Metso Oyj (METSO) Earnings Call Transcript & Summary

Good afternoon or good morning, everybody. This is Juha from Metso Outotec's Investor Relations. And with me are our President and CEO, Pekka Vauramo; and CFO, Eeva Sipilä. It is our pleasure to present today Metso Outotec's first half year report, which was out this morning. And as you have probably seen, the numbers we are presenting today are somewhat unusual. There are IFRS numbers. There are pro forma combined figures, and then also legacy Metso Minerals and Outotec segment numbers. Our half year report includes more information on accounting principles, and Eeva will also provide some insight on those as well in her presentation. After the presentation, we'll have the Q&A, and we'll try to limit the length of this call to 60 minutes. With these words, we are ready to start, and I'll hand over to, Pekka. Please go ahead.

Okay. Thank you, Juha, and welcome from my behalf as well to this second quarter results briefing. We did preannounce our results just over a week ago, a week ago, so those numbers are known and unchanged as such. And we can say that the overall performance during this quarter, which was exceptional in many ways, both external reasons and internal reasons, we can be very satisfied on our performance. It was exceptional, of course, because of the COVID-19, but it was exceptional also because we closed the Metso Outotec transaction and the Neles spin-off was also made at the same time and Neles continues now as an independent company. COVID-19 caused many things in all of our lives and businesses, including Metso and Outotec. I'll talk about Metso and Outotec separately still because second quarter, we operated as 2 separate companies and competing companies. We only closed the transaction on the last day of the second quarter. But customer service and customer communication was challenged in many ways. There were travel restrictions. There were lockdowns of various degrees in different countries where we operate. And we've been very innovative in creating new ways of communicating or taking a virtual means of communicating with our customers even in complicated technical issues and matters and develop some new tools to provide backup training and do our sales work and marketing work. Really good progress in this front. The integration plan that we had nearly 12 months' time to do, we started it right away on 1st of July, and we are well up to speed with that one. There's some updates at the end of the presentation on that one, and we also announced some new targets on the synergies. The numbers, as such, orders for Metso Outotec combined, EUR 976 million; sales, EUR 1.47 billion, both are considering the times that we live, they are good, solid numbers. Our businesses were affected on -- when it comes to orders in different ways. I'll come back to that one a bit later. But good execution of our order backlog is visible in our sales number. That good execution is also visible in our profit numbers, but even more so, I would highlight here that we were very fast and decisive when we did put both temporary and some permanent cost-saving measures in place. We were so fast that we did hit almost the 100% run rate on 1st of April. We started the actions second half of March, and that is visible in our results now. We also have now the balance sheet, opening balance sheet for -- and there are some of the balance sheet items. Eeva will go through them more in detail. But then on COVID, particularly, the impact was, of course, negative, but maybe not as negative on our business as many of the other companies have reported. Yes, we suffered from lockdowns and travel restrictions, and that affected our way of working with customers , our means of serving customers and changed some of the things as it limited our -- the mobility, both sales and service workforce. Aggregates equipment was most affected. We've said in previous communications that between second half of March and first half of April, the order intake was 0, if not even negative because there were some cancellations as well. But the activity -- order activity has picked up very nicely towards end of the June. And currently, we are at about 75% level of activity, order activity in there, and we can expect that trend to continue, provided, of course, that the COVID situation doesn't get much more severe than where we are at this moment globally and in our main markets for that one. We noticed also that decision-making on bigger projects, whether capital equipment greenfields or more complicated service upgrades and modifications has slowed down, and that is visible in some parts of the business and some segments and their order intake, particularly in Metals, to some extent, in Outotec's Minerals processing. However, the mining equipment market, which is typically Metso Minerals business that has been very active, and we have booked several smaller orders, primarily from brownfield, some of them are coming from greenfield. So they are parts of greenfield projects that we have won. And this is what we were also indicating throughout the quarter that as far as Metso Minerals is concerned, we really don't see the slowdown in mining, and that really was the case during the second quarter. Despite of some difficulties, we saw very good and strong demand for spare parts and consumables throughout the quarter and really had good results in this part, and that, of course, supported our results. We, of course, know that these restrictions, they will continue in the second quarter, even though a number of closed mines is getting smaller and smaller, and we were not really that severely impacted by mine closures. As such, only a small percentage of mines, in fact, of total were closed, and the shutdown periods have been reasonably short from 2 to 4 to 6 weeks. That's the normal rate. Some, of course, for other reasons, have continued to -- their own shutdowns, but not necessarily because of COVID. So this is where we are. We still see and feel the impact of it. It's not at all over. There are signs of COVID getting into second wave. But like I said, I mean we, as such, don't forecast where COVID is heading. We're just concerned about what the impact on our business is. When looking at the segments, these are now segments as we would have reported them as Metso or as Outotec. And first Metso Minerals, including all our equipment businesses, capital equipment businesses and services relating to minerals businesses. So orders up by 8%, and there was McCloskey contribution, 11% on that one. So a slight drop in organic terms. Services continued to increase its share slightly by 1%. Sales, up 2%, and this was about delivering the backlog. Good execution there. McCloskey contributed there as well, and services continue to grow. And adjusted EBITDA improved to EUR 121 million. That's a margin of 16%, more than 16% and a clear improvement from a year ago. And I would say that we are in minerals on our record levels, maybe during the super cycle, we have been somewhere roughly on this level. But in this cycle, this is clearly the best margin that we have delivered. Solid execution. Margins held very, very well. And I want to sort of repeat that fast and really comprehensive cost-cutting actions that we implemented from the beginning of the quarter are visible in the result. Then Outotec's Minerals Processing. The order line is a decline, that is declined for 2 reasons: one is, of course, the COVID and absence of bigger projects in this quarter. But at the same time, there were some bookings in the second quarter of last year of bigger projects. And that, of course, makes the comparison look this way as it is. So 2 impacts there. So a strong quarter in the back of it and the issues with bigger projects. Good execution of order backlog. Sales growth by 9%, and EBIT improvement from 10.8% to 12.3%. And there, again, good execution and cost-saving actions that were implemented during the quarter. And then Metals Refining. Here, really, the absence of projects is more severe. We see that orders received EUR 55 million versus EUR 145 million a year ago. There is something in the pipeline. But here, clearly, it's visible that uncertainty of the economic environment has delayed decision-making, and we were not able to book anything that was probably in other conditions would have been during the quarter. Sales also declined due to lower backlog and profit level stayed on low level. Now the adjusted EBIT being EUR 1 million, and it was EUR 5 million a year ago. So cost-saving actions were really initiated here, both temporary and permanent actions that were taken during the quarter. And they, of course, are visible in these numbers. But needless to say, the profit level needs to be improved in this business, and we are addressing it as a part of our integration and synergy work. And these numbers are now for businesses that we are continuing. There are discontinued businesses that are out of these numbers. They're reported separately. And now I'll hand it over to Eeva on -- and she will go through the financials more in detail.

