both in q four and and q one, and we will then finalize this program at the end of q two. We will have the third phase of our ERP program going live during q two. And, of course, that is the management agenda to make sure that that is very successful and and gives Metso possibilities to to leverage the benefits then then when the new system is is in use also after the phase three.

We are working with our strategy process and the the target is to to be as ready as possible. So finalizing that one during the q two, latest by q three, and then you have all seen the invitation for the for the Capital Market Day in the October 2. And we continue to develop the company culture. I’m really happy to get new CFO on board and already here today today with me, and he’s starting next Monday. He’s then finalizing also the leadership team, and then we have then all the elements in place to to continue the journey to to further enhance the already good culture inside the Metso company for achieving the results in the future.

Juha, IR Representative, Metso: All right. Thanks for the presentation, Sami. And operator, we can now open the lines for questions.

Conference Operator: The next question comes from Michael Harlow from Morgan Stanley. I

Michael Harlow, Analyst, Morgan Stanley: understand that on the topic of margins, you may not want to say too much ahead of the GMV, but will it be possible for you to highlight what are the key moving parts in the medium term and the potential sources of upside that we could see? Then on the thinking of your customers, you are highlighting the impact of uncertainty, but we also have very high commodities prices. So

Klaus Berglund, Analyst, Citi: will it

Michael Harlow, Analyst, Morgan Stanley: be possible to have some color on how you see the decision making process of your customers should we see more certainty given the high commodities prices that we’re seeing? Thank you.

Sami Takaluama, President and CEO, Metso: Yes. Thank you. Thank you for the good questions. So from the margin journey point of view, it it’s part of this company culture point that I I raised at the last last bullet there that plays plays a role because we still can identify from from our own organization internal efficiency areas. Also, it was mentioned that that we are implementing the phase three of the of the new ERP system, which will also increase the capabilities to to create efficiency inside the organization.

And then, of course, we have still some work to be done in productizing and and standardizing the the engineering part of the of the work, especially in the in the minerals capital side, which will then then create the margin benefits for for the company. And we continue to look the the whole world at the moment from from from the supply supply chain point of view as well, and and and we believe that we have capabilities to identify some areas for the for the cost benefit for for the company from from that side. And also also, I I want to lift the other end of of the equation that there are price adjustment possibilities for our wide portfolio that we are we are actively looking and implementing them into place. Your second part of the question was about the uncertainty, especially from the from the customer side. And how is that visible is is mainly coming from the fact that, especially, that the customers in a in a countries or country where the price increases and tariff surcharges are happening cannot move with the with the orders of the of the projects that they are planning to do before they understand that what will be the new cost of the complete project, not maybe even the the portion of the Metso equipment or or parts and services.

And that is creating some delay for them to recalculate that that what is the complete cost of the project and then the return of the investment from that perspective. So that’s the expectation that that that we will see these kind of delays from the certain customer projects. On the other hand, the activity level, as as mentioned, we see it very, very active and and very strong. So so there is not not really this what we highlighted is not visible yet, but we are just looking forward, and and we believe that there is a room room for this kind of uncertainty.

Michael Harlow, Analyst, Morgan Stanley: Thank you. That was very helpful. Thank you very much.

Conference Operator: The next question comes from Chitrida Sinha from JPMorgan. Please go ahead.

Chitrida Sinha, Analyst, JPMorgan: Good morning, Sami. Thanks for taking my questions. I have three please and I’ll take them one at a time. So my first question is on the Minerals OE orders. This is clearly very strong in the quarter despite the lack of large orders.

How should we think about the strength of the small and midsized orders going forward? Yes.

Sami Takaluama, President and CEO, Metso: Have been talking about this earlier that we do have a very large funnel, meaning the projects or capital orders, small or big, that we have there with the certain probabilities. And this quarter was a good testimony of the fact that you don’t need those big ones always when when you have a good amount of of these small ones coming through. And how that looks going forward, it’s also the timing issue. Some customers that we’re moving now into q one with with these projects onwards. Many of them have also flagged that they will do the same in the Q2 or not the same customers, but many of the customers have flagged these kind of decisions to be made into Q2.

