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

Good morning, everyone, and welcome. To those of you who don't know it, my name is Jannick. I'm heading up IR, FLSmidth. And on behalf of the IR team, in particular, the FLS, we've been looking very much forward to this day. It's been a long time coming. It's been many years since we last had a CMD. So finally, we're here. A few practicalities. Just welcome to everyone online. Those online, just so you know, we are around ballpark 80 people in the room. We have around 100 out sitting in the virtual world right now. So welcome all to you guys. In the room, we have a mix of investors, analysts, financial media. So we have a few company announcements out this morning. I presume you guys have seen that. We promise you. We will talk a lot more about that during the day. A few matters that we need to address. This one, I won't read it up, promise. Then it's at least done, forward-looking statements. We'll talk a lot about the future here, of course, then that's good. A few practicalities. Safety. There's targets for people with computers. I've seen people walking around with a hot coffee. Be careful you don't trip over those. So we don't have issues. [Operator Instructions] And with that, I think it's just all over to -- I hope you guys will have a great day. We look forward to it. And I think there's done who is probably look even more forward to it, our CEO, Mikko Keto. So I'll hand it over to him. Welcome.

Thanks very much, Jannick, who introduced that. I'm extremely excited to be here. I was hoping to make this even earlier. But latter part of last year, we were still calculating the thyssenkrupp mining number, so we couldn't actually organize it earlier. This has been a long time coming. And we have lots of topics to talk to you about. We are doing a full transformation of the company, and we will walk through all the details of that one with you today. Before coming to the actual topics, I'm actually very proud of the top team of FLS and what we've already done in '22. If you think about some of the milestones, what we achieved, what we will talk about in more detail today, Annette, Head of Legal, interesting year: antitrust, closing of thyssenkrupp deal and then embargo against Russia, lots of activities there. I would say really big achievement. Cori, who is our Head of HR, think about the year. Thyssenkrupp acquisition, closing on the deal, full integration. We took 10% of the workforce down because of synergy savings and also transformation in 7. Significant challenges for HR organization through everything at speed. Then moving on to Roland, our CFO. We did full transformation to global P&L from regional P&L in first half of the year. It's a significant change. So now we are reporting that we can see globally product line profitability by capital, by service and combined. It's a big achievement for the finance organization. And in many ways, Roland is my copilot in many things going forward. Then we have new members in the management team, Josh and Chris, who basically created from scratch full business line, product line organization and integrating thyssenkrupp fully into that organization in 2 or 3 months. Then Asger, Head of Cement. We did the quickest transformation I've ever seen in my professional career. We took delayed cement in 2 or 3 months. We did significant change very quickly. Mikko T., the best news about IT was that I realized after closing of thyssenkrupp deal that I haven't spoken to him for 2 weeks, then I saw him in the corridor. And that's best news, what you can have actually when you're integrating a large company into FLSmidth. You never heard about IT, everything just worked. That was best news. I didn't even think about him. Sorry about that. It didn't come to my mind. So it's a big achievement that we didn't have any IT issues with the transactions, with the email, no, nothing. So that was a big achievement. And I will say that when you look at the team today is quite different what it was in the beginning of last year, and there has been some rotation. And this transformation is not everybody's cup of tea, as you may know. But this team can deliver that. What happened over the last year, I highlighted that through the people and what they've done and achieved and delivered. Other thing is that if you look at the underlying legacy FLSmidth performance, it is improving. And that is evidence that it works, what we've done. And of course, we use the same medicine for the underperforming assets that we acquired from thyssenkrupp mining. We use exactly the same principles to turn that business around. Short-term challenges, we are quite aware of the macro challenges, what is ahead of us. And that's why we accelerated our synergy program in Mining, increased synergy targets and made it faster. In Cement, we decided we can't waste any time in transforming the Cement operation because Cement might be facing even more severe recession. But both industries are supported by mega trends, especially Mining. There's a huge mega trend support for mining industry as a whole. And we know that sooner or later, Cement, green cement will come. But we will not wait for that. We do transformation for the Cement operation, which is not volume-driven. We decided that we give you, investors, analysts more transparency for the business by separating pure-play Mining, which is the future mining assets that we are going to have and performance of that. Then Cement stand-alone and noncore activities. And if you look at the past performance of FLSmidth, the NCA assets, which are half originating from FLSmidth, other half from thyssenkrupp have been polluting the good Mining numbers. And by making a firm decision to exit certain product lines and run it down, we are able to show the performance of the Mining and Cement in clean format. And I'm happy that Investor Relations shows the right graphic. On the bottom, it's Mining going up, Cement going up and then NCA, we are running it off or selling if there's a suitable buyer. When you go to business school, this is almost like simple mathematics that engineering plus projects plus conglomerate equals low performance. In most of the cases, that is true. And on the other hand, if you look at technology, product service, pure play equals high-quality earnings. It's actually very simple if you think about it. If you look at us, if you look at the other companies, but it's a big transformation for FLSmidth. We used to be engineering and projects company dominantly in cement. So it's a big culture transformation for the whole company. Leadership of the P&L is quite different from leadership of technical product line of projects or than engineering. So that requires new type of leadership. So the P&L holders are business lines and product lines underneath. I talked to many of you about the business model for the P&L. It's inspired by what is called Atlas Copco model developed in Sweden many years ago. But it's based on the fact that you have proper ultimate P&L units, which are the business lines. Then we are having -- pushing down the same responsibility for the product lines. And we can look at all the businesses and product lines in 3 dimensions. We can look at performance by product, capital and by service. And then we can look at the life cycle, which is combo. And when we made the decisions for the nonperforming NCA assets, we will look into life cycle. Somebody told us, hey, we can make good marginal spare parts on this one. But if spare parts are 10% of the total life cycle turnover, you cannot have the organization that is 90% underperforming, 10% is okay business, but we have huge resources supporting that one. So all views are important product, service and then combo when you're looking at the decisions. Transformation drivers. One key is speed. The ones who know Rally Cross, which is where you drive really fast in the forest for the cars. And they're saying is that speed corrects mistake -- mistakes. If you make a small mistake, you kind of hit the curb, you just go faster. And we do exactly the same. So speed correct mistakes. And that's why we want to go fast and get everything 80%, 90% right. If we try to get everything 100% right, it will never happen. You'll never do transformation. And if you look at the core values, and you look at the P&L management, you cannot really do so-called Atlas Copco model not having those values, trust, empowerment, accountability. Each and every product line manager is accountable for his or her result, position in technical terms, financial performance, supply chain and program. We've done small tweak to our model in the beginning of the year. So we merged products business line and system business line because when we exited NCA assets, system line became too small. So we plugged in a couple of product lines from that business under Chris Reinbold. So it's everything is on the products business line. And that will give us 3-dimensional management product, service, life cycle. We also did one more tweak in so-called Atlas Copco model is that now program is part of the business line. So program is integral part of the business if most of the supply chain is outsourced. So in that regard, it was important that business lines take more control of that. Actually highlighted to you in the beginning already that we've done a lot. And we decided that we execute first, get results and then talk about it because traditionally has been lack of trust on our ability to execute, deliver our plans. And we decided that we need to show to you, to the market, to shareholders, investors that we can actually execute what we say. And that's why we took very seriously second half, fourth quarter challenges and say that we do it now. We don't do it tomorrow. We do it this year. And the different functions, business holders will go through what we've done this year. So it's really important. We've done maybe 40% of the transformation already, 60% yet to go. One of the biggest changes for the company is actually almost hidden if you look at the screen. We don't have FFM strategy. We have one for Mining and one for Cement pure-play. And that is a big change for the company. That is really a big change. So not one strategy, but 2 strategies. We are running Mining and Cement more and more independently. We will carve out Cement. We will make it independent business. At the same time, we feel that we are best owner for turning around Cement. And Asger will show what we've done in the fourth quarter. And we are well on our way to transform a totally different type of operation compared to the past. This came out this morning, long-term financial targets. And we decided to go back long term to non-adjusted EBITA number. So it's clean EBITA. We will be adjusting over the next couple of years because of the integration. But long term, we want to go back to clean EBITA numbers. So when you are looking at this one, it's clean EBITA. Also that our target is not too much volume-dependent. We know that we can actually achieve EBITA 13 to 15 in Mining regardless of the volume development. We're expecting positive development in service, but we are not banking on huge top line growth to achieve that target. And we know exactly how to get to that number. With bottom-up analysis, special product lines, capital, service, combo, different market, we know exactly how to get there. So we are confident that it's not just a number in the air. Same for Cement. We know that we can deliver 8%. Again, regardless of the volume. We are planning to grow service. Mix will get better. We're addressing the fixed cost. If the cement market is not growing as fast as we expect or we cannot grow service as fast as we planned, we can still hit the 8% mark. We know actually how to get there. Just reminding you that this underpinning everything what we do is our absolute commitment, MissionZero, which is technology and solutions to our customers to deliver net zero. It is underpinning everything what we do. We come back to this one in more detail in later parts of the day. In very simple terms, if I think about summarizing my key message, it is we can improve our performance. And there's evidence looking at legacy FLSmidth numbers we get there. We are undergoing a huge transformation, total transformation of the company. We will look totally different what we were a year ago in 2 years of time, totally different. And also that top team who you have here today can execute. I don't care if they're slick presenters or not. The main criteria is ability to execute. That is everything. Then I'm handing over to my copilot, Roland, and you go through a little bit more details in them.