Good morning, good afternoon to all on my behalf as well. As Juha introduced in the beginning, the first Metso Outotec quarterly report, it does require focus from all of you reading it. We have at our hands an exceptional report, which we hope provides different readers what they're looking for. But it does mean that the amount of information makes it slightly complex. So I will aim to walk you through the main highlights of the information available so that you know what to use going forward and also what to expect going forward. There are 2 key things that differentiate the Metso Outotec transaction from the vast number of M&A cases. And they're reporting, you have all seen. Firstly, despite the legal structure continuing to be Outotec, this transaction is a so-called reverse acquisition under IFRS 3. This has implications on the official IFRS figures for the quarter and for our history going forward. The second item to note is the date of closing, i.e. June 30, which is the last day of the reporting period, not as typically would be the case of being the first day of the quarter. Now these 2 key things do explain to a large extent, what you see in the report. So firstly, the official IFRS figures are those of Metso Minerals as during the quarter, both companies operated as independent groups. All IFRS historical figures we will be using going forward are those of Metso Minerals alone. And finally, Metso accounting principles are what applies to all the reporting. So what you see on this slide is a short summary of the IFRS income statement for Metso Outotec, i.e., the performance of Metso Minerals. As you -- as we know, there is today, immediate interest on how the Q2 went for both companies during the time they were separate entities. So Pekka presented already earlier the separate financial information of Metso Minerals and Outotec segments based on the accounting principles of the businesses as they had existed during the quarter. This is additional voluntary information, which hopefully serves the purpose of fitting with your existing financial models on the separate companies. Now going forward, you will be building models on Metso Outotec. And to support you in that purpose, we have provided a third set of numbers today, namely pro forma financials, typically used to illustrate how the business would have looked had the 2 companies being operating as one, in our case, since the beginning of 2019 and based on Metso accounting policies. This slide shows you the bridge from the historical separate figures into Metso Outotec pro forma figures. There are several adjustments that then take place, not least that all the transaction costs of the merger are deducted from the Q2 or earlier quarters and included as costs in 2019, which improves the January-June 2020 pro formas, but weakens the 2019 pro formas compared to the separate historical figures. Now for those of you who used to reading pro forma financials, this should be very, very familiar, of course. Moving on to the balance sheet. So here, thanks to the transaction closing on the date of the balance sheet, namely June 30, this means that the IFRS balance sheet is for the whole of Metso Outotec, full and final, giving an up-to-date view on the assets and liabilities of the new Metso Outotec. The goodwill created from the Outotec PPA was EUR 495 million, doubling the Metso Outotec goodwill to EUR 1.46 billion. Additional intangible assets from the transaction relate mainly to allocating value in the PPA to customers and technology of Outotec. Outotec had limited property, plant and equipment assets. So the growth on the road from the beginning of the year is very small. On the inventory side, Outotec added some EUR 200 million plus. But we saw a significant reduction of inventory on the Metso Minerals side, thanks to the focused actions on reducing working capital. It is good to note that especially our aggregates business is such that working capital tends to tie up in growth. And in periods of negative organic growth, as we have seen due to COVID-19, the business releases working capital. Similar development in receivables, where the reduction in Metso Minerals helped compensate for the growth coming from the inclusion of Outotec receivables. Liquid funds at the end of June totaled EUR 528 million. Metso Outotec continues to classify the businesses that Outotec announced to be for sale in late 2019 as discontinued operations. And we target to exit those businesses sooner than later, hopefully before the end of this year. Equity was boosted by EUR 899 million from the purchase consideration of Outotec based on the share price of June 30. And interest-bearing liabilities include the transfer of the previous Outotec hybrid from equity into liabilities. As you may have noted, this hybrid was called immediately after closing and is already paid back by a normal term loan. The call has a significant positive impact on the financing costs that we will see going forward. The total assets of Metso Outotec were EUR 5.575 billion at the end of June. Moving then to the cash flow. So again, as the company is operated separately, during the quarter and the first 6 months, the cash flows are reported separately. As I already mentioned, the Metso Minerals cash flow from operating activities was strong in the first half as well as in the second quarter, thanks to good profitability and a significant positive impact from a change in net working capital. Total cash from operating activities was EUR 303 million for the first half. Outotec cash flow, on the other hand, was negatively affected by projects as work in progress, that tie capital, resulting in negative cash flow from operating activities of EUR 75 million for the same period. Dividends are not visible on this table, but you see them in the full report. The Metso dividend paid in June is there, illustrated to the extent of the share of Metso Minerals. Then moving forward, just a breakdown of the net working capital as this is a key KPI internally for us in running the operations. This graph basically illustrates the buildup of the net working capital at Metso Outotec at the end of June totaling EUR 459 million. Final slide from my side is a summary of our key financial metrics as well as a few points on the Metso Outotec financial position. On top of the liquid funds of EUR 528 million on our balance sheet, we have EUR 790 million of committed and undrawn revolving credit facilities. This compares to a net debt of EUR 913 million. Our gearing at the end of June was 45.5%, and our debt to capital, 31.3%. As mentioned already earlier, we have refinanced the Outotec hybrid, and we also have financing in place to refinance the Outotec bond maturing in September. Both transactions have a positive impact on the financing costs compared to the starting point. We will obviously continue to work to further strengthen the final position and our maturity structure going forward. With that, hopefully, a clarifying financial section. I hand it back to our President and CEO to discuss the ongoing integration. So Pekka, please.

