FLSmidth & Co. A/S (FLS) Earnings Call Transcript & Summary

Hello, and welcome to the FLS H1 2021 Interim Report. [Operator Instructions] As a reminder this call is being recorded. Today, I am pleased to present CEO, Thomas Schulz. Please begin your meeting.

Hello, everybody. I welcome you all to our interim report for the first half of 2021, of course, with a lot of information on the Q2 performance. Here, out of [indiscernible] in Denmark. If we look into the quarter 2 directly with the key highlights, we had a very strong order intake and cash flow in the quarter. We increased revenue and EBITDA. Our net working capital showed a very strong performance, altogether done by a great performing organization. And we announced on the 29th of July, the acquisition of thyssenkrupp mining, which will then, when we have it and integrate it, create a big global industry leader into the mining industry under the top 10. If we then look into the market, mining is in a growth cycle. And it will go on. Question is, if it's a normal growth or a bigger growth cycle, but we will come later a little bit more in details to that. And we see clearly a midterm recovery for cement, but already an increased demand for green solutions. The guidance for 2021, we updated. We narrowed the revenue guidance from DKK 15.5 billion to DKK 16 billion as the low point, and we kept the DKK 17 billion as the high point for the revenue guidance. EBITDA margin stays 5% to 6%. But it now includes cost of around DKK 100 million regarding the TK Mining acquisition. If we then look into the mining market, this is a positive market really good commodity prices, demand grade, demand outlook grade driven by sustainability, by digitalization, infrastructure builds, infrastructure demand at all. It's a good industry to be in. What we clearly see in the industry is that the outlook, the demand for bigger CapEx investments into stationary equipment and stationary solutions like in the processing or in-pit crushing systems is quite good. It is there. Engineering orders are all there the demand discussions are there. What is not there is the big order boom in it. And the reason for that lies in the COVID with restricted [ SS ] as well as the managing of the mine sites to avoid to have too many non-own employees on the site as well as the situation regarding sustainability to have more clarity what are the sustainability targets and regulations for the miners. And with that, with the investments if they can be done or not under new regulation and which impact that has. And on top of it, it is important to recognize that the miners are producing all-time record high production rates and any disturbance in that production leads to, of course, disruption for them and they will not allow that. But overall, this is a good industry to be in. When we then look to the right side to our revenue, we have an organic growth of 13% in the quarter 2. And service grew 11% and capital 12%. And especially in the capital, that's a result more or less out of the order intake situation from last year. We performed with a 8.2% EBITDA margin versus the 7.8% what we had last year. But if we take back the M&A costs, what we had in the quarter, then we are actually around 9.7% EBITDA. Now to the order intake. Service went up 12% and capital [ grade ] 86%, in total, 32% in the quarter 2. Yes, and the capital order was larger around DKK 200 million order in it. If we then look to the right side, how the development is for the orders, you see that we are with the order level coming closer to that what we had pre-COVID. The level what we had pre-COVID, that means in the mid of 2019, we are in the way to go there, which is positive news. If we then look into the setup of the service, this is a bumpy road. Service is the light blue bar. But when you look more detailed into the industry, you will see a difference in order intake growth for service between the mobile suppliers into the industry and the stationary suppliers into the industry. It is clear that the stationary suppliers, as we are one of them are lagging versus the mobile ones. And the explanation is a purely operational simple thing. It is easier for mobile equipment to make refurbishment or any change and work on the units by simply taking them off the mine site into a refurbishment center because they can drive their mobile and bringing something in between in, when you have at the same time in stationary equipment, you can't move out a SAG mill for a week. That's not possible. And that means to make a big refurbishment there or big aftermarket investments, you have to stop the production, and that is not what they like with these fantastic commodity prices. If we then talk about the outlook, we talk, of course, about thyssenkrupp mining. We have 3 main pillars for that acquisition, one part are the employees. We are in a growth cycle. The war for talent to get the right competence into the right seat in the right location, will get more and more difficult. And we will get more than 3,000 top mining competencies through all layers into our company. This additional talent pool to our talent pool creates 1 of the top 10 in the industry, and it creates a situation for the employees with multiple career opportunities, and we get more attractive in the future for other people outside the company to join us. If we then look to the customer side, we are able to cover digitalization, sustainability, MissionZero from pit to plant. Whatever happens there, we can cover, we can add value, we can make business out of it. We can improve productivity. On top of it, a bigger company supplying into the mining industry has more money, more talents available to drive innovation, to drive new developments, which are absolutely necessary to fulfill sustainability goals. Besides that, an improved coverage closer to the customer, more sales and refurbishment offices in the combined business are for the customers very important. Last but not least, on our shareholders. This is a transformational deal. It gives us a possibility to do the same with that what thyssenkrupp mining has today, what we had 8, 10 years ago, an engineering service business to transform it into a product service business with some engineering in it and project business in it. The potential -- the synergy potential of DKK 370 million, the transformational potential and the potential to create value with the new business coming on board as we deliver it in our mining business is significant. Big part of that is the aftermarket business. And the aftermarket business is in that thyssenkrupp part, around 25% to 30% in a normalized year and we can bring it to 60%. And that is where we should play. And there is a huge additional on top of it. If we then look into what we have here, the transaction has a total consideration of DKK 2.4 billion. That's the enterprise value. The revenue in 2020 which was the COVID year, the toughest year after the second world war and global economy was DKK 5.8 billion. Of course, the EBITDA out of such a year is very much scrutinized. When we then look into when we expect to close it