Andritz AG

VSE:ANDR

Earnings Call Analysis

Andritz Q3 Results: Revenue and Margins Rise

In the face of global crises, notably the conflict in Israel and Gaza, Andritz AG persisted to deliver strong financial results in the third quarter. Revenue climbed by 11% to EUR 2.1 billion with an EBITDA increase from 8.1% to 8.4%, while net income margins hit an impressive 5.6%. Despite the geopolitical tensions, the impact on Andritz remained minimal with operations in Israel and order volume affected only to a limited extent. Order bookings did see a decline due to a high comparison base from last year's large orders. The positive shift in net working capital and a cash flow of EUR 75 million reflect a healthier financial state. Looking ahead, the guidance for 2023 is confirmed with expectations of significant revenue and earnings growth and stable EBITDA margin levels compared to 2022.

Continued Growth Amidst Decreased Order Intake

Despite a significant decrease in order intake compared to the previous year, due to missing two large pulp and paper orders worth approximately EUR 1 billion, Andritz has not shown concern but rather has reported a strong growth in revenue and earnings. With revenues climbing by 11% to EUR 2.1 billion and a sustained, healthy order backlog above EUR 10 billion, the company's financial health remains robust.

Rising Profits and Margins

Andritz has experienced a boost in profitability, with EBITDA increasing by 16% to EUR 176 million and an improved EBITDA margin from 8.1% to 8.4% in the third quarter. Net income also saw a notable rise by 27% to EUR 125 million in the same period, indicating that the company is effectively converting revenues to profit.

Strong Book-to-Bill Ratio and Net Income Growth

The company has maintained a book-to-bill ratio above 1, having an order intake of EUR 6.5 billion against a revenue of EUR 6.2 billion. Despite a drop in order intake from the previous year's EUR 7.5 billion, net income has impressively increased by more than 30% to EUR 346 million, underscoring Andritz's efficiency in generating earnings.

Strategic Acquisitions Poised for Future Growth

Andritz has strategically acquired Dedert International, an engineering company with potential in expanding markets like the starch, biofuel, and food industries, and NAF, a legacy company specializing in safety process control for the pulp and paper industry. These acquisitions, bringing in revenues of approximately EUR 90 million and EUR 15 million respectively, are expected to enhance Andritz's service offerings and solutions for emerging markets such as plant-based proteins and lithium processing.

Service and Midsized Projects on an Upward Trajectory

While large orders in pulp and paper were missing, Andritz has managed to maintain momentum, with service and midsized projects exceeding expectations. This has led to growth across various business areas, most notably hydro by 7%, metals by 1%, and separation by 4% in the third quarter. The company has also successfully navigated supply chain hurdles, leading to a substantial increase in revenue across all business areas.

Thriving Service Business Despite Market Challenges

Service business has exhibited consistent growth with a five-year compound annual growth rate of 9%. The last year's service revenue was EUR 3 billion, which has climbed further, indicating Andritz's success in expanding its service operations even under challenging market conditions.

Expanding Service Revenues in a Tough Market Environment

Andritz has succeeded in boosting service revenues from EUR 2.1 billion to EUR 2.4 billion. Specific segments such as pulp & paper, metals, hydro, and separation have all contributed to this increase. This growth can be attributed to the company's robust capital business foundations and its effectiveness in leveraging market share.

Maintaining a Substantial Order Backlog

The company has managed to keep its order backlog attractively high at EUR 10.4 billion, with the majority stemming from pulp and paper, followed by hydro. This substantial backlog ensures a steady stream of future work and revenue for the company.

Consistent Profitability

Andritz has continued to maintain a stable profitability rate. EBITDA saw an increase from EUR 426 million to EUR 509 million while preserving a margin of 8.2%. This consistency in profitability reflects the company's ability to control costs and manage financial operations efficiently.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to Andritz Quarter 3 results webcast. I'm Susan Trust, Head of Group Communications and Marketing, and I will be moderating today's webcast. I would like to introduce our President and CEO, Joachim Schönbeck; and our CFO, Norbert Nettesheim. After the presentations, you will have the possibility to ask questions.

Now without further ado, I would like to hand it over to our CEO, Joachim, please.