Okay. Thank you, Eeva. On the integration front, I already mentioned that we started day 1, July 1, the integration work following a planning period of approximately 12 months. So we have plenty of time to plan this one as we went through all the antitrust processes in 20 or so different legislations during the first year following the announcement of the transaction. So we have, today, also, in a separate announcement, announced that we will revise our synergy targets and especially the implementation timetable. And this is really following the thorough planning that we have done on this one and the organization that we have established already day 1 to really execute these ones and follow through these ones and govern the synergy work and integration work for us. So we have updated the synergy targets now to EUR 120 million cost synergies. Initially, it was EUR 100 million mark, so EUR 20 million more synergies. But more importantly so, we have revised the timetable. We said first that during the 3 years, we will achieve EUR 100 million. Now we say during the first 1.5 years, meaning until end of 2021, we will reach the EUR 120 million mark of synergies. And furthermore, we've said that the EUR 50 million run rate, this is really -- both numbers are run rates, we will hit a run rate of EUR 50 million at the end of this year 2020. Revenue synergy target, we keep unchanged. That is also unchanged when it comes to timeframe, as soon as the revenue target, of course, depends on market environment. And currently, as we know, there's uncertainty on that one, but the number as such holds. We're estimating that the one-off costs will remain the same, EUR 100 million. Most of that will -- we can expect during the first 1.5 years, meaning before end of 2021. And we will follow this one and update the market on our progress on a quarterly basis. First update will be on quarter 3 results announcement, 3 months later from now. So those are the targets that we are now focused on delivering in addition to, of course, making sure that we continue to win orders in the marketplace and do our utmost to avoid demergering. Integration work is really progressing at high-speed despite of holidays. Many of our people do not have holidays this year. Because of this, we see that it's important that we maintain and utilize this momentum what we have now gained ahead of day 1, and we still have that momentum on. We have moved fast. We have appointed already more than 1,200 people into new organization. We are ready with 4 layers of organization, and these are the levels of management that we need to execute the integration work and the synergies. As an example, we have gone from combined 23 market areas in Metso Minerals and Outotec earlier to 8 market area organizations, and that gives you an idea that what kind of potential we have there in synergies when it comes to these kind of numbers. Office locations. This is now offices really. Really, we had combined 190, and we will decrease the number of locations to 150, so a net reduction of 40 office locations. Just as an example, what this work means in these areas that are the first steps of integrates. And we have started with the new management team, the strategy work, which we will then update markets once our Board has reviewed that work in -- later on in this year, and when we're planning to have a Capital Markets Day in November, date haven't been set because we really don't know what kind of world we live in at that moment. But most likely, it will be a virtual one, and we'll announce the date in due course for that one. Then our outlook, even though there is an uncertainty relating to COVID-19 and possible worsening of the situation, we -- still, at this moment, we see that the market activity would remain at the current level. And like I said, yes, we are following, of course, the virus situation and its impact with the tools, and means that we have onto the market. So with this one, it's time for Q&A, and thanks for listening.