And that’s why I see that quite solid, this small equipment order volumes going forward.

Chitrida Sinha, Analyst, JPMorgan: Thanks. That’ll be very clear. And then my second question is on the delivery schedule of Minerals backlog this year. In the release, you mentioned it’s going to be more H2 weighted. But just how should we think about Q2 sequentially?

And then I guess H2 would be a bigger step up from there.

Sami Takaluama, President and CEO, Metso: Yes. I think you had it right. So we kind of knew that the Q1 did not have these deliveries, so many as year before. And now then going forward Q2 has more of them, and then it it’s it’s it’s if I remember now right, the second half of the year was heavier with these deliveries going forward. So so that that’s the situation that we have from the backlog realization as a net sales.

Chitrida Sinha, Analyst, JPMorgan: Thank you. And then finally, I guess, on tariffs. Thank you for the color that you’ve already provided. You’ve obviously mentioned that U. S.

Is 15% of sales and the majority is imports. If I understand correctly, China exposure is limited. So could you please provide more details on the regional exposure of where the other imports are coming from? I mean, clearly, situation is very can change very quickly. So any more color would be really appreciated.

Sami Takaluama, President and CEO, Metso: Yeah. Metso is global and we have several locations where we have our own manufacturing. And we have looked already during the Q1 that how the product transfers or supplying from from different location to, for example, US market would be happening, and and we see that that as one option. And and secondly, we have suppliers for for our products or components. We might have one as like a global global preferred one, but then we have been working already two, three years to identify the regional regional suppliers for for the similar type components with with the same quality that we require.

And this is giving us the flexibility to look look different sources than than the one that we have had for The US, for example, in the past. And the China, we did that decision already three years ago and then have been working with that. So so they are from alternatives have been found from Asia, from from India and and also also the rest of the world. So this is very global is our supply chain.

Chitrida Sinha, Analyst, JPMorgan: Thank you very much.

Conference Operator: The next question comes from Klaus Berglund from Citi. Please go ahead.

Klaus Berglund, Analyst, Citi: Thank you. Hi, Pekka, Panse and Yuva, Klaus at Citi. So could we just come back to the comment in the report that you saw more volatility in April? Did you say there, I’m sorry, said Pekka, sorry, not me. Did you say that you haven’t seen any push outs of orders yet, but it might happen?

Just to clarify that. And if you think that if there is a difference here between Minerals and Aggregates, in general, I would say that Mining as an end market is a bit more protected against the macro slowdown. But if I understand you correctly, Esam, it seems like you think there could be also risk of decision making in the mining segment as well, if we can start there. Thank you.

Sami Takaluama, President and CEO, Metso: Yes. Thank I don’t mind to be called Pekka, if you feel like, but Sami is better. Thank you. No. We have not seen pushbacks yet.

And and the the indications of of that in the mining side, have been coming mainly from The US side and and mainly from the perspective that the that the customer needs more time to understand that what the new cost level could be taking into account that everything will be more expensive in in US. So so that that has been the discussion there. And act actually, no real indications at all from from the aggregate side, which is very regional business globally. So so and and even from The US distributors. So So the seasonal pickup that they started to see, that seems to be continuing now also into April.

Klaus Berglund, Analyst, Citi: Okay. Then I wanted to make on service orders in Minerals. They’re improving quarter on quarter, as part of that is a bit of seasonality. Year over year, ex FX, they’re flattish. We’ve had quite soft order growth now for quite some time.

I mean, you’ve said about this push outs of sort of shutdown services because the miners want to maximize production given the high commodity prices. But eventually, this is creating sort of a pent up effect. And I’m just wondering, as waiting for that sort of kickback on the maintenance contract side, whether we can start to see an improvement here soon. I mean, it can’t be pushed out forever. So if you could comment on sort of maintenance plus spares and wears within the quarter and what you see ahead.

Yes.