in the industry in that magnitude, in average, you have 12 months closing time. That's nothing special. This is normal. This is more or less standard. The strategic rationales on it that we get FLSmidth bigger in mining up to 80%, 85% of the whole group that we drive growth that we drive profitability with that is clear. We get a significant stronger value proposition for our customers who more and more will look into the whole value chain, what they have to get more sustainable, more productive and we can offer everywhere something. We have a potential with the aftermarket opportunity which is, from our point of view, today still untapped. The colleagues in thyssenkrupp work on it, but it's still, from our point of view, untapped huge potential. We will drive sustainability and digitalization throughout the industry. Our MissionZero gets more real with that acquisition and of course, the compelling synergies what we have. If we then look into what the time line is, which kind of points we have to do. At first, in 2020, which is the reference year, they have a high single-digit negative EBIT margin. They are part of a huge corporate organization, multiple headquarters, quite complex as these multi-industry corporates can have. They recognize that they have to do something already in 2019 and initiated the restructuring program. What they already run and as you could hear yesterday out of the thyssenkrupp for then quarter 3 announcement. They highlighted multiple wise in the text as well as in the webcast that they are very much pleased with the performance versus that what they expected out of the restructuring untaken and they highlighted mining in the upcoming profitability what they have versus last year in that part of Multi Tracks. That, from our point of view, proves the competence and the knowledge and the willingness, the attitude, the positive attitude of that group, which will work towards a positive result when we get that business into us. And there we are with the corporate structure and what we really get. It is a carve-out business. thyssenkrupp carves that out of the existing structure, carving out means, we get roughly 3,500 colleagues and more than 95% mining business related, not a lot of overhead related people. No headquarter, no nothing of that. It is actually an unbelievable asset-light organization and business, what we get into our group, and that fits us very well. The synergy run what we have is 370 by end of '24. When you look into the time line, if we assume in the mid of 2022, closing happens, then we will have the integration realization, the execution, integration planning already started after signing directly. But the execution of the integration will start in the second half of 2022. And we will run through in 2023 with that integration. And then, of course, it's clear that the first time we can show the full synergy run rate effect in 2024. And then it's up to us where we already proved that we can transform a project service business as we did with our own into a product, projects and service business, market-leading to show that to the market with the same profitability as we have it in our Mining business. Now into Cement. Cement market got, of course, last year, quite a hit. What we can say is short term, difficult. As we said before, no change. Mid- to long-term, good, great potential. The industry demand already for green solutions actually outperforms that what we saw coming a year ago, and that is very good. We see that the industry can deal better with the pandemic. We see, of course, that big CapEx investments are still deferred. They preserve cash. But the demand, the talk, the information getting on the industry side from us regarding sustainable solution is really, really high. And our organization does a great job in serving customer base with that. We are leading in that, and it's not only about CO2 to make that clear. We said it before, Cement will transform in a multi-commodity industry, where clay is beside limestone one of the resources utilized in the future to make more green cement. Then to the figures. We had a slight down in the reported figures on the revenue, organic, more or less unchanged. And that is out of the low order intake, significant low order intake what we had last year. Still, with the business improvement and the reshaping and the top work of our Cement colleagues, we were able to improve the result still negative but significantly less negative than we had last year. If we then look into the order intake, which is, of course, showing the competitiveness and the attraction of our offerings versus others in the industry, you see that we were growing the service by 42% and the capital by 59%. It's a 55% organic growth, which is great. If we then look to the right side with the period from Q2 '19 to now, you see that we are able to build order book same as we did in Mining. Actually, our order book, what we have for the whole group after the first half of 2021 is more or less spot on with the order book what we had in the mid of '19, pre-COVID time, which is a positive news for us. When you then look here in Cement, I would like to highlight the service performance quarter-on-quarter now for 5 quarters, increasing. And that shows what we, as FLSmidth, with our regional organization can do to serve customers sustainability on the service side, too. Out of that, we got to inform, we got the first clay calcination project regarding here in Europe to cut 16% of the CO2 with our French customer, Vicat. This is, again, a landmark investment from their side, a landmark order for us, showing how competent we are in sustainability and that this is not only talk. On the right side, it's about linked actually with that, the fit for 55, the Europe climate deal. And when you calculate what it means for the Cement industry to give some crisp figures here, we have roughly 180 million, 200 million tonnes of cement production, 150 million to 200 million in the EU-28. What comes up is a EUR 90 per CO2 tonne taxation. Not to make it too complex, but fact is there is still up to the year 2025. Quite a lot of exceptions and allowance for the cement producers not to have the taxation. And you see when you have that situation, what it means, the reduction in CO2 from 1990 to 2018 in that industry is only 10.5%. That's not enough to fulfill the fit for 55. And it's not enough to serve the purpose and to fight against that what we heard at the beginning of the week in the climate report. Fact is that we, from 2025 on, get an additional on top CapEx opportunity to transform the industry more into less CO2. It means in reality that you have around DKK 100 billion for the period, [ 26 ] to [ 30 ] additional taxation in the industry. Of course, this is not all potential for us because a part of it, maybe the bigger part will go to the end customers like you and me in higher cost for cement. But a big part of it goes into new technology. And that is where we play #1. And that's the reason why we think midterm, this is a great business to be in. And with that, I would like to give to Roland, our CFO.