[Operator Instructions] Our first question comes from Klas Bergelind, Citi.

Yes. Pekka and Eeva, it's Klas from Citi. So first, I just want to ask on the synergies -- sorry, which is good to see. So I would look a little bit further out. I can ask about 2021. Can you talk about the scope to generate more savings beyond the synergies? And I'm thinking about design of the product standardization and so forth.

Yes, we do have, of course, and things like standardizing and merging the overlapping product lines. Those are the things that we count as a synergy savings as well. We do have also other that we called before merger standalone improvements. And now the numbers that we communicated, they adjust poor synergy numbers. We have other actions that will improve, for example, supply chain and supply footprint. In Metso side, we have started that work, and there's further potential in that area. And there are also some certain standalone improvements in Outotec's side that are separate from these synergy targets that we do have. And I'm sure when we work on these things, we will be able to identify additional things.

So here is the reason why I'm asking. Obviously, if you look at aggregate, it's a very standardized equipment that you manufacture. And if you look at other equipment manufacturers in mining, like Epiroc and Sandvik, they have similar equipment. If you look at Metso and Outotec on the mining side, is more preengineered and so forth. And I'm just interested in the gross margin upside beyond the EUR 120 million in terms of the ability to standardize also on the mining side. It's very interesting to sort of -- not that you have to put a number to it. I understand that that's difficult, Pekka. But if you could talk about the way you could scale the business across the different verticals.

I think we have examples in both companies, Outotec and Metso, on profitability improvement on those businesses and product lines where we have been able to pre-engineer products. And pre-engineered products, it means that we can manufacture a bigger part in controlled environment in -- either in our own factories or suppliers' plants. We -- it does have a product structure. It does have a costing ahead of, and there's very little uncertainty on the costing side of it. And that is clearly a direction that we will head in our new strategy. What it does and what is even more important, in many cases, is that when product is pre-engineered, it opens up different possibilities in the service side. The spare parts are designed at the same time when the product is designed. The spare parts are well defined. They do have spare part number. We can take stocking decisions, make availability decisions to customers, establish pricing for them and take these kind of actions. And this is clearly a direction where we will be heading in most of our businesses and in all of our businesses where we can. There are parts that will require continuously engineering order by order, but our aim is to minimize that part of the engineering and do it upfront.

