Metso Corporation Unsponsored ADR

Rita Uotila - Vice President, Investor Relations Markku Teräsvasara - President and Chief Executive Officer Jari Algars - Chief Financial Officer

Magnus Kruber - UBS Andrew Wilson - JPMorgan Manu Rimpela - Nordea Tomas Skogman - Carnegie Antti Suttelin - Danske Bank Alexander Virgo - Bank of America Merrill Lynch

Thank you, operator. Welcome to Outotec's third quarter interim report briefing with our President and CEO, Markku Terasvasara, as well as our CFO, Jari Algars.

We will start with a presentation and then after that, we will have the Q&A session. I would also like to welcome our viewers on the SD channel.

Please Markku, go ahead.

Thank you, Rita and good afternoon from my side as well. Before we go in the first three quarter result and also specifically quarter three, I would like to lift up our safety performance, because I think it is very important for me and also for our company as people are our biggest asset.

So we have a stable safety record with our LTI being around two, which is a good achievement, but of course, I said many times before, we like to develop that further. Now, first about the market development.

What we can say, of course, from our side is that the market is slowly improving. It is still very much a Brownfield development that customers are investing in building their production and productivity and debottlenecking.

Supporting that is a good level of metal prices and production, and if you want to lift up some metals in specific, you can say copper, zinc, lead, gold, lithium and silver products being more active and we see that happening in most of the regions in -- in our -- basically [Indiscernible] what you can also now talk that, this positive sentiment did not only reflect the metal prices, but also we see a clear increase in the number of open cases. So our negotiation pipeline is bigger than that we had at the same time last year.

So clearly, this positive sentiment is coming from various sites. What we can say from quarter 3 specific, of course, year-on-year order intake is up 16%.

What we can say specific on quarter 3 is that there was lack of big orders, we now owned only two, but the underlying service business and the smaller business, what we call unannounced businesses, they continue to develop well and have actually increased every quarter of this year. So also another sign of market gaining some speed.

This is typical slides from our side showing our two different businesses, and also from here you can see Minerals Processing business developing well, where the recovery started already last year in first quarter and second quarter, and then being fairly stable, trending up again the rest end of the year. And then the other business we have Metals, Energy & Water where the order intake is yet to be picked up, particularly when it comes to bigger orders.

But even here, we see a very encouraging development particularly in smelting and hydrometallurgical-related sectors where the activity has increased significantly this year. So it can be seen from service point of view, orders received increased 10% year-to-date and also sales, of course, follows the order intake and is picking up.

So our service business is trending up. In quarter 3, there was a big increase in the shutdown and modernization orders compared to the last quarters that we have.

So again, I think the portfolio there is becoming a bit wider. Smaller orders increased, our book-to-bill was below one and that you can see it from the bars that almost all order intake came from unannounced orders basically, and now we are less than 10 million.

But again, looking back [indiscernible] you need to go back to mid 2015 to get similar level that we were in quarter 3. And of course, in the pipeline, there is more bigger orders as well.

So now some key financials from Jari.

If you look at Q3 separate first, the sales increased from 245 million last year to 270 million this year. We also saw the same trend in the service sales increasing from 105 million to 120 million, while the share of service remained more or less the same or an increase of 1 percentage point from 43% to 44%.

Margins remained also the same 24% for the quarter, so our adjusted EBIT increased from €2 million to €13 million or from 1% to 5%. If you look at this quarter year-to-date, for the first three quarters, this is also means that our sales have increased by 8% or 6% in comparable currencies, from €753 million to €810 million, and our service sales from €320 million to €329 million.

Here our share of service has declined slightly from 42% to 41%. Our margin is a little bit down from last year, I will come to that a little bit later, from 25% to 23%, and our adjusted EBIT has improved from €2 million to €16 million or from 0% to 2% adjusted EBIT.

If we go into the next page, the Q1 to Q3 margin analysis, I will open this up a bit more. If we are €2 million result for the first three quarters last year, now due to the volume we have seen a -- here improvement in the volume and also in that way the margin.