And speed corrects the errors. So I think this morning, our '22 numbers were fresh out of the print. So let's just quickly glance them if we -- we say that we are in line with guidance. But in Mining, we are in the top end and a little outside guidance. But we guided DKK 14.5 billion to DKK 15 billion revenue for 2022 and ended at DKK 15.1 billion. The adjusted EBITA margin of 10.6, also a little out of the range and then a reported number of 7.6. And the difference between adjusted and reported here is DKK 252 million that we used for integration cost for TK and a full year write-off in Russia of DKK 200 million. Now the Cement business is in the range of DKK 6.3 billion revenue versus a range of DKK 6 billion to DKK 6.5 billion and an EBITA margin of 3.3%. The noncore business is actually on target, and that's a little bit suspicious, remembering that we have talked about how volatile and uncontrollable that is. But we're pretty much on top of that backlog, and the run-off is continuing according to plan. And that means that the group ends at 21.8 in revenue and 6.4 in adjusted EBITA margin. So we are quite happy about this. This is just to take it off today. This is not a 2022 session, but that's where we are preliminary and unaudited. Let's just briefly recap. We acquired TK and signed a deal last year on '21 in July. The reason why we did that, we thought it was good timing to invest more in mining. We thought TK had an interesting portfolio of products and services that complement our own offerings quite well. We also acknowledge that TK had a service business that was okay. We think we can do it better. We can groom it better, and we can make it more profitable. And that's what we're going to do, and Josh is going to talk about that. Then TK has spent quite some money in some digital and sustainability products and offerings that will complement our technology and offerings also. And then obviously, TK is highly synergetic as we have been long-term competitors. They are present in the same countries and regions as we are. So that's why we decided to do it. It's obviously strengthening our competitive position. We, 1st of September, said welcome to 2,000 highly qualified employees from TK. And we started with a backlog of DKK 5.2 billion. A little bit in number terms for some of us that are interested in that. If you look at cash in, cash out in this business, we paid DKK 2.1 billion. We will grow DKK 800 million after taking out the synergies and integrating it fully. And we also acknowledge that some of be later defined as noncore activities is loss-making on their side, DKK 600 million. So a cash out of DKK 3.5 billion. Now we will harvest at least DKK 506 million in synergies. And we will have interesting products and a service business that we will grow to a profitable level, like the guys will talk about later on today. And if we do the numbers, then payback is fully synergized less than 4 years. So for us, that's just reconfirming this was the right deal to do. DKK 560 million in synergies and take-out cost of 800, we decided to raise that post closing when we had done the numbers and a little bit more aggressive planning on the take-out speed. The synergies will be back-end loaded of -- during this year 2023. As Mikko alluded to, we have started it. So we will take out about 800 positions in Mining. We have started that in Q4, still ongoing Q1. And that impact will start to phase in over the course of the business. And then there will be more structural synergy takeouts towards the tail end of 2023 that has to do with when we can start merging legal entities and combining order entry modules and so on. A large part of this will be headcount reductions. So these are people in double roles, but there's also a substantial part on facilities and in combined pools of procurement. The DKK 5.2 billion we acquired in the backlog, there has been some attention to that. We have decided to move DKK 1.8 billion over to our noncore activity segment. We'll come back to what that is. So that is out. It is lossmaking. It will be run-off. 30% of the 5.2 is service business, healthy service business that we want and that we will groom further. And then Christian capital or products have inherited about 20 large projects in our continuing business, not necessarily exactly with the terms and margins that we wanted. But it sits in our continuing Mining business element we run off over the next 2 years. Just illustrative here, seeing why have TK been lossmaking. And if we compare to our existing business, TK on average is posting 15% less margin in their products or capital business and 10% less in their service business. We think we know exactly how to do that. It's not only synergies. It's also the way that we commercially integrate them in our product group and business line setup. More general in FLSmidth, we have been talking about derisking. We want to derisk the company. We want to derisk the business lines, both in Mining and in Cement. We've done a number of initiatives. We have established a government body or risk management board that oversees this. We have introduced risk quotes. So a certain part of -- only a certain part of our revenue every single calendar year can be revenue that stems for projects with risks above a certain level. So risks can be especially difficult countries. It can be especially difficult customers. It can be especially difficult solution, high complexity, high engineering. It all can add to a risk scale that we use internally. We introduced this in -- by the end of Q4, start of Q1. And if we look at our order backlog, we can see that not only is the order backlog growing over the course of '21 and '22, but we're also reducing the risky part of it. So this is actually saying we are building our backlog. We are reducing the risky part of that backlog. So everything else, quality of earnings in that backlog should be better. Former TK Mining will go exactly through the same process. And that happened 1st of September. So from now on, building the backlog on the acquired business is common standards in legacy FLSmidth and in ex TK. Just recapping, we -- post closing of TK, we had detailed product review. It is so we have decided when we designed our new product portfolio to keep best of breed, so to speak. We have done that. And we have also decided that some of the products, both in legacy FLSmidth and also in the acquired TK Mining business where is no longer strategically important for us. And strategically important means that either it's lossmaking, it's pretty critical point. It's not building on our service or aftermarket business. And we can't see any commercial viable solution to bring it back to decent levels. It's typically characterized by high risk, execution risk, a lot of engineering at fixed price terms, something that is very difficult to steer. So we decided to exit that, and we have moved that to a separate reporting segment. So we have 3 segments moving forward, Mining, Cement and noncore. So noncore is not an adjusting item in Mining. It's a separate segment. Now once -- when we did that, we moved DKK 1.8 billion from ex TK and DKK 1.8 billion from our own business, so a starting backlog of DKK 3.6 billion. On average, we will lose EBITA of 20% on that business, and then there will be some exit costs. So we said over the 3-year period where we run off this business, the DKK 3.6 billion will result in a loss of DKK 1.2 billion. Just this morning, we posted the first loss of DKK 0.4 billion. And we will come back to guidance where we'll be guiding for 2023 that this segment will turn over DKK 800 billion to DKK 1 billion and lose between DKK 250 million and DKK 350 million. And that leads us to guidance for 2023. Now in our opinion, this is a bit more clean than 2022. 2022 is a mix of legacy business, 4 months of TK, 3 months of moving out NCA, not so transparent in terms of run rate projections and so on. These are clean numbers. So Mining in this case is all our continuing service business from legacy FLSmidth and from TK. It's all our continuing products business from legacy FLSmidth and from TK, clean. The adjusted margin of 9% to 10% we are guiding is an adjusted margin, and that means that we have restructuring costs below that line. And for 2023, we are guiding DKK 550 million -- up to DKK 550 million to use for the synergy takeout and the structural changes we have planned when we merge the 2 entities. So revenue, DKK 16 billion to DKK 17 billion, adjusted guidance of 10% -- 9% to 10% for Mining. Cement is a clean number. We're not adjusting EBITA in Cement. So we are planning for Cement to be flat in '23 over '22 but with a continuous improvement in margins irrespective that recession may sit in the cement industry. And Asger will come back to more flavor on that. For noncore, as we discussed, DKK 800 million to DKK 1 billion in line revenue and a loss of DKK 250 million to DKK 350 million. That means that the group will turn over DKK 23 billion to DKK 24.5 billion. And the adjusted EBITA margin will be 6 to 7 and EBITA reported 4 to 5. And there was a few questions on what we adjusted for. We're only adjusting for the 5 50 in Mining, so the restructuring cost in Mining. We're not guiding on the reported number in Mining. We actually took that out for clarity. But obviously, inserting 5 50 there will bring the adjusted margin closer to 3% lower, so 6 to 7 or so. In the group, we are adjusting for the 5 50, not for the noncore. Noncore is a reporting segment. So you add up to 3 segments, and then we have the bottom line. Good. Just a little clarification. This is important for us. So our underlying FLSmidth business is now pushing 11% to 12%, and the continuing part of TK Mining in 2023 is expected to dilute our earnings by 2%. Now this is important because at least to us internally, it proves that what we're doing works. So the legacy is moving forward with a few percentage points. And TK is still diluting us in 2023. This will change. This will change. We will take out the synergies in the case as we have planned it, and we will commercially integrate TK. So pretty fast TK will be up at the same level as our legacy business, and we will continue to improve towards our new long-term targets. And Chris and Josh will speak more about all the many concrete initiatives we're doing to do exactly that. Yes, so key points. We're doing better in our legacy business at a risk. We think that's proof of concept. We're walking to talk. We think it was a great acquisition we did with TK Mining. There's a lot of good stuff, but there's also some integration and some hard work ahead of us in the next 1 or 2 years. And then we have decided to exit all the nonprofitable, nonstrategic important business in the company and put it in a separate segment so you guys and we all can follow it stringently until it hopefully leaves the P&L in 2025. That will pave the wave for the margin pickup.

Thank you very much, guys. So we'll head over to a bit of Q&A. That's basically how we try to tailor the agenda for today. So we'll do it in a session. So we'll do a Q&A hopefully on this. There will be Q&A throughout the day. We know you guys like that. So we have Mikko and Roland sitting ready. There can also come questions from online. [Operator Instructions] So please give the first one.

Lars Topholm from Carnegie. I have 2 questions. One is on the integration cost going forward. So you guide 5 50 for 2023. There was a little in Q4 '22. So just to confirm, 2024 and beyond, we're looking at a number somewhere between DKK 150 million and DKK 200 million. And then a second question, you guide on EBITA, but there's quite a bit of traffic between EBITA and EBIT. How do you optimize that? How do you take that into consideration when you measure your value creation? And how do you see the trend in that market? If I look at the history, the amortization-related -- the acquisition-related part of amortizations become smaller and smaller. That would presumably continue. So the nonacquisition-related amortization becomes bigger and bigger. How should we think about that going forward?

Maybe I will first comment some of the activities, what are the kind of synergy savings, what we are targeting this year. We are doing a business simplification for Mining. So the last -- we addressed the resources more in the regional organization. This year, we focus on the back end, more the kind of product line business line and the support functions. And business simplification means that we are starting to get ready for the principal company model emerging legal entities, releasing resources from kind of more administrative duties. So we will see a similar reduction in the workforce this year, if not more than last year. So then exit cost in some of the countries like Germany and a few others is really expensive. So there will be quite significant cost when exiting resources.

Yes. So the first thing is we have said that we're going to spend about DKK 800 million to get the synergies out. We spent DKK 250 million in '22 million, so the remaining DKK 550 million in '23. And then we'll do everything we can to have full run rate impact as of 1st of Jan 2024. Now on EBITA and what's over and under EBITA, we will strive to be crystal clear on adjusted EBITA and what we adjust for. And then why do we use EBITA. So we've been thinking a bit about that before this event wide, and the entire industry here is using EBITA. And the entire industry is also using adjusted EBITA, to be honest. So we have decided to stick to EBITA. We will most likely have an adjusted EBITA in '23, maybe a little bit in '24, and then we should be back to reported numbers. And our long-term target is also reported numbers -- clean numbers. Now we're following the accounting standards, right? And some of our intangible investments will be amortized below EBITA. There's no special thinking about that for us. We'll do the intangible investments we will do is primarily software platform. There are some product developments also. And that means that the split below PPA and amortization is changing. I don't want to be arrogant about this, but these are not super big numbers. So that's one thing. The second thing is we will give you information so that you could estimate that part. We will give you CapEx guidance and also a little bit of granularity on where it sits. So that's why we have decided to do so.

Well, just before we take one from the room, just take one from the online as well. So you mentioned 20 large contracts. With the risk attached them, how visible are they for you, it can be a big hiccup. Should we expect big nasties over the period of the execution? Or what is your faith in those?

Rather than having huge execution risks, we see bigger risks for the commercial terms so that the pricing has been too low. And so because we are exiting an NCA, the most riskier part of the portfolio. So we don't see so big technical risks and execution because it's a product portfolio that we are keeping. We see that more poor terms and conditions, poor pricing. And therefore, that is kind of impacting the book.

Good. We have a question.

Christian Tony SEB. Two questions. Can you first quantify how much of the cost synergies have you included in your 2023 guidance? And then secondly, just to clarify, these 2 percentage point margin dilution from TK, is that on top of the cost synergies? So when we bridge your '23 guidance to what you can deliver in the future, we should take the cost synergies and remove -- or, you can say, the 2 percentage points? Or is it the same thing?

Yes. So included in this guidance is maybe 100 to 150 in synergies. And most of that sits in TK. So TK underlying is actually a bit worse. So what we have to do now is take out the full synergies, and you can decide whether does it sit in legacy or not legacy, right? Synergies are not one or the other. Once when we merge the organization, we will select best athelete for all the double roles. Same in the product portfolio, best products that we need and so on. So that's the underlying synergy assumption for 2023. The rest will come when we take out the synergies and once and when the product business line and the service business line get commercially up to the standards that we require from our products and from our service business. So that is a gradual pickup over the next 2 years.

Yes? Claus?

Claus Almer from Nordea. The first question goes to Q4 '22, if that's okay. You beat your own guidance, at least on the margin side. So what did drive the better performance both within Cement and Mining? That would be the first question.

So this is not -- it's fresh out of the print, right, but Q4 is our strongest quarter, both in Cement and in Mining. We are not that far off our guidance. We had a bit positive impact from our capital portfolio. So that's primarily why Q4 ended slightly better than we had expected. It is not a run rate number. It's not a run rate number, Claus.

Because when you peak on full year, it all comes from Q4. So when you look at the Q4 isolated, it is a meaningful beat versus guidance.

It's a meaningful piece, absolutely. It's a little higher than we expected, and there's a few year-end adjustments to it and so on.

Okay.

We will talk more about that in February.

Fair enough. Then the second question goes to the guidance for Mining legacy, this 11% to 12%. But the run rate for legacy in Q3 at least was 12.1%. So either you are conservative or the run rate will go down. So how should we think about that?

We should think about that also in the FLSmidth legacy business. We have some backlog left that needs to be run off in '23. We need to take out synergies. We need to run the simplification and integration efforts. And that will take efforts and energy in that business. So we're not going to make a full year run rate of 12.1 you saw in Q3 for the full year 2023.

Meaning there will be more cost than the DKK 550 million you're adjusting for?

So Claus, if you look at our legacy business in Q3, that was especially good quarter for us. It was clean legacy. We did not have the GKN. And then we have a number of things we need to do in '23. So '23 legacy is not going to be at that level. We're not far off. We're saying 11 to 12.

Sure. Okay.

But who's counting?

Yes, yes. But of course, then if you look at that acquired assets even in the remaining part of the business, they're underperforming. So our estimate is that its dilutive impact is 2%. It could be a bit higher, could be a bit lower, but we don't know exactly because, of course, it's -- we know that business less well compared to the FLSmidth part of the business because in FLSmidth, we know all the details. But that will create a kind of a burn for the year to come.