[Joachim Schönbeck, executive]

Ladies and gentlemen, good morning also from my side. Thank you very much for attending our call. Yes, we have to recognize that our biggest wish for this year did not materialize. We were looking for the first year since a while without a global impact and a global new crisis, which unfortunately did not happen. We faced the war in -- against Hamas in Israel and Gaza, and we are a bit uncertain what will result from that for the months to come.

On the other side, we also had some good news, the constant increase of interest rates came to a halt. So in Europe as well as in U.S., interest rates did not increase further. We -- also inflation came down which we believe is a good sign for what is to come. And then the -- for the first time since more than a year, the Korean export has risen over its year-to-year comparison figure for the first time since 13 months in October, which we also believe is a good sign that the global economy might improve from what is to come.

Looking to the impacts from the war on Hamas in Israel on Andritz. It's -- we can heavily report that the impacts are low. We had a only for orders in total -- with a total order volume of around EUR 50 million with an order backlog of EUR 20 million. So we expect this is going to be suspended a bit. We had cleared all our construction sites there and can report that all Andritz personnel return safely to their homes.

Our own operations in Israel, our daughter company, Otorio focusing on cybersecurity. Operations have been a bit impacted by the services, the employees had to do -- they were called in to the Army partially, but we can report that all services for our international contracts could be fully performed as promised to the customers.

So if we go to the Andritz numbers for the third quarter. We could continue the strong growth in revenue and earnings. And out of the still high backlog, order booking was significantly down compared to third quarter of 2022. We had 2 large pulp and paper orders booked in the third quarter of last year with roughly EUR 1 billion in total and that is, for sure, what we are missing out.

So therefore, the order intake is down, but we are not greatly concerned about that. Revenue is up by 11% to EUR 2.1 billion. The backlog is still healthy with above EUR 10 billion. The EBITDA went up by 16% on a quarter-to-quarter basis to EUR 176 million and the EBITDA margin in the third quarter increased from 8.1% to 8.4%. The net income rose by 27% to EUR 125 million in the third quarter.

Quick look on the year-to-date on the first 3 quarters of the year, so we still can report a book-to-bill ratio of still above 1 with order intake of EUR 6.5 billion and a revenue of EUR 6.2 billion, even though the order intake was down from last year's EUR 7.5 billion. On the backlog, I reported EBITDA year-to-date 9 is EUR 509 million. The EBITDA margin remained stable compared to last year at 8.2% and the net income of EUR 346 million was up more than 30%.

So we made, we believe, important acquisition. We acquired a Dedert International. It's a leading engineering company offering complementary technologies in growing markets with a very good fit on the technical side as well as on the regional side. We have with our combined portfolio, we can enable complete solutions now for the watering and drying for starch, biofuel and food industry.

All 3 markets, we believe, will significantly grow over the next years. Founded already in 1968, Dedert has already a significant installed base, so sustaining a very stable service business on that. And we further improve our readiness for new markets, we believe, to develop that is on plant-based proteins as well as lithium processing. The Dedert International will be reported in our business area separation. Revenue is about EUR 90 million and we have roughly 100 employees.

Further on, we acquired the company NAF. It's a manufacturer of manual automated control wolves, safety process control, mainly for the pulp and paper industry. It's a strong legacy company, more than 100 years history in pulp and paper with -- I would say, appropriately installed base. It's based in Linköping in Sweden. Very good technical products, a bit neglected over the past years and we believe that within our pulp and paper will be an important acquisition for us to further improve our automation digitalization business as well as providing full solutions to our customers. This will be reported in our pulp and paper business area. This year's revenue will be about EUR 15 million, 50 employees, and we believe that from there, we can generate a strong growth.

Looking to the performance in the third quarter in more detail, we can say that service and midsized projects are well on track. We -- for sure, we're missing the large orders in pulp and paper, the 1 -- as I said, the EUR 1 billion from last year in quarter 3 that made a significant gap. However, as you can see, we could grow all other business areas in order intake also in the third quarter of this year and especially hydro. Hydro is up by 7%, metals up by 1% and separation by 4%, that is quite good, considering the circumstances, we, in general have.