Sami Takaluama, President and CEO, Metso: Thank you for that. Yes, it’s clear. If I start from the order side of the services, so there, we see this year kind of a very solid looking when when we look also the q one and then then then the coming quarters going forward. And regarding the q one, the comparison from ’24, if you look the numbers there, that that was the highest quarter from the orders point of view. So comparison was tough and our performance was okay to fixed currencies.

We did match that one. Regarding the sales there, the topic was exactly as you said that the upgrades and modernizations, which we did not see coming through in 2024. And that is then the result that the sales because typically these ones they have a longer lead time, we talk about six to nine months. So orders that we did not get into q two and q three of of last year resulted that the sales was was not happening then into q one of this year. Underlying underlying demand and also the underlying performance in terms of the small orders is in a good level and in the growth trajectory.

Klaus Berglund, Analyst, Citi: Okay. And finally, final one on the inventory levels in the channels in aggregates. I think you said before that if we had the solid spring season, which we now had, then inventories at the dealers going into the second quarter could start a little look a little bit more normal. Would be great if you could comment now on the levels of the sort of the dealer inventory levels here now going into the second quarter? Thank you.

Sami Takaluama, President and CEO, Metso: Yes. They from the customer prospect end customer perspective have a good level. So we have seen this slight decrease in the in the inventory levels of our distributors, especially in the North America, which is good indication. It shows that the the equipment is moving to the end customers. There is not a significant drop, but at the same time as as commented, we did start to see also the orders coming to coming to Metso already at the at the end of the q one, and the expectation is that that will continue into Q2.

Klaus Berglund, Analyst, Citi: Thank you.

Conference Operator: The next question comes from Edward Hussey from UBS. Please go ahead.

Edward Hussey, Analyst, UBS: Hi, Simeon, Hussey. Thanks for taking my questions. I guess, first question is just on the dynamic between brownfield and greenfield. The reason I ask is because we have just talked about strength in brownfield but failed to mention greenfield. I’m just wondering what the dynamic is that you’re seeing there and whether in light of tariffs, which one is more exposed?

Sami Takaluama, President and CEO, Metso: Yeah. There is a good amount of greenfield discussions, and I have been happy to be able to be part of part of many of those as well when when traveling and meeting the customers. What is maybe worth mentioning that that that greenfield discussions, they always they are interesting and they they go forward, but they are also taking long time to then then really be realized. But it’s also a very good indication of of how the future little bit longer future will look like. So so that that that’s that’s clear from that perspective.

And then the brownfield as our q one orders were also indicating the the small equipment orders, they they are brownfield ones, and that activity level say stays stable from that perspective. Which one is more impacted of of potential tariff uncertainty? Most likely that is the greenfield part that that will be larger investment that needs to be done. And if there is uncertainty, so typically that is that is creating then the hesitance more than the brownfield one.

Edward Hussey, Analyst, UBS: Okay. Thank you. And then just thinking about the sort of strong pipeline that you’ve been talking about on the equipment side. How much of that pipeline is made up by The U. S?

I mean, do you have like a kind of is it a very, very material part of the pipeline? Or is it just a relatively smaller amount? Yes.

Sami Takaluama, President and CEO, Metso: If we looked at the total business was fifteen percent twenty twenty four that was coming from The US. So we we don’t see any any material change of of the share of of of businesses. So that that that’s the amount that is is linked to The US. But then also at the same time, the years are never the same. There are customers who who are located in a region x, and and they are active at the same time.

And and then it can be the region y that is is is slow slow one year and and very active the next year. So US customers are very important for us, and and and they play a role. But so called hotspots in in in our map where where we see a lot of lot of activity happened, it’s more elsewhere than in U. S.

Edward Hussey, Analyst, UBS: Okay. Thank you. And then just final question on the margins. So sales down 4%, but resilient margins, and that’s been the case last year as well. I mean, can you just talk through what you’ve been doing to protect the margins?

And then if sales do pick up in H2, as you’ve been talking about, given the order pipeline, could you talk about what operating leverage might look like in H2?