So we'll take a question from online. It's probably to -- yes, to both of you. In August, you announced 3 new business lines, but now we can see we all reduced it to products and service. So how is this different from service capital as before? And how does that make you get greater visibility? So why is this different?

Actually, when we had the 3 business line, most of the NCA assets, if not all, came from the system business line. And it had 3 remaining product lines that we wanted to keep conveying, in-pit crushing and conveying and then IPCC, the kind of crossing stations and a few others. So we have a few product lines which were a part of the system business line. But in relative terms, it became so much smaller. It made sense to combine all capital under one management. We still have a full visibility for the, as I said, in 3 dimensions by product, by service and combined. But it just became too small, and then it didn't justify the kind of excess management around it. And also that we call it product because we are product and product line-centric even though the supply full flow is.

I don't want to be too technical, but previously, projects was a big thing in the company. And when we offered a project, project manager was the king. And that means that he would call up the guys and say, "I need the cautious a little cheaper here." Then I need a few mills and then the pumps and then I can add it up to a margin that is decent on projects. When we move to what Mikko's referred to on Atlas Copco model, we moved to product line responsibility and accountability. It means that the guys are being measured on their bottom line. So if they feed into a combined delivery, they have their pricing requirements. It's globally steered. This is the pricing. If you want crashes added to it, and you want a few mills in between, that's fine. That's the combined price, and we take a price then for executing on top. If you've seen an organization working like this, this is significantly different. This is significantly different. If we can't make that combo earnings, we will know it. It's not in itself a goal to get this monster project flat -- flagship lighthouse thing. So this will in itself more prudently steer margins.

How about you, next one over there?

Christian from Goldman. I wanted to ask on the market backdrop in terms of the constraints we've seen to greenfield CapEx, particularly in the context of your ambitions to reduce focus on large-scale projects. And I just wonder, you showed a bar chart earlier that effectively you focused more on smaller business. How much of that is led by the market versus your own actions to avoid project tenders? And then also secondly, in terms of the integration with TK, how that might be affecting your project bid activity?

If I look at then the capital business, I will say that the growth of the capital business has not been impacted by decision not to do projects, large projects. And it's about scoping. So we focus on bundle of products, which is full flow sheet and then giving performance guarantee for that bundle. But it does means that we don't do excess. We don't do third-party. We don't do civil works. We don't do any of that EPC staff. So in that sense, if I look at our wins and losses last year from the deals, I don't think we lost anything based on that decision. And also that EPCMs are very influential in decision-making regarding large CapEx. Typically, they are managing or even buying on behalf of the customer. And EPCMs like our approach. They like us to do products, giving performance guarantee for our kind of full package, but they don't actually want to do -- us to do the rest because that's their business. So actually, we have less conflicts with the EPCMs with this model. But we provide full projects, but it's a bundle of products and guarantee for the performance, which is basically false.

And I think a good proxy for the value is in our NCA business. So the DKK 3.6 billion over 3 years indicates a bit more than DKK 1 billion that we forego on top line. And then we avoid a minus 20% EBITA loss. I think that's a win-win.

Yes. I think we have time for one last question over there. Vlad first. Sorry.

And look, first 2 perhaps would be on the guidance or maybe on what's not in the guidance. First of all, very keen to hear your thoughts on the order intake trajectory in 2023. You're obviously constructive on the mining cycle, you have a bigger footprint with TK. Does it mean that orders we expect orders to grow in 2023? And then secondly, if you can help us to understand the moving parts on the free cash flow trajectory for '23 as well. Key headwinds, key tailwinds. I just checked Bloomberg consensus this morning. It's about EUR 500 million positive and your thoughts on this number as well.

So if I comment the market, I believe that the mining market will be flat on CapEx this year because of also recessional pressures. And even though there's a mega trend demand increase over time. But I believe that there might be some impact from the macro economics. Meaning that then the CapEx market would be flat compared to Q '22. And then we are aiming to grow the service part of the business because service parts of the businesses, we believe that everybody is running the mines operations at the full capacity, and that gives us opportunities to grow the service. But the capital market flat and then opportunity to grow in the service market. That's my kind of short-term protection.

And I think the cash flow is going to be a little technical, but I think the starting point would be the group's reported EBITA for 2023. Then you can make assumptions on some of the provisions that we are disclosing in the PPA on TK will some of that turn into actually used cash, apply 2% of CapEx, good proxy, a tax rate that is slightly lower in '23 than in 2022 also for cash proxies slightly higher interest from the financial -- from interest rate going up and so on, and then you will end at the free cash flow. We do not expect all the provisions just to turn into cash outflow like I know you and I have discussed, not at all, and especially not in one single year.

Good. And with that, the run time keeper will disrupt. So we'll move over to a 10-minute break. Coffee outside. I would invite you all to enjoy our MissionZero mining table down there, if you haven't seen it. It's interactive. You can actually see what the pit to plan means and what are the benefits of some of the products that we'll see after the break. So see you soon. [Break]

Welcome back from the break. I hope you enjoy some coffee and refreshments. The next topic is that we will go through the mining strategy. And if you start just glancing what is our starting point guidance for the year and also the commodity exposure. Our commodity exposure is quite ideal. We are mainly exposed to copper and 40% copper and then gold 15%. And along with our commitment, we are exiting coal by 2030. But then that part is replaced by increase in battery metals, which is just a collection of different minerals and also that we can do more in iron ore. But looking at this one is pretty good exposure for the future. We discussed about the restructuring. And the focus in '23 will be, we simplify our operations. We take the cost out of the back end. We've done most of the trimming what we need to do in the front end, regional organization. Now the focus is simplifying the way we operate. Roland will mention the principal company model. We are looking at everything. We are looking at consolidating operations to fewer locations. We are looking at having less legal entities, all that complexity has significant cost. And at the same time, we will have geo hubs for support functions for finance, HR and that type of thing. So it's really taking cost out of the back end. And I would say that most of the heavy lifting regarding restructuring is complete end of this year. We still are running off the NCA, but the internal restructuring should be more or less done end of the year. We discussed about speed. We want to read fast. Then it's all about uplifting our performance. Performance uplift is a focus then. Longer term, we are looking at totally new areas to grow. We have a fairly prominent place in the mining market and we will come to the competitive landscape in a minute. There might be limits how much we can grow in a few years of time. Then we are looking at total different avenues to grow, but not material handling. When you look at this one, CORE26, you might ask what's new there? It's actually how we execute it is new. We have a long-standing commitment for sustainability, between MissionZero, technology solutions to our customers and ESG. When I started, we didn't have a service business at all. Service was support function. Now services fully fledged business line with the very ambitious targets. And we are the partner for customer in their operations. And you need to bear in mind, money market is not CapEx market. It's OpEx market. In technology, we want to be #1 or #2 in everything where we play. Chris will go through the portfolio. In most areas, we are #1 or #2. In some areas, we still need to do better. But our starting point is really good. And then it's the performance uplift. With our minerals, there is no clear transition. In English language, you're not supposed to use double negatives, but you could say that for the minerals, there's no nothing. If you look at the model, look at this building, look at cars, look at everything with our minerals, there's no nothing. And this world is yet to realize how much minerals are needed for green transition. Green transition is talked about in politics, in different forms. But there's still a lack of realization, how much more minerals are needed to support that one. Lithium gets most of the attention when you talk about Green Energy Technologies and minerals. EV, Electric vehicles, lithium, that's the most common. What people focus on. But look at everything else. You have a copper, you have a cobalt, nickel. You have a whole variety of minerals that are needed for green transition, depending what is the application. And that's why I said that we are happy to be exposed to copper 40% because still the largest single mineral in the world with a huge deficit going forward is copper. You've seen these graphs in many publications, copper is the metal of electrification. And you look at how -- it's a multiuse commodity. And there are many things driving copper use, not only green transition. But if you look at looking at the future projections, there's not enough copper and copper plant is a huge process plant. Lithium plant is quite small. But if you look at huge process plants in Chile in other countries, they are massive CapEx investments. I need to double to build the deficit. So the history in simple terms, how many new mines are needed by 2030. And everybody is predicting that then the CapEx is skyrocketing because of this one. They're so small but it's not going to happen. This will not happen. You know it, I know it because of the licensing, permitting and also lack of appetite for growth CapEx by mining companies. There are some mining companies who are focusing growth, but many mining companies are also focused on value over volume. Meaning that the demand will support long-term price development. If you look at the demand pattern and deficit for supply. It's simple loss of economics. So world needs much more growth CapEx. And if you look at this estimate. This is also our estimate. And much of the CapEx in here is actually maintenance CapEx, it's not growth CapEx because all credits are declining you need to process more to get the same volume of concentrate out. So much of this, even this is maintenance CapEx, not growth. It means that the mining market is a great market long term for the next 5, 10, 15, 20 years. But I don't see megapom investment to cross a huge number of new plants coming up anytime in the near future. building a copper plant takes about 10 to 12 years. So if you think about 2030, there will be no surprises to anybody about copper plants ready for operation at a time. Everything what is available in 2030 is more or less under construction and the planning today. If they are not, it will not be there in 2030. And same for the smaller plants, lithium plant, maybe the cycle is 8 years. It's 2023. So we know all the future lithium plants by year 2030. So we know them. And we know it's not enough. And maybe also the point when you look -- when I saw the previous graph, the mining market is OpEx market. Sometimes people are obsessed about what's the CapEx plan, but mining is really OpEx market. If you look at then mining companies, spending OpEx, spending on CapEx, it's really OpEx market. And for our performance in the coming years, regardless of the curve of the CapEx investment, we will be doing right because we will focus on service. 2/3 of the business will be serviced. So we will be right. All these 3 main drivers support the mining market. Green transition is only one the middle class emergence of a middle class in population risk countries India, Indonesia, Bangladesh, you name it, population of which countries, and there's more and more middle class emerging, and all that is driving the mineral use, copper use. And then underlying industry challenge, as I said, much of the CapEx. Maintenance CapEx because all grades are getting worse. So you need to invest more processing to get the same volume of concentrate out. We invested a lot for the FLSmidth competence. And when we talk about FLSmidth,it's pit to plant. Basically, the core concentrator plant, processing plant. And we have a full range of products for all applications, all key commodities and all different types of ores. The FLSmidth is a very different in different operations. You need to have a full portfolio to be able to be a partner for customers to look at the optimization of the flowsheet. If you don't have full flowsheet, they will not talk to you, they will talk to somebody else. Then you might have individual product companies doing this and that, but partner for customers to look at how to optimize copper plant, coal plant, lithium plant, you need to have a full range of competencies. Chris will go through more in detail this one. Then if we talk about competition, there has been significant consolidation in the mining supplier space. Last one, our acquisition of Dusen Group Mining. So if you look at then -- the ones who have a full flowsheet, almost full flowsheet and then can support customers when they are running their operations, so service capability, optimization capability in the OpEx phase we have one competition and one competition only. In the CapEx phase, there are some individual product companies who are competing at a product basis. But most of the money market is going the direction that customers want to have partners designing the flowsheet EPCs but also suppliers. And then if there are like one of your products, they might use product company to complement your portfolio. But if I look at the table, our large customers whose on the table, there's only 2 options. The anti-barrier has been very significant for mining. There hasn't been any new players coming to mining. Customers is not very price sensitive either because its OpEx market is OpEx operation middle of Norway, in remote places. So entries huge. Nobody is making buy decisions. If somebody is selling a piece of product, 5% or the super cheap, it doesn't matter. It's all about how well you're able to run your operations, how well the suppliers are able to support you in wherever the mine is, what kind of repair center you have, what kind of capabilities, higher technical capabilities you have. Installed base is key. We are very customer-centric organization. Now we're also becoming more profit-centric, which I don't believe are contradicting each other because we are providing lots and lots of value to customers, and we can price that value. We have one of the largest installed base in the world in mining. We will talk about HBTR today. It takes 20 years to build the installed base. nothing happens in the market in a space of one year, 2 years, 5 years. 5 years is nothing in mining. It's all about historical installed base. The mining equipment, heavy equipment, they're running in 20 years, 30 years, and it takes such a long time to build the installed base. And once you have it, you can service that one, but also that then it means that you are present in those markets as the newcomer is really expense to build the presence, but we are present in most of the sites in the world, we are present in all of the markets. Strongest commodities, copper gold, nickel, zinc, lithium. We are fairly strong there. Iron ore, we could do more, but it's more market limitation and our own act, we have a good portfolio for iron ore. Looking at the growth markets. It seems that the North America is changing its attitude for licensing mining operations. They are positive talk in politics, relaxing licensing for critical commodities in North America. So we believe that North America, which is a really strong market for us will continue to grow. Our biggest market, South America is super important as well. Africa remains, of course, key mining market. One of our biggest growth markets is actually Central Asia. Kazakhstan, Uzbekistan, super important markets. We have a great market position in Kazakhstan, and that's really thoroughly mining country. There will be growth CapEx in Kazakhstan, and we are part of that. We announced something last year that we are a flowsheet supplier for a big plant. Kazakhstan is very important for us. Australia, we could do better. We have a good presence there, portfolio right within to over the market. Indonesia, Mongolia, and also that we are redefining strategic work with Chinese investors. Chinese investors are investing into mines a lot outside China. And we are defining strategy how we work with the main Chinese mining operators to get our fair share of the business. We are in the right market. It's absolutely great market. All the mega drivers, megatrends are supporting the miner market. And we have a unique position with our portfolio today. And Cruise awards that we added to SemGroup. HPI is a key product in our portfolio and a few others. Chris will go through that one. We actually have a best portfolio out to anybody in the mining market for the ones who are supplying the concentrator plant. And it's really in our hands to make most out of it. And on that note, I will give a floor to Chris.