Thank you, Thomas. And financial performance continued to improve in Q2. We increased our order intake by 38%. Our revenue grew by 9%, organically. Our gross margin increased, and also our EBITDA margin increased compared to the same quarter last year. In fact, our nominal EBITDA increased by 50% compared to the same quarter last year. All this is well supported by our business improvement activities from last year, including a 12% workforce reduction. If you look a little bit on our revenue, it increased 9% organically. On a group level, we're maintaining a 61% service share of total revenue. And if we look at the right-hand side, revenue is growing. We are not yet back to '19 levels. But for the fourth consecutive quarter, we are having a higher order intake than we have revenues, so positive book-to-bill and also continuously a good and healthy service share. If we look at our gross margin, it also improved in nominal term, well supported by the business improvement activities percentage-wise, we are up compared to last year, and that goes for both Mining and Cement. They both benefit from the improvement activities, but also from a healthy service and aftermarket share, even though Cement had an element of reshaping cost included in this. If you look at our SG&A, our SG&A cost is up in Q2 versus Q2 last year and also versus Q1 this year. It includes DKK 40 million of TK acquisition costs, and it also includes Cement reshaping costs and certain other costs for our physical footprint optimization that also includes mining and has group impacts. And if we adjust for the DKK 40 million, our underlying SG&A ratio was 17.1%, and our underlying SG&A cost is in line with our planning. We expect another DKK 60 million in the second half of '21 related to the TK acquisition. So a total of DKK 100 million in SG&A cost for the year of 2021. If we look at our EBITDA margin, that also went up compared to last year, slightly down on Q1 as we also had expected it. And if we look at the right-hand side and compare Q2 last year, Q2 this year, our increase in revenue is yielding a DKK 56 million, an increase in gross margin from both industries is yielding DKK 35 million. We have DKK 74 million of nonrecurring business improvement costs from last year. And then we have a smaller increase in SG&A. And more notably, we have the DKK 40 million in acquisition costs from the TK deal. And then we had DKK 42 million that has to do with primarily reshaping costs in Cement, but also other costs related to our physical footprint optimization that will impact both Mining and the group as such, and thereby ending up at DKK 197 million EBITDA in Q2 '21. If we look at our working capital, that performs strongly in Q2. A strong effort here by our organization, bringing our net working capital ratio below the [ magic ] 10%, limit for us. 8.2% net working capital ratio is the lowest we have seen the best we have seen for several years. If we look at the right-hand side, inventories are largely flat, they are being steered, and also a little bit thinking about a potential uptick in service and aftermarket. We or the organization have focused tremendously at creeping our trade receivables at Czech. Our trade payables went up a little bit in a positive way also supported by an increase in our supply chain financing. And then we have started to execute on the projects we won in Q1 last year and thereby WIP starting to increase. We received a few prepayments from customers connected to the projects that was posted in Q2. And thereby, our net working capital improved to DKK 1.3 billion coming down from [ DKK 1.6 7 8 billion ] in previous quarter. So really well done on this one. And that leads us to a strong cash flow for Q2 both the cash flow from operations, but also our free cash flow. And on the right-hand side, we see that composes of healthy EBITDA cash earnings that converts to cash. strongly supported by a positive change in net working capital. And that leads to our cash flow from operations on group level to DKK 407 million. We have CFFI or investments of DKK 64 million and thereafter free cash flow to the group of DKK 443 million. So a strong outcome here for the quarter 2 and thanks to the organization for this one. That means that our capital structure is well in line with our targets. Our NIBD is being reduced to DKK 1.159 million -- billion and a leverage ratio of 1.0x. On this basis here, we're updating our guidance. Our initial guidance in 2021 was a revenue guidance of DKK 15.5 billion to DKK 17 billion. We are narrowing that to DKK 16 billion to DKK 17 billion for the full year revenue in 2021. And then we will maintain our EBITDA margin of 5% to 6%. And this will now include costs to -- relate to the acquisition of thyssenkrupp's mining business at around DKK 100 million for the full year, including as previously guided cost reshaping the Cement business. And this guidance is obviously still subject to uncertainty due to the pandemic around the world. And with that, back to Thomas.