You can see the order intake split up in service, smaller capital orders and these large capital orders and you can see that it's quite stable, even growing in the service, and it's stable in the smaller capital order business on the -- of course, the very large orders were not on the market. So we could say that we did not lose significantly but circumstances at the moment are for sure, not for the very high investments.

We have a significant increase of revenue based on the execution of our healthy backlog. So all business areas could increase their revenue substantially pulp and paper, up 13%, metals up 14%, hydro up 6%, separation was up 7%. And -- it's -- first of all, it's good that we could roll the revenue that we could diligently execute the large orders that we could overcome the supply chain bottlenecks that we are well on track in executing the orders on time and budget.

We are very happy that the service business is continuously growing. We have over a 5-year period, compound annual growth rate of 9%, which is well above the general trend. And you could see that from the EUR 3 billion in 2022, if we now compare it with the last 4 quarters, it's significantly up. And it shows that we are on the right track in growing this business stronger and further than the capital business.

You could see in the third quarter, revenue was nicely up from -- for the entire group from EUR 763 million in last year to EUR 829 million and all business areas contributed to that. If we look at this at a larger scale on the year-to-date 9 increase is even larger.

We could grow from EUR 2.1 billion to EUR 2.4 billion. The total service revenue in Pulp & Paper, we are up to -- by more than EUR 130 million to EUR 1.3 billion. Metals nicely grew from EUR 286 million to EUR 330 million. Hydro went up from EUR 352 million to EUR 415 million and also separation, even though they already have a 41% share, they could grow to EUR 464 million (sic) EUR 446 million of the service business.

So we are very happy that we can even in a more challenging market environment, increase the service revenues. And that, for sure, has also a lot to do with a good capital business with a good market shares we could develop in the projects over the past years, when the big projects were on the market. The order backlog is still favorably high at EUR 10.4 billion, majority comes from pulp and paper and from hydro. And of course, the majority comes from the large capital orders, only EUR 2.3 billion out of that is related to service business.

We have a significant increase in earnings and it shows that we, despite the challenges we had, that profitability remains very good. So the EBITDA went up from EUR 426 million to EUR 509 million at a constant profitability of 8.2%. If we adjust that for extraordinary items, we went up from the EUR 423 million to EUR 513 million. That's even up 21%, as we had a positive impact last year with the sale of a property. And we had this year some smaller restructuring measures in the order of EUR 4 million.

In total, I think it's a stable profitability we can report and the same applies if we look to the various business areas, stable in pulp and paper, hydro and separation and a very nice development in metals, significantly up in the profitability from 2.3% to 4.5%, showing that we are on the right track there.

So the details to the financials will be reported to you by our CFO, Norbert Nettesheim. Norbert, if you please continue.

[Norbert Nettesheim, executive]

Yes. Thank you for passing on to me. Ladies and gentlemen, who are in the call. Also good morning from my side. I'm happy to have a pleasure to present you this time again, an increase in net income margin start this time at the right side of this slide, 5.6% net income margin, a number which we didn't see for Andritz, at least as long as I can back -- can look back to the past. And this is the result of, let's say, the very good operational performance.

Joachim explained already EBITDA EUR 509 million. The rest from EBITDA down to net income is pretty much unchanged compared to previous periods. So I will not reflect too much on that. The only thing to mention here is that with the amortization, we have a major impact now, which certainly creates a little bit of tailwind for net income. This is simply due to the fact that the Schuler IFRS amortizations are over now after the acquisition in 2013 helps little bit technically, but let's say, the major impact comes from the real operational results. And this we see then also in the net income.

The next topic, which also is now an issue which shows a little bit of an improvement compared to what we showed you in the first half year. You maybe remember that in the first half year, I elaborated a little bit on this net working capital changes at Andritz. We had a huge impact on cash flow by the increase of the net working capital in the normal cycle of operating business. In the last -- in the first 2 quarters, it was about EUR 360 million. And I told you also in the last call that this trend of increasing working capital will not continue in the same way as it did in the first half year.

So in Q3, we saw only another EUR 30 million cash relevant increase in working capital. So in total, we expect that this is now, let's say, mostly digested. It depends a little bit on order income intake of the last quarter on the down payments and prepayments from new orders. But again, I would say we will not see similar effects as we saw it in Q1 or Q2 means now with this, let's say, slowing down of this increase in working capital, we show now also a positive cash flow of EUR 75 million. And for the quarter, we have here more than EUR 150 million cash flow. That means in Q3 we brought more or less our results also into the treasure box. Cash conversion rate was favorably back to nearly 1 in Q3.