Thank you, Mikko. Good morning. My name is Chris Reinbold, I'm leading our products business line here at FLSmidth, and it's a pleasure to be with you this morning. Look forward to giving you a little bit more information about our product business, how we operate Mikko and Roland shared a lot this morning about how we're structurally transforming. This has been going on now for several years. So this is not a new strategy that we're just launching today. It's a refinement of our strategy. In 2021 and 2022, we were launching an internal initiative we called productivity at work, which is changing the way we operate, and I'll talk more about that this morning. We're transforming the product portfolio. Roland talked about the non-core activities business. when we acquired Crop Mining Technologies, we went through a strategic portfolio review, moved some of those product areas and some legacy FLSmidth areas into non-core activities. I'm not involved with that in the products business line. But what's left in the products business line, we also did some portfolio pruning, some active decisions to discontinue offering some products. So it's not just all about the on-core activities. Even in the remaining products business line, we took a methodical approach. Within 100 days after the acquisition closure of September 1, we defined our active product portfolio so that we could make it clear to our customers and focus our resources internally on the products that we felt would be the best to go after each market. What we're doing now is we're taking some of the better attributes from each of the legacy FLSmidth round the legacy TK Mining technologies and bringing some of those together. So even if we discontinued one product or another, each of those products typically had some features that certain customers like or we thought were advantageous. So it's great to see our engineers get together formerly as competitors now his colleagues and say, "Hey, how does this work? What's better? And we're trying to implement some of those improvements into our products as we move forward." Aside from the product portfolio, if we talk about the way we operate, and I'll talk more about that in a minute, certainly, Mikko and Roland talked about this. It's really been a fundamental change in the way we execute orders and go to market. We're strengthening our ability to execute, deliver consistent margins not have big losses. Some of that is because we're going from as was described earlier, a project and product company to a product-focused company going forward. So inherently, we're reducing the risks, eliminating a lot of labor at site, eliminating a lot of civil work, a lot of big structural steel works, transitioning to a product-centric business where we can control the supply chain, the execution, the delivery of the product to the customer. These actions are helping us transform and strengthen the business and will lead to continued growth. Some of that growth you've not seen in 2022. It's been a little bit muted. Our underlying product business has seen significant top line order growth as well as order intake contribution margin expansion. That's been muted a bit by some of the TK acquisition impact, but also because we're still running off as Roland said, these legacy orders, and we will continue to see that reflected in the financial results through 2023 at least. I'm going to talk today about what Mikko described our leading product portfolio. We're quite proud of that. We've been in the business a long time, which is key in mining. We don't develop experience in customer acceptance overnight. We've got, we think, a leadership position in many products. We've got a full flowsheet leadership position. We've got process expertise, technology experts. Some of you may say, we had that 3 years ago. We had that 5 years ago, which is true. It's been strengthened now with the TK acquisition that I'll talk about, but we did have those things. So why were we underperforming? Why were we not living up to the potential that we had in FLSmidth and the mining capital business to deliver the margins that our shareholders expect. I would say this slide here is one of the most important in my presentation because this doesn't just talk about our great products and flowsheet that we have and that we had 3 or 5 years ago, but talks about how we're actually executing going to market. Some of these comments on here might seem like a small organizational change. Shouldn't have a big impact, but it's fundamentally changing our operating model, as Mikko described earlier, going to global P&L responsible product groups. That means that our product group managers in the product business line, they are basically managing the global business for the product lines in that product group. That means sourcing, it means proposal development, pricing decisions, how we execute, do we produce internally, do we rely on our third-party supply base. All of these things, they're running as their own fully global P&L business. That's dramatically different than how we operated even just a few years ago in FLSmidth. We were a region P&L organization which has some advantages and can work. But for our global product lines, it was really sub-optimizing what we were doing globally. We might be pricing very aggressively on a product in South America, same product we might be capturing a lot more value in North America. There was really, number one, not the financial transparency to really detect, and that's a lot of what Roland and the finance organization has helped us with. But now we're looking at our global demand for these products, so we can optimize our pricing, optimize our capacity and not take a suboptimal regional view of that. So it's not just a simple org change or just saying we're moving the P&L that actually has structural impacts. Mikko showed earlier, our core values that we're launching with the strategy plan here internally with our employees. Two of those are empowerment and accountability. They might seem obvious, but these actually were not core values that we had in our earlier strategy. There were words that we talked about. But with the model that we had, it was difficult, frankly, for people to be empowered in some cases, and to be accountable. So it's actually the operating model that was preventing our good people, well-intentioned people from really executing to their full potential. Now with this structure, with global P&L, global product groups, they're #1 empowered. They have all the resources. They have all of the freedom within our normal financial controls to operate, but they also have the accountability. We have the ability to track global profitability by product line, by product group, for product lines or product groups that are not performing, we can take the necessary turnaround actions to get them back on track. And that's a visibility that we didn't have even just about 2 years ago in FLSmidth. The other thing here is a product-centric global value chain approach. What does that mean? It's kind of a mouthful. But what it means is, in the past, in FLSmidth, the way we executed projects, we may win a project, for example, for a thickener in South America. Thickener, it's a large tank with a rake that rotates, separates, clarifies the solids from the liquids. From the outside, it doesn't look like there's a lot going on there, but there's actually a lot of technology built into that product. It is an important product for us. It's a leadership position product for us. But if we were in the past, executing one of those in South America, would be our local team taking care of that execution. They would quote, "The thickener, they would get some technical input from our product management experts in Salt Lake City. They would prepare the proposal sometimes cost plus, unfortunately, they would offer it to the customer. Then if they want it, then they would go out for bids on the material." As you can imagine, probably heavily South American supply base centric. And oftentimes, we ran into execution problems, overruns risk. And I'm not trying to denigrate our college in South America. It's our most important region from a demand perspective. We have a great team down there, but the operating model wasn't right. Same thing might be happening in Australia with that same product completely disconnected. So what's happening today? Today, we have all of those thickener orders. In this case, that product executed out of Salt Lake City. So the same engineers, the same procurement people, same designers working on those orders with our supply base. We get the repetition, we get the expertise. We don't make continued repetitive mistakes, and we can optimize where we want to sell these around the world with our limited capacity to meet the global demand. So the difference with the product central global value chain is we're establishing for each of these product lines and have been over the last 18 months, the preferred strategic suppliers for some of the key components globally, whether it's motors, drives, even structural steel fabrications. Obviously, looking at emerging market sourcing India, China, Vietnam, et cetera. But controlling that, again, centrally globally with a well thought-out process, not an ad hoc sub-optimized regional approach. So big transformational change for us. It's been a big transformation for our people and the leaders that we have now in these product group roles we think, are the right people to take us forward with that empowerment, with that accountability. Let me talk now about our product portfolio a bit. The dark blue here represents FLSmidth, and we're showing 2 other key competitors and then the rest are grouped together and others. So as Mikko said earlier, we believe we're #1 or #2 in many product areas. This is a reputation, a position that in mining is built up over decades, in some cases, many decades. So it's very difficult to penetrate some of these product areas if you're just developing a new product. We've tried that. We've had some success, but it takes a long time. The other thing you see in this graph, hopefully, is that we're strong, not only in one product area or a few, but across the whole flowsheet. And this is loosely from left to right depiction of the flowsheet from pit to plant that Mikko talked about or that you see depicted over here on our 3D MissionZero mine table. Through the TK Mining Technologies acquisition, we've really strengthened our position in some of these areas. If we talk about in-pit crushing and conveying where we're a market leader. We've become stronger with the TK Mining Technologies acquisition, similarly with overland conveyors -- in the case of Gyratory Crushers we're very strong in that with our legacy FLS offering even stronger now with the TK Mining technologies from a market share perspective. And then the high-pressure grinding roll or HPGR that you've likely heard about, it's a newer technology in our industry. It's only been around for a few decades. But it's preferred for certain ore types, certain mining circuit applications. We introduced this product about 10 years ago, really struggle to get traction in the market, very low market share. Now with the TK Mining Technologies acquisition, we went from almost nobody in that product line to the market leader. So that's a key core benefit we get with the HPGR technology resulting from that acquisition. And it's got a very significant aftermarket service potential as well. So this is our assessment of market share, but being #1 or 2 means more than just market share. It means how do the customers view us? Do they view our technology as an advantage for them? Do we get some favorability for that? Do we have a strong aftermarket service offering? Because these are the things that give us some pricing power in the marketplace. So we're not trying to be #1 or #2 just to beat our chest and for the sake of it. We do that because it's going to give us a better position when we're negotiating with our customers, when we're providing a full flowsheet offering where we can get the highest value possible out of the marketplace. And as Mikko said earlier, there's really only one other competitor in the industry that has a flowsheet that approaches the full capability that we have. And we're really seeing that now with the consolidation that's taken place in the industry. This is an example of a large copper processing plant. This is depiction of an actual project that we delivered a few years ago in Asia. So we provided all of the equipment that you see on the left of the screen here, which fills out this flowsheet, not every piece of equipment. There are a few third party bought outside pieces, but almost all the equipment and flowsheet we provided. It's impressive to go to the site and see all of the FLSmidth blue logos throughout. We obviously have a very strong service presence there and a very strong service potential going forward. What does this mean, though, with supplying these bundles of products, which gives us that overall full flowsheet offering. It's important to note that in we're not getting into big EPCM type project supply. So Mikko made this distinction earlier. We're not competing with our EPCM customers who are also partners with our mining customers. we don't want to do civil works. We don't want to have hundreds of people at site, which leads to a lot of cost overruns and disruptions. We don't want to have to be buying a lot of structural steel that might get delayed this site or be subject to big inflationary risks. So with our strategic product-centric global sourcing strategy, we're able to maintain the capacity from our supply base for our products. We're able to control material inflation even over the last 18 months, which has been the most erratic inflationary period in my 30-plus year career. We're able to mitigate that somewhat with this product-focused supply. We're able to do this across all of the key mineral flowsheets that Mikko talked about. Copper, iron ore, zinc and in particular, in a growing demand now is for the battery metals, including lithium. So active product management means, number one, having the financial transparency to really be able to track our product portfolio and look at what products are performing and which are not. Also service intensity here, which is really just a simple measure of what's our aftermarket service order activity in relation to our capital activity. So the product group managers that we have and the products business line, their primary goal is capital order intake revenue margin, of course. But they have a secondary goal, which is the total life cycle for their product. So our product crew manager for Mills is interested not only in our capital sales, but also working with Josh Meyer, who you'll hear from shortly, and his whole service team on the aftermarket. So if we get a big order for mill components like we did last year in South America, it's not just our service team going after that, it's our new product capital teams that are focused on going and convincing the customer that we're the right people to work with. So we are focusing the portfolio. Obviously, we want to increase the products where we're more profitable on the capital side, but we're also looking at the aftermarket potential more than we were in the past. One of the products I'll talk about later pumps, which wasn't probably getting enough focus in FLSmidth from the effect that the capital sales are going to have a derivative service potential going forward. We're much more attuned to that now. I'd like to talk for a few minutes about our milling and grinding product group. We believe we're the undisputed leader in million grinding. Prior to the TK Mining Technologies acquisition, we were very strong in the horizontal mills, the SAG and ball mills, which are workhorses in the industry. We have more 40-foot SAG mills installed around the world and all of our competition combined. We've also installed the world's largest capacity SAG mill. So we're definitely a strong player in that. We've been making these for many, many years, decades and have built up a strong reputation in the marketplace. With the acquisition of the TK Mining Technologies business, we bring the #1 player in high-pressure grinding rolls. So now we have both technologies. And you hear a lot in the market even you guys probably hear a lot about high pressure grinding roles and changing the grinding circuit and the advantages of that. That's true for certain ore types. It's true for certain mines, certain mining circuits, but not for all. SAG and Ball mills are still prevalent. They're going to be important for decades into the future, the advantage that we have, we have both technologies. So if it's a particular mining site where SAG and Ball mill circuit makes sense, we can be the leading provider of that. It's an HPGR circuit, HPGR with a Ball mill or HPGR in a pebble crushing circuit, we can also be the leader there. So we really think we are the one-stop shop for milling and grinding in addition with our vertical mills that time won't permit me to get into here, but we've got a lot of other technologies that make us that milling and grinding leader. Another area I'd like to talk about is our crushing portfolio. This is part of our crushing and screening product group. We've been making gyratory crushers in FLSmidth for over 100 years. So this is a product that was introduced in the early 1900s. Obviously, it's been updated over time. The capacities have grown, the safety features have grown we now have, we think, the industry-leading top service gyratory crusher which allows our mining customers to perform maintenance from the top of the gyratory crusher, and these are very big animals, not have to have people go underneath, which is may have some inherent safety risks. And then we've also introduced more recently a patented self-aligning main shaft insertion which allows our customers to more quickly and efficiently replace that main shaft when it becomes necessary. With the TK Mining Technologies portfolio addition, we bring the [indiscernible] product. This was a product that was quite popular in Australia and for underground mining. So we've even strengthened our leading gyratory crusher portfolio with this additional technology that we can offer. We talked about in-pit crushing and conveying before Mikko mentioned it. TK Mining Technologies was quite strong in this area. We had some experience as well in FLSmidth. What TK Mining technology brought is really they had developed a standardized modular approach to these crushing stations. So when you see one of these crushing stations like the photo on the screen here, it looks like a big project. But in reality, these are preengineered, preassembled modules that can come together at site lowering our risk profile, lowering the execution profile, fitting in with our model and strategy of a derisked portfolio where we can deliver higher margins. Today, with our strength in the in-pit crushing and conveying semi-mobile crushing plants where we think we're a leader, along with our product crushing technology that goes inside of it, the gyratory crusher, jaw crushers, ABON sizers. Together, this makes us very powerful. We had a press release 2 weeks ago where we announced we're supplying what will be the world's largest gyratory crusher, along with our crushing station to a leading copper miner in South America. We're very confident in that technology because it's a slight extrapolation of what we're producing. One of the growth areas that we really have potential to grow, and we talked earlier, Mikko indicated the mining market is expected to be relatively flat this year from our vantage point. But one area we do want to grow is in our pump cycle and valves business. This is one of the areas from the earlier market share chart where we can't claim we're #1 or #2. We think we're #2 to #3. We want to become a clear #2 with pumps for the mining industry. The good news is we think we have the right product. Our patented wearing technology, which allows our mining customers to adjust the pump while it's operating is preferred by our mining customers. It's a key technology. So we do not need to embark on a big R&D effort here or introduce new risky technology to the marketplace to grow. We also don't want to get into a price war. So the way we're going to grow here is we're putting resources out closer to our customers' mind sites, site salespeople, site service people to a much greater extent than what we had before. They're going to believe -- we believe, drive conversions of pumps from the competition to us, and then we're going to have the presence there to service those pumps. This is going to provide a significant service annuity for our service business line going forward, and we're quite excited about this area. One more example of the full flowsheet technology here is with a relevant growth area in the industry, Green Minerals getting a lot of attention, lithium. We're very active in lithium even though it's growing a lot, it's still small volume, obviously, relative to copper, some of the other minerals. We've got the products for this lithium industry. We've got the full flowsheet capability not completely full flowsheet in some of the lithium areas, but we're working to fill it out. But the other thing we have that we haven't talked about yet in Salt Lake City, we have a mineral testing research center. This is what we believe is an industry-leading OEM center where we, every day, are doing hundreds of ore sample testing for our clients. Assays for their own use, but it's also work we're doing to model new process pilot operations that could be used in their mind. So we have the metallurgists, the process experts to work with the ore samples from their specific prospective mine sites, help them model the right flowsheet to apply the right equipment for their application. There's a lot of interest in lithium. There's a lack of supply as Mikko indicated. Strong anticipated demand moving forward. We're active in all of these areas, whether it be hard rock, spodumene, whether it be clays in Nevada, for example, or whether it be the lithium brines and also the emerging DLE direct lithium extraction technologies. There's a lot of new start-up players in these areas. They're coming to FLSmidth They want to work with us because we have the technologies. We have the testing capability. We have some process expertise to marry with theirs and help the industry really ramp up lithium production and meet the needs of the electrification of the economy. So let me close with a few key summary messages for you. Number one, derisking the portfolio. That doesn't just mean moving some things over to non-core activities. It means in the remaining portfolio. Only working with products where we can not have on-site risk where we can build in standardization and repetition. We want to deliver consistent performance and improve margins. We're seeing that already with our operating model. You're not seeing it yet because it's being masked by legacy execution, TK integration costs, Russia wind-down costs, all of these things. But we're quite excited, quite confident that we're going to get to the targets long term that were shared this morning because of what we're seeing in our execution going forward. We do have significant growth potential yet. Even though we're a market leader in many of these areas, we're not just going to grow with the market. We're going to grow faster in pumps on the capital side, which is going to drive our service business. We also want to be a big player in emerging lithium growth demand, and we think we have the right technologies for that. And then finally, the repeated full flowsheet capability makes us one of a few key suppliers in the industry that our mining customers want to work with, need to work with and then working to make sure the underlying products are #1 or #2 in their space. Thank you for your attention. I look forward to talking to you more throughout the day. Now I'd like to turn it over to my colleague, Josh Meyer, who heads up our service business line.