Okay. No, that's good to hear. Then I had a question on the Outotec side and the backlog. And obviously, we don't see any increased provisions. So I guess, so far, so good. But just to listen to you, Pekka, do you feel good about the execution out of the backlog so far? I mean people on this call, obviously, curious whether you need to increase provisions, take any write-down and so forth on the Outotec side?

Yes. We are comfortable where we stand at this moment with all of these issues. And like I said, I mean executing the backlog is really the name of the game there right now because of absence of new bigger greenfields. But at the same time, the brownfield activity is still active even though anything that is bigger or more complicated to contract or to offer takes more time for decision. But there are parts of business that are running very, very smoothly, and some parts are even compensating those more complicated parts at this moment. And I'm referring here to service -- in service side, the spare parts business and consumables business.

Okay. My final one is on -- it's actually on service. And so if the FX hit is around 5%, and you're growing Minerals service around 6% in the quarter, and that is really solid. Could you describe the spares, wears and the contract business have each developed through the quarter because the exit rate here must be growth of low double digits, if I back it out. So if you could talk both on Mining and aggregates across the verticals would be really interesting.

Aggregate side, naturally, I mean, we saw a dramatic drop in order intake. We saw roughly half of the drop in aggregate service. So it is more resilient also in the aggregate side, but there was a drop during the COVID days. At this moment, we do have some follow-ups where we follow utilization digitally of our machines. And we have returned on daily utilization to pre-COVID levels now in aggregate side for those parts that we are measuring. And that is, of course, an indication that service will return to more normal levels and consumables will return and probably has returned to pre-COVID levels already in the aggregates. New equipment still is a little bit down from that one. Where we saw a reduction in services was really the labor component, we call professional services, and that was because of restrictions. That, on the other hand, is a lower-margin business. And at the same time, customers seem to continue to secure and wanting to secure their solid, seamless operation without breakdowns. And they have ordered spare parts. They have ordered wear parts, probably slightly more than what they would have in normal conditions. We also need to make note on metal prices here at this moment. Metal prices have recovered very well. They are -- all of them are on pre-COVID levels or higher and some even clearly higher, like gold, for example, and then that is boosting all kinds of activities in gold mines.

Our next question comes from Magnus Kruber, UBS.

Pekka, Eeva, you have Magnus Kruber with UBS. So a couple of ones from me. So first, on the Mining, could you talk a little bit about the quotation activity you saw through the quarter? And ideally, how July has started, please?

Yes, like I said, I mean, there's some slowdown of bigger packages, but we are very happy to equally offer smaller equipment and smaller packages. So backlog, we have a good, solid backlog, but decision-making on anything bigger is slower at this moment, but good activity on sort of smaller orders, which we, in fact, with them even more than big packages.

And is it fair to say that July is better than June?

Well, July is a vacation month in many parts. And therefore, it's a difficult month to compare with June. But if we stay within a quarter, we can say that May was better than April and June was better than May.

Okay. Perfect. That's very clear. And on the short-term cost savings, I think you commented around EUR 20 million for Q2. Did you realize that or it came -- or did it come in above? And also if you had any comments around what Outotec might have achieved there because they were a little bit scarce in their comments there prior to the closure?

Yes, Magnus. So we had the EUR 20 million target, and we were very much in line with that target. As Pekka mentioned, we had a quick start. And basically, we're running from the beginning of the quarter on that speed, and that obviously had a clear positive impact on the Metso Minerals numbers. On the Outotec side, sort of similar temporary cost-saving measures were in place for approximately EUR 10 million for the quarter.

Okay. Perfect. That's very useful. Also, could you talk a little bit about what sort of specific COVID-related costs you incurred in the quarter? .

Well, I think the majority of the costs are obviously related to safety, having some extra cost around making sure that -- well, to get people safely home and then also moving between sites various protective measures and these type of things. Then obviously, there were some costs related to securing deliveries. We were late with some deliveries due to the lockdowns. And then to catch up, we had to sort of work either over time or then have sort of speedier logistics. Overall, the logistics situation improved during the quarter quite significantly. It was very difficult in April when the -- when so much of the sort of global logistical network basically was coming down by the day. But luckily, then things calmed down and improved. So -- and towards the end of the quarter, it was kind of more standard, but that took a lot of attention. And I think there, the team did a fantastic job on really securing solid execution.

Okay. Perfect. Could you sort of quantify that a little bit, how that stacks up against the savings so we can sort of understand what the net effect was here?