But we had also negative margin impacts, Metals, Energy & Water low workload, sales and service mix, cost overruns which we saw in first halves and some exchange rates. The fixed costs has improved, which has improved the result, and then we had a significant gain in the exchange rate.

If we look at this exchange rate gain, over half of it relates to the margin, which would offset some of the margin drop you see here, a significant part of the rest relates to the fixed costs. So all in all, this would more or less disappear if they would -- if this neutralized in the rest of the result.

Also the final impact on the FX to our results these three quarters is very little. If we look at Minerals Processing, the order intake is up 6%, so we have seen an increase in plant, equipment and spare parts orders.

And the sales have increased by 31%. If we look at in absolute figures, order intake was €487 million for the first 3 quarters and the sales was €472 million.

So order intake is above sales. And the service sales is €212 million, which is an improvement of about 8% or 4% in comparable currencies compared to last year, and it was €197 million.

And our adjusted EBIT almost doubled from €22 million to €42 million. So the good improvement we have seen earlier continues, which we also can see on the right-hand side if you have the chart in front of you.

The quarterly results have improved compared to the previous ones. Metals, Energy & Water, we have a higher order intake now than last year, significantly higher with 33% improvement from €263 million last year to €351 million so far this year.

Obviously last year's low order intake impact the sales this year, and therefore, also the sales has come down by 14% from €392 million to €339 million. Service sales is also slightly down from €122 million to €117 million.

And adjusted EBIT is also lower than last year and it was minus €17 million, minus 4%, now it's minus €21 million and minus 6%. But what is positive, you can see from the chart on the right hand side, we are getting closer to this year level, which means our savings have taken effect despite we see lower sales.

If we look at the cash flow, it's been quite positive for the quarter, this part you cannot see it here if you compare it to the previous or first half year cash flow. We had an improvement of close to €30 million.

So if we look at what other changes compared to last year, EBITDA last year was €17 million, now €42 million, which obviously have impacted it. We have also -- despite premature order, backlog still is affecting our net working capital, its half which also have had the impact.

And then despite we have €31 million in depreciation and amortization, we have been quite stringent on our CapEx. We have only invested [€13 million], so there also we have been able to improve our cash flow that way.

So the free cash flow is minus €14 million when it was minus €81 million a year ago. Interest paid, received, and tax paid is minus €6 million, when it was minus €9 million a year ago.

So the free cash flow after interest and taxes is minus €21 million, it was minus €90 million a year ago. We have repaid some long-term debt and we have also had some changes in the current debt and we also have had impacts from the hybrid bond interest.

So all in all, the net cash from financing activities is plus €5 million when it was €53 million a year ago. So the total net change in cash and cash equivalent is minus €15 million when it was minus €37 million a year ago.

So we have a good cash situation. Liquidity and equities remain solid.

So there's not much more to say about that. The balance sheet has come down a little bit as the advances received have come down, but still we've been able to improve the situation.

So all in all, we are in a very solid situation with the product at the end of this year with our liquidity as it has also strengthened during the last quarter. And now over again to Markku on the market outlook and guidance.

Okay, thank you, Jari. And having a look on the coming months, of course the market opportunity continues to be there.

As already mentioned, we see it in many different ways, among others, the number of cases that we have opened at the moment and also the number of smaller orders that we continue to receive. So the market is giving us the opportunity and also it is well distributed or spread out throughout the whole market or the whole world in different regions, but also in several metals.

So that point of view I think is -- it's a very positive situation we have. Service gives us continued opportunities not only in spare parts or wear parts, but also when debottlenecking of all -- doing smaller productivity improvements, the asset will also give us upgrades and modification opportunities and also shutdown services.

And as we had said before, the timing of the bigger orders which are in the pipeline is difficult to foresee, so we will always have this lumpiness from quarter-to-quarter when I'm comparing numbers depending on how many big orders materialize in any given quarter. Our financial guidance is based on current order backlog and market outlook and it is unchanged.

Our focus areas going forward, of course, as the opportunities there, our main focus is to win the orders in still a competitive marketplace. We will continue our cost saving of our businesses where the market is not supporting and as you heard from the capital market space and also included in those presentation is that our ambition is to grow without investing more in fixed cost, and we think this is fully possible.