Thank you very much, Chris. Hello, everyone. I recognize I'm what stands between you and lunch. So I'll try to keep this quick, and I'll try to also keep it informative. As Chris said, my name is Josh Meyer. I'm responsible for our service business line here at FLSmidth. And just, as Mikko said, the fact that I can say I'm responsible for running our service business line is a big change. And I'll highlight and underscore why that is so important in just a few minutes. Before, however, I get into the what we're doing or how we're doing it within the service business line. I want to talk quickly about why. Everyone talks about service in the mining industry and the importance of service. And I think everyone in this room understands fundamentally that service is the profitability driver for not only us but for most of our peers. However, it's not just the profitability that makes service so critical and why service is one of the 4 key focus areas of our new CORE26 strategy. It's also hands down the most stable part of the business. It's not like some industries countercyclical, however, it is far less cyclical than the capital business. At the same time, Chris and Mikko alluded to the tremendous potential that we have as a result of our position over many years as industry leader on the capital side of the business. that translates into the fact that it is also by far our largest opportunity. And lastly, as I'll highlight in just a little bit, it is the area where we can have the most impact on the industry and on our customers in terms of their own productivity, their own financial performance and their sustainability targets. So service is critical to who we are. And we've talked about service for a long time. But part of that transition or that journey of becoming a service-centric business started with convincing ourselves and every one of our colleagues within the company about why service is so critical. Our targets and what we believe to be a healthy balance for the business moving forward is about a 2/3 to 1/3 ratio between service and capital business. And that's the aspiration of our target over time is to maintain that mix in our revenue. So how do we get there? The path is relatively simple and straightforward. And I would argue that when you look at the name of our strategy, Core26, it applies absolutely fundamentally to the service business. And I'll share with you in the next slide some of the things we're doing to strengthen our core. We have a solid base. We have not executed well on it. So strengthening our core is at the foundation of the growth that will come in our service business. At the same time, Chris talked about how we start to migrate to a more service-centric business model. That's not just about having a service business line and putting the resources in place to create the service business, but it's about transforming the way we do business across the company. That's efficiencies in our supply chain. That's designing for serviceability. That's putting our focus, energy and effort on the products that generate the most service potential down the road. That transformation is well underway. That recognition is well underway, and it has broad-based implications for us as a company. And then lastly, I would love to tell you that our entire service portfolio is fantastic. Unfortunately, we have some dogs there as well. We're addressing those, and I'll talk to that in just a minute, but we can offset the pieces that we're going to prune with incremental growth to be able to provide overall growth in our service business to achieve those 2/3, 1/3 targets that I just mentioned. And at the same time, fundamentally, we believe, improve the profitability of our service business and of the company as a whole. And that comes from transforming the way that we go to market, and I'll talk to that in just a few moments. So Chris spent a lot of time on a slide that was very similar to this. And he underscored very clearly how transformative this business line migration or what Mikko referred to as an Atlas Copco model was for the capital business. I would argue that it is equally, if not more fundamental to the service business. Mikko said earlier to all of you that we had seen our service business as a support function. When I joined the company, I had regional presidents saying to me, well, we'll determine what we need for support. We'll tell you what we need from the service business. We've completely flipped that on its head. Those same regional presidents are now part of the service business line. We control from the supply chain and procurement all the way down to the sales and service execution teams led by those regions that are now the interface with customers. We've taken much of that control and centralized it so that we're now focusing on the profitable parts of our business. We're driving a consistent approach. We're fixing many of those process and efficiencies that Chris mentioned that came with a highly decentralized organizational structure. Now we're driving those efficiencies. We're gaining pricing controls, we're gaining supply chain controls that we never had under our prior organizational structure. This is truly transformative. And in the few months that we've already been operating under this structure, we have some very tangible examples of how it is impacting directly our business. Mikko alluded to and Roland alluded to some of the synergy savings and the focus we had on our regional organizations. We've already been able to execute on eliminating 800 synergy savings opportunities. We're executing on 800 headcounts of synergy savings on duplications of roles between the acquired TK Mining technologies and the historical FLS go-to-market organizations. At the same time, I mentioned that we are pruning some parts of our business. We have a tremendous number of headcounts and resources dedicated to basic labor services that we don't believe, we're convinced clearly had no significant value in the value chain, yet require tremendous costs and organizations to support. We're well on the path of executing on that exit. And you've already seen and you'll see further details in February when we release the details of our financials, we are already increasing the value capture by -- and that's demonstrated through the improved underlying margins in our service business. What does that really translate to? It means that we've been able to not only control our costs, but we've also been able to execute on pricing. Our prices have outpaced inflation, meaning we are capturing a larger portion of that value. And it is our intent moving forward not only to capture that through process controls, but by transforming the way we go to market. And I'll show you that in just a few moments. Okay. So we've created this new business model or this new business line. How does it look? Well, we've divided the business into 5 service groups or service areas. The first 2 on the left are what you would historically think of as a traditional parts businesses, right? So spare parts and consumables or what some might call ware parts. They're fundamentally different even though they're parts. So the left are all the bits and pieces that make up the machinery that we sell. It's a much more captive business, and it's an area where we haven't had tremendous process controls, and we haven't had a methodical approach to executing on the business. So simplification and standardization have a tremendous impact on that portion of our business. Consumables. If you think about are automobile, consumables would be tires and filters and windshield wipers. They are the things that are designed to wear out, they require regular replacement and they generate a tremendous opportunity. We have not seen that as a core part of our business in the past and have not invested. We're now bringing on capacity and capabilities to execute there. The third piece is professional services. This is the labor -- field labor and the service centers that essentially are aware we put our people in contact with our customers to be able to deliver on our commitments from a service perspective. Upgrades and retrofits is where we execute on planned work on existing installations. It's intended to improve the efficiencies of a customer's equipment or to extend the life. We've -- based on our project-based approach historically taken on very complex projects in this area. There's tremendous opportunity for us to improve our margins and our quality of our earnings through simplification and standardization in this space. And then lastly, I'll touch very briefly on digital and Mikko Tepponen will explain further after lunch. But we are now moving digital into the service business. and bundling it together with our service offerings to transform the way that we deliver on our service promises rather than seeing digital as a stand-alone hardware and software. So Chris is -- this is an extension of Chris' chart that showed that we are a market leader in essentially all product types across the flow sheet or in most product types across the flow sheet. As I mentioned earlier, the fact that we have had a clear market leadership position means that we also have a phenomenal installed base that generates phenomenal aftermarket opportunities. And the fact that our equipment stays in operation for 20, 30, 40 years means that we have tremendous potential from a single installation for many, many years. We have been underperforming in many regards in the capture of our service potential. I'm going to speak very briefly about a few examples in just a moment of how we take those different buckets of service groupings and marry them with these various product groups. It's the intersection of those service groups with an understanding of our position and the opportunities generated by each of these products that creates our ability to capture that potential. Now Mikko talked about and Chris talked about, and I just highlighted how the installed base is a tremendous benefit for us. Ironically, one of the areas where, as Chris highlighted, we don't have a clear market leadership, in fact, we have a relatively small portion of the overall capital business, is in pumps. Pumps unlike many other products are very captive in terms of the ability to capture the service business. Generally, the company that sells the capital or the pump also captures the aftermarket. Now pumps ironically and positively for us are unlike many of the other products in that they're high volume, and they can be changed out even in an existing line operation. So the path to growth for service on pumps comes through the work that Chris highlighted of our dedicated resources focus and the teams we've put in place to execute on pump installations. So growth and capital side of pumps generates our aftermarket opportunities. So not only are we investing in the ability to grow our capital pumps business, but we are also investing in the supply chain and the individuals needed in the field to be able to capture that business. The opposite extreme is SAG and Ball mills. Once a ball mill is installed, it doesn't get replaced. I don't think anyone here could find a single example globally of a mill that was changed out after installation. So once it's there, it's there for 20, 30, 40 years. We have clear market leadership in mills, yet we have tremendously underperformed in our capture of that installed base. Much of the opportunity in mills is generated by the mill liners. We have not seen mill liners as a core part of our business, and we have not invested in the way necessary to have the capacity and the capabilities and the IP to capture a large portion of mill lining. Over the last 6 months, we have invested in new facilities that will come online in 2023. We've established partnerships with key suppliers, and we brought on board expertise that will allow us to grow in this area. The last example I'll use is HPGRs. Chris and Mikko have talked about the HPGRs. There's been a lot of discussion in the market about HPGR technology as of late. And as Chris highlighted, this is an area that through the acquisition of TK Mining Technologies, we are now the clear market leader. What differentiates our ability to capture service potential in HPGRs is our service centers. The service centers are where the true execution of the aftermarket in HPGRs comes. We're going to be focusing on expanding and growing our service center competence. This is one of the key portions of our acquisition of TK Mining Technologies. The service center competence and capacity that we acquired is hands down the best in the industry. So while you may see maps of service centers from a whole variety of players, I think we can say very clearly that we have not only been exceptionally broad footprint that represents or overlaps with the potential and opportunities that Mikko talked about. But we have the competence and capacity that no one else has. And we can now leverage those -- that acquired capability to also benefit our historical FLS portfolio. There's a tremendous amount of capacity and capability that extends beyond HPGRs into the entirety of our flow sheet. And then I want to take you back to one of my opening comments about the opportunity that service generates for customer and for FLSmidth value generation. Simple example, continuing on HPGRs. If you look at the overall TCO, or total life cycle cost, of an HPGR over a 20-year lifespan. The initial CapEx spend represents a relatively small portion of the total cost of ownership. In fact, if we were to change the pricing of an HPGR up or down by 10%. It has rounded up to a 1% overall impact on TCO over that 20-year life cycle, has 0 obviously impact on energy consumption, 0 downstream impact on sustainability. All we've done is change the cost this much. But yet that's been a tremendous area of focus, not only for us but also for our customers, given the magnitude of that initial investment. But where we can really have an impact is in the aftermarket. It's in services. we use an example of HPGR Pro installation. This is an offering available through our upgrades and retrofits portfolio executed in our service centers. A single HPGR Pro installation can reduce the total cost of ownership over that 20-year life cycle by 12%. It can reduce energy consumption by 20%. And it can remove 2,800 tonnes of CO2 on an annual basis. That's the equivalent of taking 600 cars off of the road one single HPGR. If we're going to generate opportunities for partnership and loyalty from our customers, this is clearly where it comes. Now Chris also mentioned that in the past, we haven't always been maybe as systematic as we could be in our pricing. Historically, on the service business, we've done a lot of cost plus. How do our costs translate into these types of benefits. There's no connection. So we're increasingly migrating to capturing the value that we generate, at least a portion of that through our pricing models. So part of this business transformation is very largely about changing the way we go to market and migrating away from cost-plus pricing to value-based pricing and market-based pricing. And underpinning all of that, and Mikko Tepponen will talk to this in greater detail after lunch, is how we migrate from selling the hardware and software that makes up our tremendous digital portfolio, instead of selling it as a stand-alone offering, integrating it into our services. So now we've launched [indiscernible] in fall of last year, our PerformanceIQ portfolio. And essentially, what we've done is taken all of those dozens and dozens of independent individual digital offerings and pulled them together in ways that make sense for our customers that deliver value that allows us to capture a portion of that value and to ultimately be able to validate all of the things that we talked about earlier in terms of the savings that we generate and the benefits. So it starts with something as simple as providing in a clear, consistent way database information to allow decision-making by our customers, all the way up to some of the pilot projects that we have underway at the moment on real-time monitoring and dynamic adjustment to full flow sheets to optimize in the customers' operations. When we do that, we have transformed the business and become a clear partner for our customers. So similar to the others, I've got 3 key takeaways for you. The first is we have implemented a service-centric business model. We're well on the way of execution. We're already seeing in the very early stages clear examples of the benefits, and we expect that to continue for the foreseeable future. We have an enormous potential, driven by our clear leadership position on capital and the installed base that comes with it for growth. And we have very clear initiatives, priorities and focus on driving differentiation and value for our customers and then capturing a portion of that value to bring improved profitability for us as a company. So with that, I will hand it over to Jannick for the Q&A.