In the small box at the right upper side of the chart, you see the explanations on working capital. And I simply want to point out line 1, line 2 and the second line before the end. These exactly are the lines which increased due to the execution of the large orders, increase in contract assets, increase in inventories and increase in advanced payments to suppliers.

This is simply the normal effect out of the execution of the major orders where we got the down payments in previous periods. Generally, prepayment situation is pretty stable. So what we consumed, we also got. So the last line contract liabilities is nearly stable, which means that, as I said before, we are coming now more in a steady state of working capital developments. That's it on cash flow and because it's so important, I added 2 additional slides on that.

Here, you see the average cash flow of the last full 7 years was more than EUR 300 million. So it means when you remember the operational results of the last 7 years, we are more or less bringing everything down to the cash flow, what we also -- what we look forward in profits. And you can trust that we are heavily working to continue this in the future. And with regard to the quarter-to-quarter view on operating cash flow, I have added here only as a onetime slide just this month, this quarter, a quarterly view on the cash flow. And you see here how significantly it is fluctuating from quarter-to-quarter.

So these comparisons quarter 3 to quarter 3 of previous years is mostly very much influenced by the order intake situation and by the down payment situation for the large orders. When you go to the 3 years rolling average, which you see at the right side of this slide, it's a much more stable business and the numbers are much more favorable as we see them from 1 quarter, maybe to the next quarter.

So this does a little bit of an education, but allow this, please, from my side to get a little bit clarity into this cash flow development topic. So that's about the cash flow. Cash flow ends at the end in the liquidity in the balance sheet. And also here, you see that from the end of the second quarter to end of the third quarter, we have improved. The net liquidity went up by EUR 125 million.

The gross liquidity didn't go up that much. The reason was very simply that we are still in the process of, let's say, optimizing our balance sheet a little bit. So we paid back EUR 100 million of debt in the Q3 which then, let's say, leaves us still a very comfortable cost liquidity of EUR 1.6 million. And compared to the size of our company, I would say we are here in a very favorable position and we are ready to execute whatever has to be executed and where we need cash for. So that's about the liquidity situation.

And last but not least, here, this summary slide more for you to read in the papers. Mostly said, order intake Joachim has emphasized on huge order is missing, revenues significantly increased, cash flow influenced by net working capital. And the topic at the last line, I would quickly emphasize on employees increased, but most of this increase is due to acquisitions and due to temporary effects in the staff on construction sites, which as soon as construction site is done, then also will be adjusted. So it's not an increase in fixed cost capacities -- in fixed capacities and will not be a burden for the future periods.

So that's it from my side. I'll pass back to you, Joachim, Thank you very much.

[Joachim Schönbeck, executive]

Thank you, Norbert for the explanations. Let's have a quick look to the various business areas, starting with pulp and paper. First, have a view on the markets of our customers, which usually give a good indication of what is going to come. We could see in September very nicely for the first time since 11 months because we could see an increase in prices in Northern Bleached Softwood Kraft, that's, I would say, a significant market churn for bleached eucalyptus kraft we could already see 4 months consecutive price increase. So I think that is good, even though demand for paper on board still remains below levels of 2022. I would say these are first good signs.

We -- with that, and we believe that also the ability for investments will increase next years with our customers, even though we do not expect a large greenfield project in the next year to come. So therefore, we are cautious in planning and we -- as you have learned in the previous years on the capital side, we are very -- I would say, very used to be very adaptable in our capacities to serve the large projects when they come and not to go into restructuring when they don't come.

So this flexibility is there -- however, we still see a demand for modernizations and also for the new businesses with the green products, the sidestream utilization in the pulp mills that is definitely going to come. Order intake in the third quarter low to EUR 600 million, backlog dropped due to the execution of these large orders by 18%. Revenue nicely up by 13% to almost EUR 1 billion. And the EBITDA with a margin of 10.3% on a very satisfactory level.