We also have the service business, we have a new organization in place from 1st April and we clearly see the positive impact in our operations and obtaining the opportunities that are there. Cost competitiveness, we want to improve that both in terms of our being more cost efficient and also developing products and services that clearly are value-added.

I mean some of the metals and typically whenever it comes to complex methods, we have a very good offering for that. And last but not least, of course, we continue to be close to our customers.

And even strengthened -- strengthen our customer centricity really at the full potential. So that was the presentation part from our side, and now we open the line for Q&A.

Thank you, Markku and thank you Jari for presentation. Operator, now we are ready to take questions from telephone line.

Hi, Markku. Magnus here with UBS.

A couple of questions from my side. I'll take them one at a time.

You mentioned cost around in some project tampering margins. Is this outside of the program I think you mentioned in the past?

And how many obviously reported [Indiscernible] which division?

We have a handful of projects where we have had some challenges. This is mostly related to what we already said in Q2.

It's still impacting Q3. So, we had a couple of projects which were new technology and where we were hit by some cost overruns when we were delivering them.

So they are in Minerals Processing and -- with a minor part in Metals, Energy & water. We've clearly not had any significant change in the older projects.

I think I mentioned in the Q2 we've had some, but it's very small. So the majority has come from some new technology projects where we have learned something during the way and this continues to have some impact on us.

Thank you so much. And could you say something about how your supply chain looks at this stage in Mineral Processing?

Any tight segments, any longer delivery times in some components?

I think for the time being, it is still on a healthy level. Of course, we compete on the same market as anyone else, but we see that it's manageable and what we have a long-term agreement in place and commitments for the project deliveries.

From that point of view, I think we are still comfortable with that.

And I think deliveries in Minerals Processing came in a little bit weaker than expected in Q3. So how should we think about this in Q4, is there any delays in the new projects?

No, you mean sales or what do you mean?

Yes, sales, apologies.

I think it's nothing out of the ordinary I would say. It just happens, but some quarters there is a little bit more some -- there is a little bit less.

So there is no delays nothing actually to talk about.

And then finally, how is pricing looking in Processing? Is it's still the same, unchanged from last quarter, still as difficult as it were?

I think when it comes to spare parts and wear parts, we see an opportunity for price increase which we have already put in place to the some degree. And I wouldn't say that the pricing is less difficult than it was in the previous quarter and before.

I think that the more market opens and improves, of course, that gives us an opportunity to improve our pricing. But we always base our products case-by-case depending on what is the true value proposition and value-add we can offer to our core customers.

So from that point of view, I think it's more case-by-case pricing than following a certain trend apart from spare parts or wear parts.

I just got a fewer questions if I can please. On the guidance, on the adjusted EBITDA number, it needs a quite a lot to be done in the fourth quarter.

And could you just sort of talk us through the moving parts in terms of getting to the full-year guidance number, just whether it's to be with costs and savings. Obviously, we don't see all project completions.

I guess, sense to sort of the bridge to that Q4 number that we need to get to, please.

If you look at the year we had a very strong Q4. So I would say nothing out of the ordinary.

It's been over all the years our strongest quarter sales-wise, and that is standard, let's say the normal margin coming out of that. So there is nothing specific outside of Outotec total cost saving or anything else to cost savings, we continue as we have planned.

But in terms of the kind of the margin that is implied, it would be the strongest margin we've seen before a number of years, that's -- I'm doing right enough together, is that right?

It is a combination of margins and volume that's been coming.

Obviously, it depends on how much spare parts or how much it's coming from certain type of projects, so this is a combination.

And in terms of service orders, clearly that's been a pretty good [indiscernible], can you just give us an idea of if you're seeing different trends across Minerals Processing and Metals, Energy & Water, or is it a positive trajectory in both divisions?

I would say that the Minerals Processing, it is a steady improvement. It is more related to spare parts and wear parts, and there we see a steady development.