Sami Takaluama, President and CEO, Metso: Yeah. Can just say that, obviously, there is a leverage there. I cannot quantify that. I don’t have that kind of a process or in my head to be able to calculate that, but it’s clear that it’s there. And then thank you for for recognizing the resilience.

We we are having a very strong, not only management agenda, but also the the culture inside the company regarding this topic, and and this is then visible. So it’s a combination of multiple things that do happen in inside and also outside the organization. It it’s not one silver bullet that has created this one.

Edward Hussey, Analyst, UBS: So Thank you.

Sami Takaluama, President and CEO, Metso: Which also makes, by the way, that it it’s sticky. So it’s it’s really resilient from that point of point of view.

Conference Operator: The next question comes from Christian Hinderaker from Goldman Sachs. Please go ahead.

Christian Hinderaker, Analyst, Goldman Sachs: Morning, Sami and Johan and welcome, Pasi. First question is coming back to tariffs. I guess, I mean, we’ve sort of talked to this in terms of the initial response on your side with regard to pricing. How do we think about this midterm? I appreciate it’s a fluid dynamic, but do you think there’s any need for footprint changes?

And might you look to acquire or build out production, say, aggregates in The U. S. At some stage? That’s the first one.

Sami Takaluama, President and CEO, Metso: Obviously, we as a management, we have been looked all of those options and a little bit more that you already mentioned. Right now, we have not announced anything. We obviously also want to understand first now during the q two when the when the ninety day freeze period is over, what what will be the real situation with the tariffs regarding the whole whole world. And based on that, we will then execute that scenario that that best fits for for that situation. But it’s it’s very clear that we have options, and and and we are we are looking to to then make make the best option to be then executed going forward.

Right now, we we are and and if we would make a decision to, for example, build a greenfield factory for US because of this situation, that could happen. But we also then understand that the benefit of that will be somewhere in a in a two years or something like that to get the production ramped up from the completely So that needs to be then looked at after we fully understand that what is the situation in the whole world regarding the tariffs and also the counter tariffs.

Christian Hinderaker, Analyst, Goldman Sachs: Thank you. And then maybe just secondly, coming back to the discussion on customer behavior. I mean, Q1, I think very much in the past now relative to April. How do we think mining customers are thinking in terms of project commitments given the volatile backdrop? I mean do you think that there’s risk of push outs to come?

And also, can we just cover off the modernizations part? Because I know that’s improved in the first quarter. But if we see a further softening in the macro, would that weaken as well? Thank you.

Sami Takaluama, President and CEO, Metso: Yes. There is no discussions, no signs of any kind of pushback of already agreed project deliveries. So they are continuing exactly as agreed with the customers, Not not even even a hint of of from the customer side of of any kind of changes needed or wanted for those. So I think this uncertainty really really boils down for for the for the new orders and and is there elements for for the customers to to need to rethink of their investment need at this point or postpone it to later. So as said, we have flagged this this potential risk in the situation that we don’t really see anything of that happening today, but understanding and being aware that that is that would be normal behavior for for certain situations for the certain customers.

Klaus Berglund, Analyst, Citi: Understood. Thank you.

Conference Operator: The next question comes from Andreas Koski from BNP Paribas.

Andreas Koski, Analyst, BNP Paribas: A couple of questions from me. Start with Aggregates. Strong order intake in the quarter. Do you think it was positively impacted by preordering ahead of tariffs?

Sami Takaluama, President and CEO, Metso: Yes. Obviously, something that we have been very much thinking as well here when we started to see those orders coming already in in in March from The US, and there is a possibility that that there was some some preordering. But then then again, that was only a certain amount of the total orders that we got. So if that was the case, we are happy of that and what we have seen now in April. Then that continues.

Andreas Koski, Analyst, BNP Paribas: Okay. And say, longer term, are you worried about your market position in The U. S. Versus competitors as you import most of what you’re selling? And do you have a sense what price increases are necessary to offset tariffs as they stand today?