Thanks a lot, Roland. So now we are there. The last slide, what I would like to show here in the total package as a detail, is about our own in-house performance. And we have, since 2012, a fantastic performance improvement on safety. But this year, based on the, yes, COVID impact, restriction chain opening, not only in our industry, we see in a lot of industries that actually safety got on a slight worsening path. This is not good, but I'm actually impressed about all the activities throughout our organization to improve that. If we highlight another thing, and there we are especially quite proud of the greenhouse gas emissions. We are now on 16,000, around. The target is 38,000 for the year, and this is already significantly lower than the year before, where we had not a lot of things happening based on COVID. So that's an outstanding top performance in our own sustainability part. So to summarize a little, strong cash flow, strong order intake, increase in revenue, real good increase in EBITDA unbelievable strong net working capital performance for the quarter 2, we announced the acquisition of thyssenkrupp mining, and we updated slightly the guidance on the revenue line. With that, we would like to go for the Q&A.

[Operator Instructions] The first question comes from the line of Kristian Johansen from Danske Bank.

I have 3 questions. I'll do them one by one. So first one, on the restrictions to mine site, can you just give us an update on what the situation is as of today?

Yes, I can. What we see is that we have, in some areas of the world, actually no restrictions any longer. Of course, tests to go on site and so on. But customers demand us not to send in too many people. What is the impact for us despite the fact that it's actually open. Normally, we send in 2, 3, 4 engineers to make due diligence to go around with the customer to look here and there what we can improve. That is, of course, on a low level at the moment. And that, of course, has an impact on order intake. Then we have on the other extreme side, areas where customers decided still to block the mine sites. Based on the risk not to get the COVID on their site because they are very far away from residential areas and the capacity, what they have on mine site would be totally overrun on the health side, if the COVID outbreak would happen very quick. And we know that the Delta variant gets very fast into a bigger group. So overall, we have a more stable picture. The miners are dealing, they are more professional with it. The government is still more professional with it, but still, it has an impact on the order intake development because for stationary equipment, you have to be significant more on-site than for mobile equipment.

Understood. Quite clear. Then my second question is on this DKK 100 million in costs related to the thyssenkrupp acquisition. First of all, the remaining DKK 60 million, can you give any indication of how that will be split between Q3 and Q4? And also just to be completely clear, this is not part of the DKK 560 million you are guiding in integration cost relatively, right?