Looking to metals. The situation of the metals customers is, I would say, is still good, high -- relatively high investment activity still going on. Steel prices came down from the peak in May 2022, but still at very healthy levels and investment activities in the steel industry basically are focused around, first of all, the green steel and undertakings as well as e-mobility and for both of these activities, we have many products to offer.

We have the green hydrogen electrolyzers, carbon capture activities. On the battery side, we are providing, I would say, state-of-the-art technologies, we received an order for a pilot line for these next-generation solid-state lithium-ion batteries. I would say that's very significant step in our direction. Silicon steel will become of a demand to accommodate all these motors needed for the e-mobility rate reduction vehicles will play an even more important role and fuel sales for trucks you might have learned that significant investments have going on there and we're also part of that. And you can see that financials very favorably developed in the third quarter as well as in the first 3 quarters.

Order intake well up in the year-to-date 9, basically driven by metals processing, order backlog nicely up by 13% even though also the revenue by 14% in the quarter and 19% on the year-to-date 9. With EBITDA significantly increased from EUR 40 million to EUR 63 million from 3.6% to 4.7% on the year-to-date 9. I would say, confirming that we are moving in the right direction.

We would like to bring your attention to the first large order we have received for our green hydrogen activities. It's one of the largest electrolyzer orders in Europe so far. It's a 100-megawatt installation for green hydrogen from the steel companies, Salzgitter in Germany. It's a. Pressurized alkaline electrolyzer with technology from HydrogenPro. And we will deliver basically the plant and process engineering, piping, automation.

We have the assembly of the electrolyzer stacks. That's the, I would say, the core element of the electrolyzers and the installation and the building. So we are very happy that after Koppö Energia in Finland, who gave us the FEED contract in the second quarter that we now have the first firm delivery contract.

So looking to hydro, that's for sure, one of the market segments where market prospects are still very favorable. We see market picking up basically in all regions except Latin America. And while in EMEA and in North America. It is mainly related to modernizations and rehabilitations, we see new builds in China and in APAC. So it's a good mix.

Hydro will have a very high strategic relevance for the energy transformation that is planned in many countries around the world. It is important for grid stability out of the inertia of the technology employed. And of course, it's very important that gravity is available 24/7, which is not the case for all renewable energies.

If you look at the numbers, you can see that the order intake and revenue is up compared to last year. The EBITDA margin is down from last year, as the difficulties we had in the longer-lasting hydro projects from the supply chain issues over the past years, especially what came from the Ukrainian war, materialized only now. And so therefore, I would say we need some more months to address that. So the EBITDA margin is down to 5% in the first 3 quarters, down from 5.3%, but we believe that we have cleared out now these orders.

Looking to our last business area separation. We have -- we have an order intake which is up in the third quarter, but which is slightly down in the first 3 quarters to EUR 909 million, stable backlog. The revenue increased substantially in the third quarter as well as in the first 3 quarters. And here, we can happily say that the growth that is prevailing and is based on the good growth in the service business, which also helps our profitability.

In the markets we are serving in separation also investment decisions have been a bit delayed for the large capital orders. And therefore, we had to make up from the service. We had -- on the third quarter, we had a very nice development on the EBITDA, EBITDA margin up to 12.2%. And we are confident that we can further increase the service share in that business and maintain the good profitability.

Coming to the outlook, market outlook, as I said, basically not changed financial guidance for 2023 is confirmed. We see an impact on the investment and project decisions. We see relatively constant and good demand for the green products and also service remains stable and enable us to grow that business.

The economic and geopolitical environment is closely challenged, closely monitored by us. So we will continue for '23 with a profitable growth and we repeat that we anticipate a significant increase in revenue and earnings and we expect a stable profitability on an EBITDA margin level compared to 2022.

So thank you very much for listening to our presentation. And if there are any questions, we are happy to answer.

[Operator]

Yes. Thank you for your insights, Joachim and Norbert. So next, we will move on to a Q&A session. [Operator Instructions]

[Akash Gupta, analyst]

It's Akash here from JPMorgan. If I can start, I have 2 questions, please. And the first one is on pulp and paper order intake. So you had EUR 615 million in the quarter. And you were sounding a bit cautious on the greenfield where you don't expect any more orders in 2024. The question I have is that you also sounded a little bit optimistic on some -- given some improvement in pulp prices. So the question is more about what sort of order run rate shall we expect going forward? Because if I annualize EUR 615 million, it will be substantially below what market expectations are. So maybe if you can talk about the prospect for pulp and paper order intake in the next 12 months?