And when will they kick in?

Sami Takaluama, President and CEO, Metso: Not worried. We have done quite a lot of market studies to understand our position and our supply lanes and all also then the known known competitors, and it it seems to be that there is quite a similar situation for for the players in the in the both industries. So so from that perspective, the the worry impact is is quite low, and that combined with the fact that I have discussed here already that we do have quite a good amount of flexibility to look where the sourcing happens to U. S. And that gives, in our mind, maybe even better position compared to some of the competitors.

Andreas Koski, Analyst, BNP Paribas: Thank you. And then on working capital, I think your inventory level is still at around €1,900,000,000 Can you give any indication of what kind of inventory release that we should expect in, say, Q2, Q3 based on your plans that you have?

Sami Takaluama, President and CEO, Metso: Yes. I think the peak number was €2,000,000,000 that we had in the mid-twenty four. And the program that is created now is to to reduce 200,000,000 out of that. So 1.8. And then need to remember that we did acquire a business and with that we also gained a little bit of inventory that was not fully known the time.

But anyways, point is that one point eight, hundred million down from the peak. That’s the program that we have ongoing.

Andreas Koski, Analyst, BNP Paribas: Okay. And then lastly, if it’s okay. You mentioned many times during your presentation the increased uncertainty and that it could impact your end markets. But you’re still guiding for unchanged activity over the next six months. So I’m just a bit curious how you discussed the outlook internally and came to the conclusion that the base case is that demand will not be impacted by the uncertainty.

Sami Takaluama, President and CEO, Metso: Yes, that’s a very good question. Thank you for that. It’s always a challenge because you have when you are looking to global global markets, you have areas where you see the positive uptick for the for the short term view, and then you have areas that have some risks. And and and then then we need to make the judgment call that that how how do we see the whole global view. And the global view is is based on the several points that that we review when making this statement.

It’s stable, but then we just want to acknowledge that we are also a management team that has understood that this tariff situation could have an impact on the customer behavior.

Andreas Koski, Analyst, BNP Paribas: That’s great. Thank you very much.

Conference Operator: The next question comes from Tore Fangmann from Bank of America. Please go ahead.

Andreas Koski, Analyst, BNP Paribas: Hi, Sami. Thank you for taking my question. Only one left. Just one question on pricing. One of your peers recently mentioned negative pricing pressure, especially for steel heavy equipment.

Is this something you see as well? And if so, how has this developed over the recent weeks? Thank you.

Sami Takaluama, President and CEO, Metso: In those discussions that we have with our customers and the equipment and projects that we are discussing. That’s our situation regarding the pricing pressure.

Andreas Koski, Analyst, BNP Paribas: Thank you.

Conference Operator: The next question comes from Nick Houston from RBC. Please go ahead.

Pasi Ciklingen, Incoming CFO, Metso0: Yes. Good morning, everyone. Thanks for taking my questions. I have two left. Just returning to the aggregates business, plus 2% organic order growth in the quarter.

It looks like the first positive number here since Q4 twenty twenty two, equipment orders up 16% year over year. You’re saying the market is largely unchanged, but we assume that pre buy was only a minor impact here. Are you getting a sense that we’re finally moving off the bottom of the construction equipment cycle? Is that something you’re seeing?

Sami Takaluama, President and CEO, Metso: Yes. That seems to be the case now. Of course, there is this part of the seasonal activity happening. But two large markets that that we are in US and Europe. So the positive signals were were really coming from from the election of the Trump, and and that was our our understanding that what will happen in the market.

And it seems to be the right that it creates positiveness for the for the construction market in The US. The second one, the Europe then, of course, the the German announcement of of the infrastructure spend for the upcoming years is is something that has created the trust back for the for the customers, and and we did see then then the first first positive signs regarding that one as well. So in in that sense, it it looks that the the worst is behind from from that perspective.

Pasi Ciklingen, Incoming CFO, Metso0: Great. Thank you. And then my second one is just on the level of capacity utilization at your facility. I think you’ve had some temporary layoffs in recent quarters, particularly in Finland. The order backlog is looking a little bit healthier.