Yes. So thank you for that one. So we estimate that the DKK 60 million will be split evenly between Q3 and Q4 this year. And a very little part of this is part of the integration cost.

Understood. Okay. And then looking into next year, should we I mean, expect that DKK 30 million run rate to continue then? Or what's the...

No, that you should not...

Essentially the cost you have now?

No. But there will clearly be a cost next year, but this is very much subject to when we do closing and when proper integration can start. So that's too early to guess about.

Okay. Understood. And then my last question, you also mentioned on the call that TK Corp reported the other day for calendar Q2. Are you able to share any details on the financial performance of TK Mining for the first half of 2021?

Yes. We are only allowed to share that what they say themselves, and they had reporting yesterday. And on multiple occasions in the text, what they have on the webcast, you will find the result for Multi Tracks and then, of course, comments like that the profitability in the same year before in Multi Tracks was minus DKK 249 million. And at the moment, it's minus DKK 35 million. And they highlight beside AST, of course, mining as a contributor in that improvement. And that goes well in line with the comments what they have in verbalized that they are quite satisfied with the performance of the restructuring ongoing in mining and that they are ahead of plans. More, we can't share because we have here a clear competition situation. So that's the situation. But if you want, you can go on to thyssenkrupp.com site, and then they have on the section where they report on the so-called summary for Q3 as well as year-to-date text, both texts are around 50 pages. There you find multiple comments regarding mining that it's part of the improvement.

No, no, I understand and I'm not seeing those. I guess, obviously, what would be nice is to have some expect figures on the mining part. But maybe just to understand the reason you cannot share exact figures, is that due to competitive reasons? Or is this a deliberate choice of thyssenkrupp that you do not want to share that?

We have -- at first, it has nothing to do what they want to share and whatnot. It's purely legal binding based on competition. Second, if it comes to expectation, how we see, of course, we see that the business will come into a quite significant better situation than it performed last year when we have the closing. Why we are confident about that is 2020 is the worst global economy year since 1945, and it hit all the companies. Second, they have a restructuring what they themselves publicly say they are ahead of plan. And third, when we take over that business, it's a carve-out. So we will not enjoy all the head cost --headquarter structures, building structures, whatever they have in the corporate group, which is quite significant in large corporations as they are. We get a carved-out business, restructured in their way, and that is what we get in. So the profitability, what we will enjoy when they come over will be significantly better. And the colleagues know that, that we expect that.

The next question comes from the line of Claus Almer from Nordea.

Yes, a few questions from my side as well. The first question goes to you, Thomas, you mentioned in the beginning that the mining industry has a great outlook and a great demand. When do you think we will start to see this in your order intake? That'll be the first question.

Yes. Yes, I don't want to make it as a joke, but we have already a significant order intake growth, 32%, 32%. We have a growth in service. We have a growth in capital of 86%. We have an order backlog mainly driven by mining, which is already on the level of the mid of 2019, which is pre-COVID time. So I think it's obvious that the hit what the mining industry got our industry, the supply industry got in the COVID, we are moving out step by step. So that is what we already see, an 86% capital growth quarter-on-quarter. Then what you will see more is, and we reported on that before. We can see what is in the pipeline. The pipeline in mining looks good. It looks really good. We have a lot of engineering orders. We know that the peers have a lot of engineering orders. So the industry is definitely intact for that. The reason that it's not released in a bigger amount because only a few were awarded to all of the suppliers. The reason why it didn't happen is the miners in the boardroom look into managing the COVID, managing the fantastic cash flow what they have by pushing unbelievable heart to produce as much as possible. And of course, they look into what are the upcoming sustainability regulations there where they have the mine sites. That all together gives opposite to that, that they create a lot of cash flow, positive cash flow that they have a fantastic demand, high commodity prices. They are, yes, not that ambitious now to go out and to place the big CapEx orders, but they will come. That's a given. Otherwise, they will be not able to supply that cash. They will be not able to serve the demand. They will be not able to serve an increasing demand based on infrastructure builds, no matter if it's out of U.S. or China or anywhere else, digitalization and sustainability. We are not at the peak of the cycle. We are at -- yes, in a very bumpy road in a growth cycle, but definitely more at the beginning than in the mid or at the end of that growth cycle.

