Following the first month of integration work, Metso Outotec has assessed and validated the synergy targets related to the combination of Metso’s Minerals business with Outotec.
The timetable and scope of the cost synergies are confirmed to be more positive than originally estimated. The target is therefore raised to €120-million of annual pre-tax run-rate cost synergies and the implementation will be accelerated so that the run-rate of the synergies is expected to be realised by the end of 2021.
About €50-million of annual run-rate of the cost synergies is expected to be achieved already by the end of 2020. Procurement is estimated to represent about 25% of the total cost synergies and the rest would be brought about from personnel, functional and other cost synergies.
The company maintains its original €150-million annual revenue run-rate synergy target by the end of 2022 but notes that the COVID-19 situation creates uncertainty about the market development.
The realisation of cost and revenue synergies is expected to result in one-off, pre-tax costs of approximately €100-million, which is in line with the earlier estimate. Most of these costs are expected to be incurred by the end of 2021.
The initial synergy targets, published in July 2019, were €100-million of run rate pre-tax cost synergies and €150-million additional revenue synergies. Both targets were initially expected to materialize in three years after the merger has completed.
In addition to the synergies, Metso Outotec will continue with temporary savings initiatives due to the COVID-19 situation, as well as with permanent standalone improvements across its businesses.
Metso Outotec will provide quarterly status updates on the progress of the synergy work in conjunction with its quarterly results announcements.