So I’m just wondering if you’re taking some steps to accommodate potentially higher volumes there.

Sami Takaluama, President and CEO, Metso: Yes. Those temporary layoffs, they were very much needed at that point. And it’s also very good system in these countries that we are able to to to use use that model because we also can get then the very skilled and important workforce back to the work relatively quickly, and and that gives us the the flexibility to to react for for the for the market conditions, which which happen quite quickly more quickly in the in the aggregate market than in the in the minerals market. So so so from that perspective, we we, of course, are are really happy of this increased order volumes and and the order backlog, and then that means that there is there is a good amount of work for our our employees.

Pasi Ciklingen, Incoming CFO, Metso0: Great. Thank you very much.

Conference Operator: The next question comes from Vlad Sergievsky from Barclays. Please go ahead.

Pasi Ciklingen, Incoming CFO, Metso1: Gentlemen, thank you very much for taking my questions. I’ll have three and I’ll ask one at a time. First one, you mentioned price elasticity in The U. S, which obviously could have an impact on demand. Would you be able to discuss how does this price elasticity do you expect it to work across your key business lines?

Where it is more significant? And where perhaps which business lines are less elastic the price you think?

Sami Takaluama, President and CEO, Metso: Yeah. I think that the impact for us as as as communicated is not so much coming from the tariffs as such. So there is not one product or or one technology that would have the major impact. The biggest impact for us comes if that creates global degrowth and global hesitation of the customers to move forward with their investment plans.

Pasi Ciklingen, Incoming CFO, Metso1: Understood. And if I can ask about the inventory place. Obviously, very good to see absolute inventories going down a bit again in Q1. At the same time, inventory to sales ratio has barely gone down sequentially and actually up a little bit year over year. How do you see this specifically inventory to sales ratio developing in the coming quarters?

And how dependent it is on the demand environment that you are going to see?

Sami Takaluama, President and CEO, Metso: Yeah. Thanks, Vlad. Very, very important question because it’s also very important to understand that we are in a business that without the inventory, you are not able to do the business and serve the customers. So so that is something that we will be following up and and also gaining more understanding that we’re at the right level right level not not having negative impact for our business volumes is is lying. And now it was clear that this program that we are now executing, the 200,000,000 off from the peak and reaching that level, it’s it’s calculated so that that is not going to have an impact on our capability to do to do new business and and serve our customers.

Pasi Ciklingen, Incoming CFO, Metso1: Very clear, Sami. And the last quick one from me. Question on FX hedging. I remember a few quarters ago, Mets actually had a pretty material headwind to profitability from FX hedging. Does it happen to be a tailwind in Q1 at all?

And if it was, are you able to roughly quantify it?

Sami Takaluama, President and CEO, Metso: Maybe Pazi can answer this one. Or Juha?

Juha, IR Representative, Metso: I can take take this one. Yeah. Vlad, you can see the positive in in other operating income and expenses in the in the profit and loss statement. So this quarter, we were plus six. Year ago, it was minus eight.

And basically, the delta is coming from FX. So it was quite a bit of a negative a year ago and this time positive because, of course, our hedging comes a little bit, let’s say, delayed compared to what happens in the market rates and with the fluctuations you’ve seen in the first quarter that was the result. So yes, it’s disclosed there. So plus 6% is almost entirely FX related.

Pasi Ciklingen, Incoming CFO, Metso1: Very clear, gentlemen. Thank you very much and all the best.

Juha, IR Representative, Metso: All right. There seems to be no further questions. So we thank you for joining us this busy day. We will start to get ready for our AGM, which starts momentarily. Before that, let me remind you about a couple of important dates.

Our second quarter results will be coming out July 23. And as Sami said, the CMD plan to take place October 2 and of course, invitations and other information will follow in due course. But this was it for the first quarter conference call. Thanks again and goodbye.

Sami Takaluama, President and CEO, Metso: Thank you.

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