If you look at the situation as for Q1, and I know 3 months period for a long cycle industry like the mining sector is quite short. But do you see the mining companies are getting closer to push the CapEx button? Or are they still considering and figuring out whether commodity prices will stay at the current level, et cetera, et cetera?

The -- you will not see huge movements this year. That is what we see. The big capital releases, some will happen, but the majority in the years to come. That is clear based on the 3 reasons what I gave. It is not logical to believe that with the situation what we have that they're now out of the out of any pre warning all come with big CapEx orders. We don't see that coming. That's not the information what we have from them. Their wording is guys, no hectic, no panic. Dear FLSmidth, you will get your orders at the moment, we look into high production rates, managing the COVID and we need some more clarity in some parts of the world on the regulations, what we have regarding water, tailings dams and so on. And regarding the commodity there is no belief on our side that we really see a downward swing on the commodity prices, which is out of the normal. Sorry, Claus, you had another question.

No, no that's quite fine. So a question for Roland. This impressive growth in the profitability you saw in Q2. How much of this is mix and how much is maybe pricing?

Yes. So the profitability we saw in Q2 is driven by a few things. Well, first of all, we still enjoy a healthy service and aftermarket share, and that applies both for mining and for cement Secondly, our business improvement activities is kicking in, right? That means, for instance, on a gross profit level, we are running at better capacity utilizations right in our operations. And that's driving profitability. So if you look at second half, most of this will continue, but we will start to deliver on the orders and especially in mining that we received last year in Q1. And that means that capital will be a larger part of our revenue and thereby weigh down on the overall mining margin in second half. So that's how we think about it.

Okay. That makes a lot of sense. And by the way, thanks so much for the more color on your guidance per division. That was all for me.

The next question comes from the line of Klaus Kehl from Nykredit Market.

Gentlemen. A couple of questions about the Cement division. Your backlog is now starting to point up and based on some fairly conservative assumptions about the order intake for second half. I guess that at the end of the year, you will have a backlog that would point out -- well, point up by about 10%. And you are also starting to reshape the business and taking out costs. So I guess, outlook for 2022 is actually not that bad. Could you comment a little bit about that?

Yes, we can comment on that. The good job, what the whole organization does is as you rightly said, with the profit improvement and on top of it, what we always highlight, the repositioning out of the CO2 producing more into CO2 avoiding technology for the cement industry, which costs money, which is part of the reshaping, which is quite significantly hanging into figures not only last year, this year, too. So we said before in Q1 that we expect that Cement will be positive on the bottom line in 2022. And we stick with that. And of course, maybe we don't guide for 2022. I have to say that. But of course, with the order backlog, with the demand in green technology, we will have a year where we really can see, yes, the positive bottom line will come.

And when you say positive bottom line, do you mean the EBITA or do you mean net profit?

I mean the EBITA. That is a fair question.

Okay. Okay. And then also, I guess that your order intake must have accelerated during Q2. Could you just give us any indication on the exit run rate for order intake in end Q2 or beginning of Q3, Yes, just to have a feeling for where the world is right now?

Yes, in the -- of course, what you have at the end of Q2 is you have in a big -- in the Northern hemisphere, quite a lot of vacation time, not that we appreciate long vacation times, but it happens partly in the world. And that always has an impact, which means that the towards the end of Q2, you have a slowdown in business activities. That's normal. That's absolutely standard. And then it will get speed again in the Q3 and then it hypes normally in the Q4. So that's the normal regulation in the year. If we don't have too much disruption out of COVID and lockdowns and blockages of transport and so on, then we foresee that roughly the same behavior this year. By the way, that's as we already guided, and we think that with the guidance and the corporate guidance, what we had we are actually spot on.

The next question comes from the line of Robert Davies from Morgan Stanley.

My first one was just on your expectations within the mining part of the business for [ breadth ] to the aftermarket coming into the second half of the year. Are you getting any indications from clients that they are sort of going to give you a bit more side [indiscernible] should it accelerate through the second half? Are you expecting a sort of similar trajectory through H2 versus 2Q? I'm just trying to get a feel for whether there's sort of further momentum to come in that aftermarket business in mining specifically through the second half?