[Joachim Schönbeck, executive]

Yes. Akash, thank you very much for the questions. As I said, the large greenfield projects, we anticipate rather for 2025 than for 2024. We -- for sure, will grow the service business further also for next year for the medium-sized modernizations and potential side streams, biomethanol lignin separation these areas. There are projects, and as we see the prices on the -- prices on our customer base is developing further that we will -- we also believe that we will see some improved investment activities in the next year. So we would consider a quarter of EUR 616 million rather the bottom of the cycle than that we expect that to continue further.

[Akash Gupta, analyst]

And my second question is on M&A pipeline. And you announced to midsized deal in the quarter. We see that the multiple in the equity market have come down a lot since the start of the year, and you have a very overcapitalized balance sheet. Maybe if you could talk about what sort of activity are you seeing in your M&A pipeline? And is there any potential target that could be size of, let's say, Schuler or Xerium, for example?

[Joachim Schönbeck, executive]

Yes, we are -- as you could see from the acquisitions we made, we are further targeting that. We are looking on opportunities, for sure, we are in a position to proceed with acquisitions of our interest. We will stay with our basic philosophy on acquisitions that it should be complementary to our existing business. So direct competition will definitely be monitored very carefully. And I would say the focus definitely is on the service business and the automation side. We will continue that, and we are active in some discussions already.

[Operator]

The next question comes from Sven Weier from UBS.

[Sven Weier, analyst]

Listen, the first question I had was more precisely on Q4, right? Because we all see that Q3 was very silent, let's say, on big tickets. You just had this green hydrogen order, but otherwise, it was relatively quiet. Now when we start to look at your press releases that you had since the beginning of Q4, it was actually quite noisy, especially on the pulp side. I mean I have no idea how big these orders are. But I guess you just said that the order intake in Q3, you had in part was probably the bottom. Is it fair to believe that Q4 could already show a tangible upswing just simply because you already had a few big tickets and maybe the same question also for the other divisions.

[Joachim Schönbeck, executive]

Yes. We had -- thank you for the question. It was a quiet quarter, if you look to pulp and paper. I think we have even with a very reserved environment we have, we could increase the order intake in the other 3 business areas that should not be overlooked. We believe that the fourth quarter on the pulp and paper side, we expect some improvements. But of course, the difficulty with the future is that we don't know it. But as I said, we expected -- or we believe that the Q3 order intake on the pulp and paper side is on the bottom side of the cycle.

[Sven Weier, analyst]

And in the other 3 divisions, what is the activity there? Should we -- I mean, it was good in Q3, no doubt. But -- do you also see some big tickets for the other 3 divisions for Q4?

[Joachim Schönbeck, executive]

We, for sure, see something in hydro. And for metals, we would rather see it on a continuous compared to the previous quarter this year. I have to say that I don't have the quarterly figures for the all divisions from last year now in my head. So I cannot really judge on that. But I would expect the order intake stable compared with Q3 of this year.

[Sven Weier, analyst]

And just my question then on the hydro margin, you already mentioned maybe there was still a delayed impact from inflation, was just wondering, is that still -- I think you said that might still continue for a few months. So do you think that the issue will be dealt, of course, by the end of this year and then 2024 there's no more impact on this? So how should we think about the hydro margin?

[Joachim Schönbeck, executive]

Yes, we believe so. That is a fair assumption. We had to clear out certain supply chain issues which surfaced during this year only. As you know, many of these hydro projects, they continue over 5, 6, 7 years. So we usually have price adjustment clauses in. So inflation will finally be, I would say, shared between the customers and ourselves. But usually, the mechanisms are such that we be clear that with the customer rather at the end of the project than on a consecutive base.

But of course, we have to account for the costs to come as soon as we know them. So therefore, we have -- I would say, we have a time shift there, which has impacted, which has impacted the profitability. And we believe that we will be back to a stable situation next year.