When it comes to Metals, Energy & Water, that is more related to shutdown services and upgrades and modifications, which we actually had a good quarter in quarter three in terms of order intake and we see the opportunities there.

And maybe if I have just to -- to get a better understanding of the cash flow and obviously a very good description of how the material backlog is not helping. Can you give us an idea of, kind of what you would expect to see of the cash flow, I'm thinking with the working capital over the next few quarters?

Just trying to get a sense of kind of how that shift from this little weaker cash positions to a strong cash position comes through, please.

Provided we get new orders and let's say the mature backlog was into a more fresh one, we are usually more cash positive in the beginning of the project and it more neutralizes towards the end of the project. So the cash we get during the first six to 12 months, we are then using when we come on laboring the project and that is what we have seen for a longer period a year now.

And now, we expect that -- provided we get new orders, we should start to see some improvement going forward. Obviously, again, last we said in CMD, we are also aiming to grow our service and that obviously consumes some cash.

So the main positive cash flow is actually coming out of EBITDA and that we are not using our depreciations to invest into the new assets with the same degree, that is our biggest positive driver going forward for the cash flow.

That makes sense. And then let me just ask one more, just to clarify on slide 11 in the margin bridge.

Just trying to understand the FX gains and losses on the sort of the unrealized and realized. And can you give us any idea of what you think that's looking right for the Q4 growth here out with a pretty meaningful swing in terms of the Q3?

I said that at the end of the day, the impact on the adjusted EBITDA is minimal. This is something which more or less is neutralized in the margin.

And obviously, when we do that translation. So it also affects the fixed cost et cetera.

So at the end of the day, I cannot give any judgment on where the exchange rates go. We had a very -- impacted by U.S.

dollar and Mexican peso. We have quite a lot of businesses in that area, but I unfortunately cannot give a prediction on how they will go going forward.

But I can just assure you, we have a little hedge done and we are not anticipating to get any significant impact on the bottom line.

It's not an impact from the margin, it's just an impact on the actually move quarter-to-quarter that we've seen [indiscernible]?

This is the way how we are reporting it. So we are actually having obviously hedging contracts for all open let's say U.S.

dollar of contracts and that hedging gain or loss is something which has shown grossing this FX gain and losses. And then we have a negative effect in the sales value maybe in the cost value and that this is kind of a gross way of showing things.

It's not included the effect in the margin or in the cost as such. So it looks like a big number, but at the end of the day, the impact is very minimal on our bottom line.

My first question would be on the backlogs. So if you look at the backlog that you have, it's down 5% compared to the previous year.

And I think that based on the backlog deliveries for us next year, it is looking to be down under like [indiscernible] numbers correctly, if you exclude the services part of the backlog. I'm just thinking that what will -- how much orders do you kind of think that you can win during a year that didn't end up delivering during that same year?

Just wondering of what kind of growth outlook we should expect based on the kind of backlog that you have delivered for next year on the sales transfer to [AIP]. Is there any comment you can make on that?

It looks from quarter-to-quarter I think the lumpiness makes it a bit different or difficult to follow on and find the trends and [indiscernible] the big orders, very few, but that was one we were expecting. Going forward is that we will get also bigger orders as the pipeline is improving.

So I think comparing that for both of the quarters maybe a kind of a tough competition. You have to have a bit of -- longer view on it and it's correct that particularly on Metals, Energy & Water side, we like to see more during fourth quarter, and then of course are actively working towards that.

And these stuff that the pipeline is -- that's a [indiscernible] various projects that we want to finalize till before the end of the year.

Can you please provide a bit more granularity on the demand [outlook] by the sub-segments in the Metals Energy & Water?

We aren't and not normally giving guidance on that, but what we have said already and what we kind of, of course, reveal the step that when it comes to metals refining part of business, particularly when it comes to smelting and hydrometallurgy, then the activity is significantly up compared to last year this time. So that is an area where we see a positive movement.

There is also quite the many energy cases in the pipeline, not yet materialized, but we see that the market is quite active. Of course, you would hope more cases in our federal space and also in acid of cares and roasting, but it's not that they are completely out of opportunity.