Well, the net effect was clearly positive, I mean, overwhelmingly. So it's quite difficult to put an exact number on the cost. To be honest, we will -- sometimes we have some logistical hassle deliveries also in normal circumstances. So -- but yes, as you see from the quarterly numbers, so definitely 16 plus percentage point adjusted EBITA would not have happened without a net contribution on the savings in Metso Minerals.

Indeed. Absolutely. And Can you just -- just as a final follow-up on that. What kind of savings do you think you will achieve short-term in Q3?

Well, as we have now moved to the integration phase, so the temporary COVID-related actions have actually ceased. We need to have the organization now fully focused on the integration and delivering the synergies. So you should sort of assume that whether then integration or obviously sort of reacting to the market level as well needs to be part of the synergy target would be difficult for us to run various cost cutting measures. It's all now a part of the overall synergy to make sure that we have the right-sized organization in Metso Outotec for the current market environment.

Our next question comes from Alexander Virgo, Bank of America.

I guess two quickly, if I could, please. Free cash flow performance, I think, has been very strong in Metso. You obviously talked a little bit about your working capital management. I wondered if you could talk a little bit about the sustainability of that performance. I appreciate the comment that aggregates throwing off cash and reduce in declining, but it would be helpful to understand how we can think about H2 and obviously, ongoing, what sort of levels are you aiming at in terms of net working capital performance, for example, longer term? And then second question on the outlook. I appreciate that that's an overarching market outlook, encompassing a whole host of various different nuances. I wondered perhaps you could give us a little bit of a nuance on mining versus aggregates versus recycling, for example, just to help us with the nature of that outlook in the near term.

Okay. Sure, Alex. So on the free cash flow. So yes, I did note the aggregates specifically that we had a very positive cash contribution from the aggregate side. Now that we are back on, as Pekka mentioned, that the kind of exit rate from end of June was roughly 75% of normal. And we expect that to continue as we say in the outlook. So that obviously does mean that we will be ramping up activity towards the end of the year. So I'm expecting then more sort of negative development from a cash point of view than in the fourth quarter, at least as -- then hopefully, we would sort of be building up for a better high season in 2021. In the rest of the business, it's more perhaps stable. I mean, obviously, this type of positive development in accounts receivable doesn't come without hard work in these circumstances so it is a daily struggle. We would hope that things would sort of be stable. Inventory, obviously, will be impacted by, if there will be sort of abrupt lockdowns again in some of the key supplying regions. So we need to be a bit attentive on that, and difficult maybe to know exactly. But I think net-net, we'll sort of -- we will certainly be continuing the improvement actions we have on the supply side on the sort of overall long-term inventory targets in the businesses and then that then having then the counter impact from the sort of hopefully upcoming growth in aggregates. So certainly, the first half was exceptional in what you -- and not something you should expect for the second half. And then, obviously, on the Outotec businesses, the order intake does have an impact on the cash flow generation. We do expect to see deliveries to ramp up in projects' execution and then also release some cash from the work in progress. But at the same time, of course, advances are very much related to how the order intake will develop in the second half. And then you had a question on the outlook. Pekka, you want to take that? Yes.

Yes, on the outlook what goes beyond what we said and a little bit opening up how it looks like. In the aggregates, like I said, I mean, we've seen a good improvement from beginning of second quarter to the end of the quarter, and we are expecting that development to continue. This is, of course, subject to COVID -- worsening of COVID and things like that. But we know that construction activity is, in fact, booming in China. We are making I would say, record months, month-by-month in China in our aggregates business right now, though China is not the biggest market. So it doesn't sort of mean that we can turn around the business because of that one. U.S. construction activity is, other than commercial buildings, it's on very active level, in fact. So infrastructure and housing is on good level. And those are some of the drivers for aggregates volumes and aggregates pricing as well. So if that continues, we can expect that there will be a proper season for aggregates equipment next year, which we missed, we all, including our competitors, they missed that season for this year. So this is how I see the aggregates business going at this moment. But like I said, subject to many things. Mining side and our Minerals business altogether, highly dependent on metal prices at this moment. And like I said, metal prices have recovered. They are on pre-COVID levels. Uncertainties affecting major decisions. So I've already said that one. And we haven't seen that one sort of going away. And many of customers have taken decisions to reduce their CapEx, and this seems to be affecting the greenfields. Of course, the continued good levels in metal prices will slowly change this picture. This could happen, and that would be, of course, positive for the business. Metal prices, they are, to some extent, driving also our Metals business. But there's also other things in Metals business, things like smelter capacity, refining capacity and treatment charges. And for some of the metals, the forecast for treatment charges are, in fact, very positive. And if they come through, that also could mean that we could see some orders and order activity in Metals side, which we clearly need at this moment for us. So -- but everything is subject to COVID not really getting to higher levels or a global second wave that would, of course, wipe out many of these things, what I just said here. But this is where we stand. And our conclusion is that the -- given the COVID on where we are today, we are expecting similar outlook in the market.