[Sven Weier, analyst]

The final question, if I may, is just again on hydro, and you talked about the regional prospects. I mean I'm wondering also more specifically about Africa, right? I mean, we all know there's a huge untapped potential there. But I guess, in the past, also maybe more politically difficult to get the project they had. I mean now with the overall energy transition going on, do you sense kind of renewed momentum in Africa that things are getting done or starts to be done? Or do we still think that will take quite a few years until we see more.

[Joachim Schönbeck, executive]

We are -- I mean, we are not very upbeat that we could increase our order intake from Africa substantially. We had -- we booked last year, we booked a large project in Senegal. You might recall that -- and we rather believe that this will continue on that level. Political environment is definitely more of relevance to the development of the African market than the, I would say, the desire for energy transition in the Western world. I would say it's a more slow process.

[Operator]

It seems that we don't have any more questions coming from the audience. So this means that we will conclude this webcast. So ladies and gentlemen -- 1 more? Okay, please.

[Akash Gupta, analyst]

Akash here from JPMorgan again with a follow-up. The follow-up question I have is that you have announced a Capital Markets Day on January 24. And I'm wondering if you can talk about what shall we expect? And you have done some change in the segment structure last year. So will it be fair to expect a new margin target for the segment.

[Joachim Schönbeck, executive]

Yes, we can -- that is what you can expect margin targets for the segments and I would say, more refined strategy and, I would say a renewed road map as 2022 to 2024 road map is coming to its -- basically to its end.

[Operator]

Are there any more questions coming up? One, I believe -- the next question comes from Peter Rothenaicher from Baader Bank AG.

[Peter Rothenaicher, analyst]

Yes, gentlemen. So in the quarterly report, you have, as in the half year report, once again, the statement of risk of capacity adjustments needed. Can you comment a little bit how evident is this looking into 2024. So in particularly, what do you consider is the situation regarding capacity utilization for the big pulp projects. Is there a risk of some necessary adjustments? And is this statement only referring then to pulp and paper?

[Joachim Schönbeck, executive]

No, we don't -- as I said, we are quite used to the capacity adjustments between the years when we have these large projects under executions and the years where we don't have that. So the capacity adjustments we need to do in the majority of a temporary kind and will not have a significant impact on the bottom line of our results. So we are quite used to through that process. And therefore, we need -- it's only that we need to maintain our ability to deliver the large projects over the times when they are not on the market.

[Peter Rothenaicher, analyst]

Okay. Another question regarding the hydrogen project. So I saw you now explicitly booked within the metals. Can you comment what is the reason for putting it into metals and not pulp and paper and -- does this mean all hydrogen projects or activities are then booked within metals?

[Joachim Schönbeck, executive]

No, we have -- you're right to question that, but we now happily have the first big order from a steel customer. So you could think it's the right place to book it. It is part of metals as it developed our -- from our own development around that. And that came from metals as we have electrolyzers technology available in metals from our galvanizing plants. So this is where it origined and this is why we have it in metals. But you could also see that we are serving various industries with that. Koppö Energia is from the energy utility sector, Salzgitter from the metal sector. So therefore, it's more historically driven than the outcome of a clear market consideration.

[Peter Rothenaicher, analyst]

Okay. And with regard to the first order from Finland you got, do you expect the follow-up all the -- for the construction to come up quite soon?

[Joachim Schönbeck, executive]

We believe and we hope that it will -- in the first half of next year, that the investors will get a final go. We have clarified everything for the financing and that we get a green light for a full notice to proceed. I can tell you, on our side, the FEED study, everything is on time and delivered to the satisfaction of the customer, and we have not heard any shortcomings there.

[Peter Rothenaicher, analyst]

Recently, I've read in an article that the cost of production for hydrogen seem to be much higher than initially expected. So what is your view on this? Might it have a negative impact on investment activity in your view?

[Joachim Schönbeck, executive]

So at least we are not surprised by the costs. And -- but of course, we can see that in public opinion, this energy transition is made of many illusions. So there might be people who thought that green energy is for free. We never had that idea, but we can confirm that the costs are within what we have promised and guaranteed to the customer.

[Operator]

Okay. It seems that was the last question we received today. So I would like to thank the audience and wish you a good day.

[Joachim Schönbeck, executive]

Thank you very much from our side. Bye-bye. Thank you.