We just are talking about timing when they start coming in and also actively working to get the orders in.

And what about water?

Water is what was already discussed in during the Capital Markets Day. Water is in two flows.

It's -- we have acquired a lot of water-related business when it comes to water management and tailings in the mineral processing and in concentrated plants. But when it comes to municipal water, it's more an opportunistic approach where we have a competency in-house and we are prepared to take business when it comes.

But the core structure on that organization is not so high. So it's basically an add-on bonus when we get this.

So if I understand you right, I kind of know that challenge delays in, especially in the Ferro's value chain. Is that right?

That's where your [Indiscernible] is under utilization like -- what it looks now?

Yes, ferroalloys and I think if you look at the steel production and capacity in the world, it's of course, there is oversupply in steel capacity. What is still happening [Indiscernible] is projects which supports reducing emissions and improving energy efficiencies.

So there is some pelletizing projects in the pipeline. And when you talk about ferroalloys, which is more related to stainless steel manufacturing, that is of course better than that.

But the big federal sector is, of course, still negatively impacted about overcapacity in the industry.

Okay. And then given the improved order outlook and the cost cutting, you have and may have now moving some people you see taking in Germany, to my understanding, do you kind of start to feel not promising that we will go back to black figures next year, but -- I mean does it start to feel realistic at least as we will see black EBITDA adjusted in 2018 in MEW?

Citec move-up we are doing is more on the long-term perspective. So it will not have imminent impact.

Obviously we have to negotiate it and also we have certain guarantees. But I think this is more for the long term.

But when we come to the next downturn, we have built a strategy that we want to build in more flexibility, because now the orders are lumpy, which are coming in. And from that standpoint, we have built now a more flexible organization.

So we can take these declines in the workload better, and without going into red. But this is really a long-term decision and impact.

But the question was, I mean, do you start to feel comfortable with the order backlog you have and the cost changes for next year that you are in? It's realistic to be back in [indiscernible] or is it just fully up to order intake bookings in the first 6 months or next year still?

Of course order intake is -- we need orders to be able to have worked for the organization. At the same time, what we say is that the pipeline is more healthy than we had last year at the same time.

So of course the current is coming closer and closer, but exactly to give you time, timing of that is not possible. And of course, every product line, the level of business we have at the moment, the outlook and the cost structure is reviewed continuously.

So if we see that -- the outlook is not supporting the cost that we had. We addressed that of course continuously.

Yes. And can you just remind me about changes in FRISK scores 2018 compared to 2017?

We have not set any guidance for that yet. As Markku said, depending on how the outlook is, and how well we are able to get in orders, we are constantly contemplating that we have to do some adjustments to our fixed cost.

As you can see, we are all the time making decisions on let's say, lowering the fixed cost long term and building in flexibility. So we are following our strategy.

And the most important thing for us, obviously for Metals, Energy & Water is to get orders to balance out of the workload. So we've not fully reached that point yet.

I understand that, but when I just look at the EO items you have taken this year, they are low charges booked, while last year, you booked very large charges. And then, I cannot recall any other change than this recently announced movement of people in Germany to Citec there is no order.

I mean, number of employees is flat year-over-year. So there is not structurally any change in the cost structure apart from this change in Germany going into next year.

This has been decided as of today.

I think what you need to bear in mind is that our headcount reporting is not as the year reporting. So we report the number of employees that have a contract with the company and those also include temporary employees for the projects.

For example, you get the stuff from project in one country and temporarily need to employ 150 people for that. That will come on our headcounts.

So we have a number of heads that are continuously rotating in the company, and actually there has been a shift from, so called white collar to what blue collar people because we have more work that needs to be done, particularly on our service side, but also on some of the project deliveries. So I think from that point of view, the headcount number is not giving you exactly the right picture.

As stated, you could see that at this point, the sales was going down in Metals, Energy & Water, the loss has declined. So we are getting into the right direction.

Still we need more orders to start to come under the plus side.

And then finally, when I read your report about short-term risks and uncertainties, you have used more or less the same wording as a quarter ago. But it sounds, of course, pretty scary, when you talk about that you have -- Outotec has identified a significant risk of claims and credit losses related to a few large products in the Metals, Energy & Water segment.