Our next question comes from Artem Tokarenko, Crédit Suisse.

My first one is around aggregates. Thank you very much for providing the exit run rates for June. So I just wanted to kindly confirm if you've seen any further improvement in July and August from that run rate? And also if you could maybe elaborate on this in terms of the regional differences, which you saw in the quarter in that business, please?

On the aggregates, we have seen slight improvement or the improvement continuing in aggregate side. We do see the China impact. We had some bigger -- surprisingly, bigger orders that we booked in June in China. So that was very encouraging to see that happening. And when we spoke earlier on, like about a year ago, that the quarry regulations in China are changing. Now those changes are really visible. They are developing super quarries as we, and as they call it there and these super quarries, they are the most modern queries in the world that they are building and they need equipment in those queries, and that is taking place and happening there, and it's visible for -- in our business right now.

Right. And my second question is around the ilmenite smelter project . Could you maybe talk a little bit about what's the recent progress there? What's the new timeline for finalizing the project? And whether your assessment after the merger is in line with what you are thinking about this project and associated costs while doing the due diligence?

Well, I think if I start from answering your last question. So our view is very, very similar. Now as it -- as we did quite a lot of work around the due diligence phase on the project. On the execution, so COVID-19 has slowed down the project. Obviously, site work also in this project as every other project in the world has been affected. So we're now looking into the work continuing well into 2021.

And my last question is around disposal process of the assets indicated for disposal from Outotec business. Can you maybe elaborate a bit on potential buyers or potential type of a buyer who might be interested in those assets? And also whether you have to make any contributions from your side towards mitigating the losses in those businesses?

Well, I wouldn't want to go to the details of the discussions we're having with various interested parties. What I said earlier that we target to exit by the end of the year, so that's what we're working towards. And then we are sort of assessing, of course, those businesses as all the other businesses in a way to ensure that we have a right setup for the market situation. And that's basically sort of what there is to say, obviously, then subject to also then what the -- how the discussions proceed with the buying -- buyer candidates.

Your next question comes from Tomi Railo, DNB.

This is Tomi from DNB. Just a question on the mining equipment orders. How much were they? And what was the level of the large announced orders you booked in the second quarter?

Well, I think as we're moving into new segment reporting, it probably doesn't make sense to comment very much details on the sort of old historical numbers. We had a few, what Pekka referred to as brownfield and product type of debottlenecking projects. But in the sort of EUR 10 million, EUR 20 million magnitude. So that really sort of reflecting the market situation. Very important orders and good orders for our business, but really sort of coming from many small orders rather than sort of any bigger ones.

And then maybe as you have been talking about the greenfields, now you book some orders. And I think Pekka said that absence of the greenfields, have you now emptied in a way the pipeline of greenfields?

No, it's not at all that we have emptied. There's just plenty of proposals out there. But because of the restrictions, uncertainty and some CapEx cuts, these are the easiest ones for many customers to postpone and then also further preparation seems to be more complicated under these kind of circumstances. So we just need to live through this one. And provided that the metal prices continue to be on favorable level, these projects are still very solid projects that our customers have at hand. So I'm not expecting them to disappear.

And the third and final question. If you can just comment a little bit on that run rate for cost synergies, for example, is it fair to assume that half of the targeted run rate for this year and the time horizon for you to achieve that full cost, I think, by the end of '21?

Well, those are the numbers that we announced. They are run rate EUR 50 million at the end of the year. We are confident that we will get there. So we have 5 months' time to that one. And we can expect -- I mean we are right now accelerating the work now that we have the organization that will drive the synergy work in place. And I would say that you can expect fairly sort of straight line from here to that EUR 50 million run rate. And same applies for next year. I mean, the next 12 months from EUR 50 million to EUR 120 million run rate, we're confident that we will get that one.

Our next question comes from Felix Henriksson, Nordea.