Thanks. So yes, I know under promised, over delivered. I know George actually promised you guys lunch. That's not going to happen, not right now, at least. So let's take time for a little bit of Q&A. So we go to lunch around 20 past and then we have 40 minutes of lunch. So let's get the first question asked. Someone has already? We'll start here, then same ones. So we have a mic, please.

A couple of questions to both of you. So you mentioned in lithium, you didn't have the complete flow yet. But you were working on getting it. Does that imply M&A? And if it does, which specific areas would you be looking at? And if it doesn't require M&A, so you don't control the full flow sheet, then, how are you going to work with partners on maybe bidding for complete installations. And then on the service business, a very good presentation. And this is said with all respect, but having followed FLSmidth for some 25 years, service has been in focus many, many, many times but not much happened. So what I wonder is, can you do something to show us some milestones that makes us certain that now you're actually on track to achieve your milestones. For example, I'm thinking about are you going to disclose, for example, your growth in the sale of pumps, which I understand is an important driver for the service business Will you disclose margins on the service business? And maybe referring to Slide 66 of your presentation where you showed the service potential just on your own installed base, can you put some more specific numbers on how much of that potential are you capturing today? And will it be possible to show us going forward and how that hopefully increases. Hope that...

[indiscernible].

I didn't know we were [indiscernible], it's actually just one.

I'll pick up the guidance comment, and I think we don't give details on the product line performance, but we can follow the product line performance by capital and by service. And then we can look at the margins. But there have been significant improvement in service margin in [indiscernible] business year-on-year. So very significant. So it's not a small number. So we can see that it's working. .

Do you want to take lithium first?

Yes, to your question, Lars, on lithium, there's -- I mean, we strive to be the full flow sheet provider for all of the minerals, but we're not doing that just dogmatically. I mean there are some product areas that might have a very low service potential. If we talk specifically about lithium, let's talk about lithium brine, for example, there's agitator tanks, very low service potential, not a lot of inherent technology there that might deliver the kind of returns we're looking for in capital. So it doesn't mean we have to provide every potential piece of equipment. But the important processing equipment we strive to provide. We just announced a couple of days ago, we had a press release indicating that we're going to be providing some pyro processing technology for a finished lithium maker. This is our pyro technology, preheater, kiln, cooler. This is important technology for spodumene and we've been playing in many projects in that area for the traditional lithium brines that sit there and evaporate, there's less potential for us, very little to no aftermarket. We have provided filter presses, clarifiers, other equipment in that area. And for the new DLE type technologies that are emerging and people are looking at, there's a lot of activity with our filter press technology that we're looking at. So if we're not -- if we don't deem it to be important to go after one of those particular product areas in the flow sheet, we are in discussions with some partners on, for example, some material handling equipment like conveyors, where we cannot take the risk on ourselves. There's not much aftermarket, but still be an important provider to those lithium miners.

On the service piece, I guess, I'll let Roland speak to or make the decisions down the road of what level of clarity or we provide on the details of the individual piece parts of our revenue and profitability. But as Mikko said, we've already demonstrated significant improvement. I think what changes in I figured it would potentially be you that asked that question, but it was on the minds of most everyone here is, all right, what's fundamentally different. And I think it ultimately boils down to 2 things: It's resources; and its execution. And if I look at -- what is -- what do I mean by that? When I first got here middle of last year, almost immediately, I was became aware of a project of quite significant project where we had delivered a tremendous amount of capital equipment, and it took us over 6 months to provide suggested part stocking list and pricing. Can we really say we were a service-focused company if that's the case? And when I asked who's responsible for that, we had asked Chris' team in the global product line to essentially put together those parts lists and manuals as part of their spare time. We've now put dedicated individuals and resources in place whose sole focus it is to not only create those manual parts list and pricing. But to do that, way in advance of the delivery of the equipment. And it starts with the mindset shift and then getting those resources in place to be able to deliver that we have not done historically. So we've talked about it a lot in the past, but we didn't necessarily align our resource allocations or our focus to the execution of those things. So that's fundamentally the change that's happened is we've started to lead the discussion and the decision with how is this generating service potential? What are we doing to capture the service opportunities that this drives, whereas in the past, as was alluded to earlier, we talked about how do we capture this great big project opportunity? And then how do we project manage it. That's not the one the thing that's driving long-term profitability and customer intimacy.

There's a short follow-up on that.

In the microphone, please. And a short one there. We need other people as well.

Super shortly.

Good.

So I know lead times are long, but is it possible to measure your service potential capture on projects you won the last year versus your total base and is the number higher?

We've seen improvements already in the back half of this year. As you alluded to, supply chains were a limiting factor throughout part of the year. We're -- based on our current backlogs and our current win rates, we believe that by the end of this year, we will see significant improvements in our market capture share of wallet performance in -- across most of our customers.