I mean can you understand this is a bit sensitive as an area, but can we start to get some kind of end in Q4 or in the first six months of next year when it comes to this old product and the potential kind of financial risks related to that? When can this whole chapter become history?

In all of these, we have had, let's say, positive development. But as we have stated already last year when we had them, at least one of them will take quite a long time for us to get out of -- because we need to fix it and we need to start it up again, because it broke down in the start-up phase.

And that will take a long time. But we feel we are properly provisioned for it.

And I said things are going into the right direction. So we are feeling pretty okay with those.

And I am trying to calculate your underlying gross margin. That means I am stripping out the provisions and overruns and I'm also stripping out what I estimate is your personnel costs.

I get the result that your gross margin is shifting down quite a bit this year 2 or 3 percentage points from year ago and this is -- this of course is quite a lot. My question is, now that you get new business and demand is improving, what is the margin level for the new businesses?

Is it better than what you have currently in the order book or is it so that we've simply seen a shift towards lower gross margins in this business and we shouldn't expect an improvement going forward?

We are obviously looking for an improvement. As said, we have been challenged with some erosion during the year.

And all in all, we really don't see any -- let's say -- let's put it that way, yes it is a tough market, still there are not enough let's say active customers yet, but as we stated it looks like the market is improving and we hopefully will reach a point where let's say we would see balancing supply and demand and we can, I think there is more room for price increases, but it's very much as Markku already mentioned that it depends a little bit on what type of orders we are getting are they big, are they small, some orders we get more margins, some others and it's more than just the mix of what is happening. And obviously what is the best is when we have now delivered and that we couldn't then release some provisions at the end of the project that everything has gone well and that is then adding further to it.

We've not seen that in [indiscernible] but obviously we are working hard that we are able to keep the provisions we have made for the projects.

Okay. And then on the demand prospects, you sound optimistic in this call, but when I read the reports I think you kind of had indicated that there may have been a pushback of some of the projects you expected earlier.

Because in the second quarter report, you said that the market offers exciting opportunities for the second half and now you were just overall positive without any time specification. So would you say that there has been some pushbacks of project or not really?

I think as Algar has mentioned, I think it's the project, bigger project, it's a lumpy business and sometimes you get more of them during quarter, sometimes you get less of them during quarter. Of course, you could say that there has been some projects moving forward.

But they have been the projects which we are clearly confident that they will come, so I would still count that on a normal quarter-to-quarter fluctuation. But the outlook of the market has remained a positive and as I mentioned already, the number of cases that we are working on is increasing, basically from quarter-to-quarter compared to last year.

So I think it's a timing issue that we spoke of.

Yes, okay. And finally, Minerals Processing margin taking out the FX losses and gains went down year-over-year.

Any reason why?

This was just cost overruns we were talking about earlier. And then also…

Okay. I thought the problem projects were in Metals, Energy & Water.

But they seem to be also in Minerals Processing.

A few big ones. As stated earlier here in the call, we said that we have had some new technology deliveries in Minerals Processing, where we have learnt that it actually costs for -- it cost us a bit more to execute this.

So we have been impacted by this in Minerals Processing.

Was this the first quarter when you had overruns in Minerals Processing? Is it correct to say that previously you talked about Metals, Energy & Water and now there was something in Minerals Processing as well?

No, it's something which has come up during the year and this has impacted also us in Q3.

Just on this transfer of -- potential transfer of stuffs to Citec . Could you give any sort of timing for that?

I know it's not this year, but next year and any size of savings associated with that?

I don't think we can say anything in addition to what we have announced on that. Obviously this is something which has been agreed with both parties, but this is totally due to how long the Union negotiations will take in Germany and we get everything finalized.

So it really would be just a pure guess on my side if I would say a day. So we're working to finalize this as soon as possible and as said the impact will be more in the future when we come into points where we have lack of orders.