Pekka and Eeva, a question on the cost synergy update. So you're saying that the procurement will represent about 25% of the total cost synergies compared to 40% previously. So could you perhaps explain the reason behind this and also provide a bit more color on where you expect to achieve the cost synergies on the supply chain and procurement side of things?

Well, I think the main change on procurement is the fact that, obviously, when the original number was given last summer, we didn't know about COVID-19. So the volumes obviously impact the procurement savings. And hence, we've focused on ensuring that we have enough activities on the items that are not volume related, so the other cost savings. And well, I think, Pekka referred to already the sort of organizational structure and facilities and these type of things that are sort of directly related to the combination. The supply footprint work that has been ongoing in Metso continues. Also, as Pekka mentioned earlier in way, from our point of view, a bit -- you could call it standalone in a sense that it's, of course, not related to the combination. And we will be sort of reporting on the progress of that as things move ahead. We've made certain announcements earlier in the year and are working with them, and they're obviously sort of that's what we have to sort of say concretely on those. There is obviously some lead time in when one is making changes to supply footprint.

Okay. And then perhaps a follow-up related to the backlog and the Outotec side of things. So could you provide an update on the delivery schedules of the large modern and vital mining company projects in light of the COVID-19 and open up a bit that where are we in terms of delivering those projects from the backlog?

Yes. There have been some slight delays with some of the activities in both of those, but nothing major as such. And as you see from the Minerals Processing segment report, the sales have continued to grow, and that tells about the execution of those projects, as we speak. Some delays, but those things have been addressed and issued already at this moment.

Our next question comes from Mr. Robert, Morgan Stanley.

This is Robert from Morgan Stanley. Just a couple of questions. One was on the consolidation of your service network? And how much scope do you think you've got for doing that? Just particularly interested, from your service engineers on the ground, do you sort of cross-train them in servicing Metso and Outotec bits of kit? And do you have kind of scope, I guess, going forward to reduce the headcount within that service business? And then the second one was just following up a little bit on -- you mentioned about remote aftermarket and diagnostic work. How many of your customers are actually uptaking that as an option right now? And what do you see the sort of medium-term scope for doing remote service work across the different segments?

Okay. Yes, of course, consolidation of service network is an issue that we look, like the consolidation for us means that we will consolidate warehouses, we will consolidate locations, we will be fairly cautious with the headcount reductions in that area. We will do where we have excess labor in those areas. But at this moment, we really haven't been able to identify so many really in the front line service workforce. I think they are people that we do need in our business, but it's more in the back-office side and admin side that we do, plus in the logistics side where we have that one. Then on the remote aftermarket, we have had in the aggregate side, we have, for example, visibility on mobile crushing unit, local tracks hours, and we are tracking those hours. We have been tracking for many, many years, and it's been very interesting information now during the COVID days to see how those hours have developed. Of course, the population of those machines, I think it's, by the way, more than 1,000. So there's already some statistical importance with that one. But the population will change from year-to-year, and some of the customers are not keeping the connection open and live, but the ones who are keeping it live and when we compare to previous years to this year. We can see that we are already -- we have already exceeded the utilization ours at this moment from 2 previous years, while we were at very, very low level in April, in particular, and we have seen steady increase from April. And now like I said, I mean, we are currently already higher than we were last year and year before, which is very positive. Then in the mining side, we have more than 100 pieces of equipment that we are monitoring. It's been disappointingly slow ramp-up into that one. We hope that these days have shown that remote monitoring does have value, and we will be pushing this one going ahead. We noticed also that it's not the pandemic time when it's time to establish remote monitoring and remote maintenance. One needs to prepare for these kind of times between the -- call them between the pandemics, assuming that there will be one of these also some time at later stage. And I'm sure that some of the customers will see this happening. We have some other digital tools like more professional way of communicating with customers. We've developed Metso response app, where we are restoring all the communication, technical communication between the 2 organizations, and this is really to -- aim to replace WhatsApps and SMS', which are person-to-person communication means. So these are the kind of things and tools that we have developed and identified the need for during the pandemic.

We have no further questions. Yes, speakers, back to you for the conclusion.

All right. We are a couple of minutes past the hour. So it's time to wrap up this second quarter and half year results conference call. We thank you for participating and asking questions. We will be back with third quarter results late October, and those will be reported according to the official Metso Outotec structure. So again, a new set of numbers in the following report. Until that, thanks again, and enjoy the summer. Bye-bye.

Thank you.

Thank you.