And with that, I'll follow up on a question from online. Someone actually asking specifically about your service penetration in the acquired HPGR installed base. So how do you manage to fend off the rising competition in this market? How do you ensure you get the capture as everyone else?

So I mentioned -- and I'll let Chris complement this, if you'd like. But I mentioned earlier that service centers are a clear differentiator in this area. There's tremendous opportunity on HPGRs to do role refurbishments. So our service centers have unique capability and competence to be able to take the roles, rebuild them, re-mill them, re-tap them, put in and optimize the studs. We have hands down. The deepest know-how and knowledge of the HPGR technology, which allows us to also then optimize the studs themselves or the ware parts that go into those roles so that we can generate the best performance for our customers. So having that serve that installed capacity in our service centers and then having -- marrying that with the know-how of the HPGR technology and how it operates ensures that we capture the vast majority of the opportunity created by the HPGR products. I mentioned we do have a couple of areas in the world where we're investing in growth, where our service center competence or capacity needs to catch up with the growing installed base. But for the most part, where we have installed base, we also have tremendous service center capabilities that no one else has.

Good. Yes. Anyone here, Claus, you were first and fast.

Claus Almer from Nordea. A question to both you and Chris and Josh, sorry. When you talk to the clients, so the miners how is [indiscernible] being perceived? And all those changes you have talked about today is that well perceived by the clients or it's still a lot of work on the other side? That will be the first one.

I think on the capital side, our -- first of all, we're humble when we talk with our customers. We've got a lot of competition in the industry, but we do have situation with our installed base and with our full flow sheet capability and desirable products that does put us in an advantageous position, especially over the last couple of years, where there were a lot of supply disruptions due to COVID, there was a ramp-up in CapEx demand in the mining industry. Part of the challenge that our customers were having was how quickly could they get equipment, how quickly could they get new mills, how quickly could they get new thickeners, et cetera? So our changing strategy, which really started in 2021 to go to a global product management with a product-centric supply chain strategy paid off for us because we were working with suppliers continuously building up additional strategic suppliers so that we had -- we were getting preferential capacity, preferential deliveries in some cases, which allowed us to be more valuable to our mining customers to be able to get them the equipment faster. So that's just an ongoing activity when you have a globally managed product line with procurement, engineering, sitting all together in 1 P&L, the velocity that they can perform those kind of actions and transactions much faster than traditional type of projects set up. So I think our mining customers view FLSmidth as a quality supplier with good technology. We're not perfect. For sure, we have issues. We sometimes have late deliveries. We sometimes have issue with the product that need to be overcome. I think how we try to differentiate ourselves is how we respond to those issues, to respond quickly with our service capability with our engineering technology experts to try to address the issue in the field. So they view us as somebody I think, that can help them achieve their goals, which are higher output, better efficiency, better productivity. I think we are -- we believe we're uniquely positioned to help our customers in that regard. Many of them tell us that. They also like some of our new emerging technologies, even though there's a relatively slow adoption rate in this industry for new technologies, it's quite conservative. But some of the novel technologies we have, for example, in fast flotation, our reflux technologies are very appealing to our mining customers who are looking in how to get that higher output. And then coming back to the question on HPGR maybe just quickly because it ties into that. As an OEM, the way we stay ahead of other people coming in and getting our aftermarket consumables business and ware business, we have to continue to innovate and bring new features to the product. So if we talk specifically about the HPGR Pro, that's a relatively new model that our colleagues from the former TK Mining technologies we're introducing, and now we have in the portfolio. It has rotating side plates. It's got a different stud layout. It's got a stud detection system. These are all things that will help generate the improved output productivity that Josh mentioned on the slide earlier. Similarly, our Nelson gold concentrators staying ahead of the curve with new liners for separating the minerals that perform better. This is how we stay ahead of other people that are trying to come in and take our aftermarket consumable business.

If I may be a little bit rude and as Lars also said, we've heard this many times. And if I've asked you 3 years ago, if you're part of -- if you're [indiscernible] at that time, the reply was probably a little bit of the same. So I'm more trying to address what is actually the minus -- the reaction to minus with all the changes you have done for the last couple of years. How do you see this reflecting in order intake or conversations and so on?

I might actually take the NCA question because how we made a decision regarding your portfolio because we are, of course, exiting some products, what the same customers have that Chris and Josh are serving. So late September, I made a world tour before we announced the decision, I went to Australia, I went to South America, I spoke with all key players. I explained the reasons for our customer top management for exiting this business, offered our support in migrating to other suppliers and at the same time, basically we're a firm with the kind of decision that we need to exit this business. So we actually took that discussion prior to the announcement face-to-face with the customers top management. We continue to support them in migrating to other suppliers still this year, and we believe that they have been happy with the support so far.

In the same approach applies to the exit of basic labor services, for example. So as Mikko said, nobody likes to hear, no customer likes to hear you're exiting a business. The key to that is how you transition and provide ongoing support or alternatives so that they can continue to operate that portion of their business seamlessly. So we've put a tremendous amount of focus on, not only NCA, but the other parts of the business that we are reducing or exiting. So far, our customer reception has been I think, quite positive, particularly as we have generated or have been able to demonstrate that we're redirecting that focus to areas that have much bigger impacts on their operations. So specifically intangibly we haven't seen drop-offs. In fact, we've seen increases -- significant increases in order intake in our backlog. It isn't impacting in any negative way our overall successes with customers.

And then -- sorry, and then looking at the food on the street. So those who are actually going to execute on this, so what's their reactions? Are they buying in to the new thinking? It's a totally different way of working, I guess. .

Lars, did you speak to him about the cultural journey? This is -- this is obviously -- it is a cultural journey. And I mentioned at the beginning, the 2/3, 1/3 split and helping people understand why that's so fundamental. While we talked about service, and we talked about getting back to our core for a while, I would argue that a lot of the team didn't quite understand what that meant. And you can't just say it once and it sinks in, and everybody knows what they need to do. So we've put a lot of effort and energy also on bringing the team on board. We will continue to do so. We're doing a lot of internal strategy training and explanation at the moment and over the coming months. But broadly, I would say, yes, the employees and the field force that the sharp end of the stick with our customers are on board and are supportive of the journey. They have to deal with some of those hard discussions. So sometimes, there's a course correction opportunities when someone takes a beating for something that maybe they weren't prepared to explain. We go back a system, as Mikko said, we'll work with them and their customers to help reinforce the message and explain our transition path. And that support has been appreciated and has worked in continuing with customer satisfaction and loyalty. So long way of saying, yes, we're putting a lot of effort on bringing our employees and team members along with us on this journey. And so far, they seem to be accompanying it well.

And on that short answer. We unfortunately have to go to break. Time is running when you're having fun. So practicalities here will be back at 1:00, so you have around 40 minutes. When you get out, at least this is not for those in the virtual presence, this is at least those for the room. When you walk down the stairs where we came, just do a quick u-turn, you walk onto the stairs, there's a restaurant. Please help yourself in the buffet. There's a dedicated room next to the buffet. They should be signed saying it's for FLSmidth Capital Markets Day, hopefully, otherwise, it's called I think it's even called the cattle room, so have fun in there. But enjoy your lunch. And after lunch, we'll dive into how digital and our operations, they support our mining business, and then we'll deep dive into Cement as well. So see you in 40 minutes sharp. [Break]

Welcome back, everybody, from lunch. My name is Mikko Tepponen. I'm the Chief Digital Officer, and I will talk to you how digital supports our ambitions. With FLSmidth, we've been delivering digital solutions already for quite some time. I think our first automation solution was delivered in 1969. We've continued to deliver those digital capabilities for our customers ever since. It's, however, been the last couple of years where we sort of really emphasized, lifted up at digital as a strategic priority, continue to invest into it through acquisitions as well as the building internal capabilities to the point that nowadays, it's 50% of our R&D investments that have our digital by nature or other R&D development that have a critical digital component into them. The mining industry as such is a laggard when it comes down to digital maturity. Miners are conservative and not that eager to implement new solutions. However, it's also in their priorities at the moment. They need to get much more out of production. They need to also move some of their operations from those remote mine sites into a central setup. And that is where we, FLSmidth, come to play. We've also been on a journey where we've started off much more as a technology player that, okay, how do we build this technology, digital technology, what does it mean? And it's really been the last couple of years when we focus on how do we make money out of it, how do we turn that into commercial opportunities. Josh mentioned earlier, the PerformanceIQ and our launch of it. That is really about how does digital churn into supporting our business. Chris mentioned that we are a full flow sheet provider. It's been talked a couple of times here and there as well. We are that as well when it comes down to digital. There was, I think, 15 years ago, Apple launch, there's an app for that. If it's a mining application from pit to plant, there's an app for that. And fortunately, it has the capability of providing that. And that is really all about providing our customers the operational insights, the reliability solutions, the optimization solutions. Those are the apps that we want to provide for the industry. And as you can see, that's what we have. We've taken a very conscious approach that we're not a platform provider. We don't want to provide our customers a digital platform like some others. We are the app provider. And how we deliver those applications is that we deliver them as stand-alone solutions for our customers, also into our competitors' equipment at times, but most importantly, like just mentioned earlier, we're combining and bundling them with the traditional services so that we are bundling the digital capabilities with those professional services parts to really drive the value home for our customers. It is oftentimes the customer doesn't need another shiny tool telling this is what's going on in your production. They need the actions to really drive those productivity gains out. We're not doing that alone. We focused on acquisitions and continue to do that. In 2020, we acquired KnowledgeScape for advanced sensors and optimization. Now as mentioned earlier, with thyssenkrupp Mining, we've sort of added digital capabilities, for example -- as an example here on conveying and many other things, HPGR as well. And we're working with technology partnerships. Microsoft as a great example, we're working with their cloud, data, artificial intelligence solutions. And AVEVA, those who've been following mining industry for a while know that a lot of our mining customers, they are using AVEVA and especially OSIsoft that AVEVA has acquired as core of their data operations. We're putting our applications on top of their platform so they can be sort of delivered for our customers faster, more cyber secure. They're kind of are in our sort of world, the App Store for us. Let's look at perhaps 2 concrete examples on this. And these are kind of showing that there's massive potential around this topic when it comes down to our customers and both for ourselves as well. On the left-hand side here, you see the thickener example. Chris mentioned thickeners as one part of our flow sheet as a big pool with the rake. That big pool with the rake can be run in many different ways. Here's an example for one single installation, just one of those big pools, what it means for the customer. If we optimize the operation of that thickener, we can really increase the water recovery, significantly 14% here, leading into EUR 100-plus million annual savings for our customers. That 14% might be an arbitrary number, what does it mean that for this 1 single piece of installation means 2% of the annual household water consumption of all of Denmark. So the potential both for sustainability and profitability for the customers are huge. What does it mean for us FLSmidth? We have less than 5% of our 2,000-plus of those thickness that we have globally available come today with this optimization capability. As we move forward, we intend to utilize those digital capabilities to continue and bundle, sell those for our customers combined with the services that we offer. We've heard about pumps also from Josh and Chris throughout. We want to grow our installed base, our market share. Again, there's an app for that. There's an app for our customers to monitor how the pumps are operating -- are they operating to the optimal. But most importantly, there's the same app we can use internally, both for our field technicians as well as our salespeople to really drive and see how can they help their customers better. We're really building on that customer intimacy. So it can be a very direct customer benefit or it can be more of an internal benefit that we're aiming for. Digital has also an internal component. You heard Mikko talk about us simplifying being more streamlined both of our processes and our operations. We need to decomplex. We need to be faster, speed corrects mistakes and so forth. From a process and IT perspective, we are really driving home the new operating model and that transformation. Driving on those global processes means that we need to drastically simplify our IT landscape, so really reducing how we operate. And that is just kind of, of course, we can reduce the IT systems. What does that mean? A very practical example here is that we've -- from '21 to '22, drastically reduced the time it takes ourselves to quote on a spare part. Why is that important? It's because if the faster your quote is part, the more likely you are to actually win the order from the customer. Really sort of hitting that heat rate, improving that and making us be more efficient and in the same time, actually be much more customer-centric and serve our customers better. No discussion around digital is complete if we don't talk about the risks that is kind of inherent into it as well. Cybersecurity, of course, being the biggest one of them. And that is really where a lot of times our customers and ourselves are facing this, the ransomware attacks, everything else, you all read and heard about all of these. For us, cyber security really comes in 2 ways. One is that we need to secure both the equipment that we deliver for our customers because that equipment has some brains into it. There's a computer always that goes with all of these pieces of equipment that we deliver for our customers. but also the digital solutions that we're just talking about. So how do we secure that? We have implemented cyber security design principles, and we're comprehending to this highest industry standard and certification, which is the IEC 62443. Besides the external part, of course, cyber security is also very much about protecting FLSmidth as a company. And that continues through the awareness, continuing implementing network segmentation, zero-trust policy and so forth and so forth. Again, as usual, as my counterpart previously, 3 key takeaways. We are indeed digitalizing the entire flow sheet. But what is most important there is we're bundling those digital solutions with our traditional services to really give the customer the productivity gains. Those productivity gains are very, very tangible for our customers. They're -- in many cases, they're the fastest way for the customers to get sustainability, productivity gains is through the digital solutions. So we are working on driving the sustainability, profitability, efficiency targets for our customers. And we, as FLSmidth, intend to, of course, benefit from growing that digital capability with our customers. Finally, we're simplifying and streamlining both the IT and processes in FLSmidth to really drive the operational performance and also that we can serve our customers faster and better. And with that, I hand it over to my colleague Asger, to talk to you about operations. Thank you.