So this generic engineering what we have had in-house, we have now decided that we would rather acquire this whole project from the market and rather work to get [Indiscernible] we still have it in-house and then having the problems we've seen that we don't have the flexibility when we need it and it's actually done obviously, adding fixed cost at the point where we don't have enough work to pay for those fixed costs.

Okay, do I understand it correctly that even if they take over the stuff, will you still be paying for them or?

No, I think, I don't really want to go into the details, but there is some period where we have, let's say, we will utilize them by our sales and obviously depending on the workloads even for a longer period of time. So it will gradually start to have some impact on the costs.

Maybe an impact also on the fixed costs during next year, but we are not guiding for any such, we'll not guide for any such. This is totally depending on our order intake and obviously then also on the Union negotiations and then on the Citec situation.

So there are many things affecting this.

And just one final thing on that, do you expect any cost associated with this as and when it's decided, whatever happens.

No, nothing that we feel we would have got any restructuring resource or currency. But that said, we are in the middle of negotiations with the Union.

So this is obviously dependent on how these go.

Understood, very clear. Okay, so and I asked one more question on a separate -- there was an order announcement, not from you but from AMG this morning as well related to the new project.

It seems to be the second leg in your project as you've been involved in earlier, is it fair to say that the size of the second leg is similar to the first one in terms of value?

We are very happy with that because we are building the first step as we go and probably remember the order size of that order. This agreement we made for them is on basic engineering.

So it's just at the first step of the project, but of course, already an indication that actually customers fairly are satisfied with the first approach we are executing at the moment. And over time, there will be a new plant built as well, where we feel that we -- we have a good opportunity, but that is of course a separate negotiation coming later capacity-wise for the client.

From the size point of view we are talking about similar sized projects than the one that we are building at the moment.

Okay. And I think they mentioned December's date when they will make a decision.

Do you think you would get it, if you would get it, would you think you'll get the down payment in December as well or should we expect it in that case to flow into next year?

I think we want to make a shift and it gets this on that part. We are just hoping we have got under a basic engineering model and we hope it will progress.

And obvious, for the client they want to progress fast.

Thanks for fitting me in. I have a couple of questions.

One, just on generic customer behavior. So if you maybe could comment a little bit in terms of -- you've obviously seen an improvement in quoting activity or discussions, but given visibility appears to remain quite low, larger business obviously still very lumpy.

I'm just curious to hear what the customers are saying with respect to actually getting over the line on signature? And then second question, if I look at Page 7, the split in service order intake, you've seen like down in recurring services as a mix which obviously given their recurring is a little bit interesting.

So what is it that's driven that? And will we see that come back up to the sort of 100 million or so level that we can see historically?

I think coming back to the last question first, when it comes to service, service order intake, of course, what we look in the pipeline and also what we see order to-date, there is the level of recurring revenue orders coming in as well as -- so you could see this as a kind of a normal fluctuation.

Sorry, just a follow-up. It looks quite a big drop sequentially for something that's meant to be recurring.

So what do you exactly defining as recurring and why did it drop so much?

Typically we are having in recurring type of orders, we have the technical services, spare parts and wear parts. And even though our wear parts over that spare parts order, can go up and down we also have a lot of project related spare parts orders where together with our CapEx, say, we booked a significant sized spare parts and wear parts orders to get over that and manage those less bigger projects.

There is less parts that are books are on those orders.

Sorry, it was just a question as to what you're hearing from the customer or your customers choice I would say, with respect to them actually getting over the line on signing all of these quotations and quotation activity that you talk about, and some of your peers have talked about as well. I'm just curious as to what the customers are saying in terms of why they are not actually signing or what is it, is it scope, is it budget constraints, what is it that's the stopping the quotation activity from converting?

I think it boils down to their own business case and what kind of confidence and the relation they have for the future. I don't see that there is -- as I said, I don't see any changes in that sentiment and reason than it's more likely -- and I was suggesting that, this is since we are closer and closer, but exactly it is still difficult to see.

But definitely there is no -- nothing that indicates more hesitation or more negative development.

Thank you, Operator. That was all the questions this time.

So thank you for participating to this briefing session. Thank you for the presentation.

Thank you all.