Yes. What we see is on one side that we have customers really trying to limit any downtime to produce as much as they can. And that has, of course, an effect that our service realization there is lower. On the other side, we see more and more miners going actually public saying that they under-invested in maintenance and that they are now coming into very critical stages. And that's -- that was a little bit a new thing that miners are going public with that and saying we have to do more on maintenance and replacement business, substitution business to keep the high production rates up. What people from outside maybe don't see so much. We have quite a lot of miners, they produce over the 100% capacity what actually the plant should deliver. You can do that. You can do that especially with premium equipment, and we are always proud that you can run FLSmidth equipment quite higher than the norm capacity. But of course, you can't do that all the time. It's like a little bit in the car. You should not drive with a car more than 200 permanently. That is not good for the engine. So it's similar with the mining industry. Anytime it will come significantly more in the aftermarket. Do we see that for this year? No. We see, as we guided it for, normal year with the outlook in mining. And when they take a breath by force because they have to stop because it doesn't work any longer or they see a possibility to have some downtime. Then you will see immediately quite a positive development in the stationary sector of the aftermarket in the industry. We see significant more differences in the order intake behavior between the stationary suppliers and the mobile suppliers than we actually see towards commodities regarding in the mining industry. And that is quite good for us because we know we always lack behind in that, what comes as growth versus the mobile ones where it was 16 years in.

And then my follow-up question was just actually along similar vein really around site access issues. I know you had some -- I think it was early in 2020, you had quite a big order over DKK 3 billion on the over OE side in Mining. I was just curious to know, are you having trouble sort of deliveries, installations and commissioning on some of these bigger pieces of equipment? I guess the crux of my question is really are we likely to sort of see kind of pressure on some of the delivery of the sales numbers through '21 and '22 and then a sort of pick up from there as the COVID restrictions ease? Or are you kind of circa navigating some of those headwinds and with testing and isolation. And I'm just kind of curious to get a bit more color.

Yes. It's actually the same picture as we had a quarter ago, 2 quarters or 3 quarters ago. It's not a big change. What does it mean? In some areas, we know there are restrictions that is factored in, in some other areas, and this is really then the hurtful one if things are happening out of the no information before. lockdown. We are not allowed to cross the border or like this morning, for example, in China, one of the biggest, if not the biggest, harbor shutdown based on 1 COVID case. That if we would have equipment there, what I don't know yet, that will have an effect. So -- and we know to give a little bit what it means if in China, that harbor goes 1 day down, we see the effect in Europe actually 3 days delay and so on. We can calculate that. We have a very agile supply chain and procurement organization. We track that. What we see today and what we saw up to now and what we expect up to the end of the year is actually completely factored into the guidance. It comes really out as we profiled it.

And maybe just one final one. Just on -- you mentioned some of the bigger projects, the miners themselves are not necessarily pulling the trigger there. I guess it sounds like you've got some confidence that they're going to come through. Any idea around sort of timing? Are you expecting a sort of a far wave of these larger orders to come through in '22? Is it sort of too dependent on COVID to make that prediction yet? Could you wait until '23 or even '24 before bringing these on? Or would that be too late in terms of the sort of supply-demand balances your customers are talking about?

Yes, we think that we know it site by site. If they would like to keep the production rates in that demand or in that level as they want, we know exactly where they have to do the investment and where they can delay it further. And that is openly discussed with the customer and the customer knows that very well, too. Second, the -- when we look into that, based on the fact that we don't see a demand drop. We really don't see a demand drop, and I take now the infrastructure bill, which will have not an effect on us this year in U.S., but this is not only building materials. This is driving minerals, too. This is driving significant minerals, too. And it will create a situation that other countries will look into infrastructure too because there is then a competition who has in the future, the best infrastructure. China did a lot with Silk Road. And now the U.S. is coming. Let's see what Europe, Latin America, Southeast Asia is doing in that. So the demand for minerals, the commodity prices, we really don't foresee in that cycle that it will significantly go down. If it goes up, yes, maybe a little bit here and there, but we think the level where it is, is a very healthy level. So the customers have the money. The issue what they have is the timing based on production rates today and that there is a clear regulation what is allowed with water treatment and so on. And when we look into that and then I'm done what we quote, we always quote options to upgrade towards sustainability if there's any change happening. That's a stronghold of us in the market, and we will enforce that further.

The next question comes from the line of Magnus Kruber from UBS.