Thank you, Mikko. So welcome to operations, and I'll spend some minutes on explaining how we see operations and supply chain, not only as a differentiator. You already heard Chris and Josh allude to some of the things that we are working on the business lines, but also that how we see us as the custodians of the customer experience. So it's about lead time, it's about type of delivery and full on time our quality. And then again, I mean, that the customers are in contact with us through mobile apps, as you've also seen with Mikko, our Intellect system. So if you're not doing things as they would like to, then we instantly know about it. FLSmidth, and Mikko talked to the change we are undergoing from engineering to a product technology. We have more than 125,000 deliveries a year to customers. that's 13 to 14 each and every hour around the clock. And mines and cement plant, they are not located the most touristic places in the world. So it's really in our DNA to deliver in the outskirts of mountains, desserts, et cetera. And even through COVID, we have a DIFOT target of 90%, we did not take that much of a hit and this is beating industry best practice. A few years ago, when we boldly said that we would have our supplier base from 15,000 to 7,500. There were some smiles and business was shaking ahead, 1,450 suppliers make 90% of our spend, 1,490 -- 1,450 sorry. And that enabled us to work strategically with our suppliers, share capacity planning, some of the large fabrication suppliers, we can deploy our own people. So we have an in-house office there with suppliers. And also through a situation with a very fluctuating raw material prices, we're able to control much better and also put bots in. So we have Robots Digital Solutions. So preferred suppliers, as Chris talked to you about, then if they are a little bit bold during an inflationary pressure. We take them off the robot and then I get the most [ hunted ] guy in the world. And then they can come back once we sort of have settled things. So it's a different way of working. And then at the same time, we were 1 of the first to embed near-shoring. So bringing back production to South America, U.S., Europe, Denmark, instead of having a single source to China and India and thereby also standing on a few more legs instead of just one. And that also means that we've been able to -- you see that more in a few weeks that -- get our freight logistics cost. We peaked at around 5.5% during the most terminal times. And now we're back to our '19 reference here around 5% or 4% of our revenue for that. And we often work very closely with our customers because we offer sometimes better solutions than their normal shippers. So it's really about -- I mean, an unrest was natural disasters. We are a global company, so we'll always be exposed to changes having a very resilient supply chain and working very closely with our great colleagues in the factories. So during China lockdown, we had a close in Qingdao of maximum 10 days in China. And in India of three flagship factories there, a maximum of 21 days. I will give you a glimpse into the machine room, in a few seconds, but to understand that the key priorities for our supply chain going forward to support particularly our service growth, but also the product part is to safeguard the supply chain. We will continue to have a target of 90% of our DIFOT. We will continue to digitalize our logistics operations. We work with as an example, the [ LAMA ] software, where we can put all historical orders for the past 5 years in and estimated orders for the next years and then see how we can optimize it. And it's not a linear optimization. You can optimize on speed, on price, congestions and then see which shippers offer the best opportunities, and we work with 2, 3 global ones. And then the regional execution is empowered to work with another 4 to 6 months, so we at all times conserves our customers. And again, driving synergies. Also with the TK integration, reduce our standard cost. We use our factories as the driver of standardization and modernization. And then again, having the opportunity to support the growth. You heard Chris and Josh, we want to grow in [ midline ]. We want to grow on pumps. And there, we need to have an agile, flexible supply chain to support that growth at lowest possible cost so that there's more in the pocket for us. And during the aftermath of COVID, the inflational pressure, we've developed price baskets free to [indiscernible] components and products. So we, on a daily basis can see the components of rubber, copper, steel, freight, logistics, warehousing, how that match up and then we can take decisions -- proactive decision ahead of the game instead of sitting afterwards 1, 2 months after, after the fact, and you can do nothing about it. So the factors. They serve as a gate process for in-sourcing, outsourcing, make buy. Approximately 40% of our activities, one way or the other, will hit our factory supply chain. We call it asset light, but we also call it asset right. So what is not strategic for us, we outsource. There are so many -- there are thousands of [ Max Miller ] and mearsk line in the world with truck suppliers, et cetera. I mean we don't need to have all those very fancy, very expensive machine, we can supply those components being machine with the suppliers next door. But when it comes to support the growth of pumps, There, we have enhanced our manufacturing facilities in Tucson, Arizona to support the growth there, and we made sure that our service centers and our flagship factories and regions can do assembly of pumps and testing. And then as Josh said, we are building the world's most advanced automatic mill liner factory in Chile as we speak, and that will be up running here in a few months' time. So these are an example on how we see it not only at asset light, but asset right. And both for mining and for cement, sustainability is on top of the mind, and that also goes for us. And by 2025, 30% of our supplier spend will have signed to the science-based target. And it is easier to work with a little less than 1,500 suppliers than 15,000 when you work on these things. So if I should sum it up, a truly global manufacturing setup, where we are situated around the various geographies for flexibility, continue to drive efficiencies, modularization, standardization, the synergy realization that [indiscernible] and also Chris has just talked about for the TK and then having the sustainability mindset on top of our head. Thank you.

Thank you, Oscar. And with that, we'll move over to a short Q&A with Asger and Mikko as well on digital. So anyone daring a question, otherwise, we'll take one from online. There's one over here. We'll go that.

[ Christian Hendrik ] from Goldman Sachs. I wanted to ask around the integration of TK Mining. Obviously, some of the major challenges there perhaps are integrating the logistics positions and the sort of service center map that's been discussed earlier this morning. Can you talk about some of the biggest benefits of that integration that you've seen to date? And then also what you see as the biggest hurdles in the coming quarters?

What I said before 1,000 for suppliers, that's post the selection of the suppliers. We spent the first 2 weeks together with colleagues thyssenkrupp Group on defining, deciding on the suppliers to be because you have a small window of opportunity before the suppliers get a little bit sort of on their back up being too assured that they are the continued, and we actually had a very healthy influx to the FLSmidth supplier base from the TK supplier base.

And I can actually continue on even though the question was not on the digital, but just a brief comment on that is that equally on the integration of TK Mining with FLSmidth opens an opportunity. We talk a lot about streamlining and having a harmonization of the IT landscape and the systems and the solutions and whatnot. This is now the perfect time to also sort of streamline and consolidate on that system base.

I'll take one question from the online. So how is significant is digital spending for your revenues today? So you flagged the 50% of spend go on R&D going into digital components. But how big is it -- how big is the potential? Are you going to overtake all of Georgia's business? Or how is this going to fly?

it is -- of course, the main purpose continues to be on supporting how do we grow the service business and the products business and our ongoing business. But it is sort of, I would say, significant already. It is over DKK 1 billion when it comes down to purely digital. And even though that might say that, okay, it's a small percentage of our overall revenue, it is still kind of for an industrial player quite significant. So -- and it will continue to grow, both from the perspective of that digital growing on its own as well as then most importantly, really to support the sort of the entire business.

Yes. We have a question from [indiscernible]

Vlad Sergievskii, Bank of America. When you acquired thyssenkrupp Group, you obviously acquired a sizable project business, which is working through multi-lump sum contracts. Originally, obviously, those projects were won by thyssenkrupp, and therefore, designed on thyssenkrupp systems and engineering, procurement, et cetera, et cetera. How are you managing those? Are you using thyssenkrupp systems or you migrate them to your own?

Where the orders have been placed, then of course, we continue with those suppliers. And we also took a good chunk in of the TK suppliers in certain geographies where that is sort of their way of proving to us that they can also supply for the future.

And from the systems perspective, we are heavily integrating. There's only one common way of working as we move forward. Chris and Josh both alluded to that we have really one team going forward. And that is also how we work on the systems side. We are streamlining heavily. That's why I'm saying that we're moving from 1,000 application that includes also the acquired [indiscernible] application landscape. So we only work in one way as we move forward.

Yes? Claus Almer?

A question regarding all these suppliers, both the FLS suppliers, but also coming from TK. Have you seen any major differences in the sourcing prices? And maybe a second question to that, a bigger volume doesn't mean bigger discounts?

I mean I think TK had a more luxury in our mindset, more luxurious lifestyle and the indirect suppliers where they had what we had Index 10, where we had index 4 to 5. So there, there are some good opportunities in aligning on the indirect suppliers. That's for us the usual light gas rental, but also we see paint fasteners as kind of indirect service categories because it's a very commoditized categories. Then on the direct, it's a more social. So there were a few suppliers where we had carefully [indiscernible] introduce new ones because we actually shared the 2 of us were quite big. But in general, it's been a -- it's been a good opportunity for optimizing the business.

And do you then get bigger volume discount?

Yes.

That was a very subtle, yes. I'll take one here from online. So there's obviously been -- or is a lot of talk about energy crisis. There's been a lot of concerns from the supplier and how we expose to that. Certainly, you can say, Russia gas completely cut off. So you can talk a little bit about how are risk approach to the supply chain, as you also mentioned a little bit about near shoring. So the significance of the components of the raw mats, the suppliers and logistics that intertwined in this sort of macroeconomic turmoil and political terminal win.

But as again, I mean, you say, I mean, really cutting down to less than 1,500 for 90% of the spend. That's one risk mitigating action because, I mean, you get to know them. You have people there, you can see it, and it's -- I mean, the worst thing -- I mean that's when people certainly are [barely off balance], I mean, so we do whatever we can do to check. We have all kind of financial checks. Also online get all our inputs and everything is digitalized. So people working with those supplier groups, they can on a click on the iPad, see on a day-to-day basis, how we're actually doing and how we're performing to the benchmark. We have this PPV that will measure each and every month's purchase price variance. So we can see what have we paid the past 3 years for certain components, what do we paying now should wait a little bit, should we close immediately, and we can see how the energy prices move up and down. And then, of course, when we all could listen and read in the [indiscernible] 6 months ago that Germany, we go completely into black. Then we benefit from having more feed around that we have a more regionalized approach to our supplier footprint. So then we, of course, work with suppliers to awards being too dependent on areas. And when you're in South America or even the states. I mean the kind of energy crisis we talk about almost eaten every day here in Europe. I mean, that's not even on the radar there. So I mean, there are different issues. On the inflationary pressure, I mean, we're used to working in Chile, Brazil, some of the Asian countries where they're used to having inflation between 5% and 15%. I mean, Turkey lately is also in the important content for us for sourcing and they have inflation, I mean, to [indiscernible] top. So it's also -- it was about balancing and mitigating what you do.

Yes. Anyone else? Otherwise, I think we'll time for -- Vlad, you want to follow up?