Value creation and our impacts

The key resources for Outotec’s value creation are deep know-how of processing natural resources, technology patents, research and development, as well as Outotec brand. In addition, long customer and supplier relationships are essential resources for the company.

Financial impact

Outotec’s approach to economic sustainability is demonstrated by our long-term financial targets involving profitability and continuous growth. We strive for transparency in our operations, and we base our decisions on sound business reasons and commercial rationale. Our approach is also reflected in four of our material themes:

 

Outotec's value creation model and impacts

Direct economic value generated and distributed (GRI 201-1)

The market environment improved in 2017, and the year was clearly more positive for Outotec than 2016. Our order intake increased by 20% from 2016 and we saw an accelerated growth towards the end of the year. In terms of sales and profitability, our two business segments were in different phases. The sales of the Minerals Processing segment and services developed favorably throughout the year, whereas the sales of the Metals, Energy & Water segment decreased. Group sales increased by 8% and service sales by 6% from 2016. The sales growth and our fixed cost savings which improved our profitability. However, our two business segments were in different phases and the result of Metals, Energy & Water remained negative. Therefore, we initiated new measures – such as the outsourcing of some engineering activities – to enhance flexibility and ensure the future profitability of the segment.
 
At the end of 2017, Outotec’s market capitalization was EUR 1,300 million (2016: EUR 914 million). The total wealth created by Outotec in 2017 was EUR 347 million (EUR 344 million).
 
As Outotec’s key asset is employees, the most significant economic value distributed is wages and salaries, which amounted to EUR 326 million in 2017 (EUR 329 million).  

Region Wages and salaries, EUR million Number of employees
EMEA 199 2,813
Americas 59 758
APAC 68 575

Long customer relationships and 3,000 direct suppliers are also essential resources for Outotec, since some 90% of our manufacturing (based on monetary value) is sourced from external suppliers. Due to negative result in 2016, Outotec did neither pay dividends to shareholders nor contributions to charities in 2017. In future, Outotec aims to maintain its leadership in sustainable technologies and grow its service business to enhance its ability to create value over the cycles.

Indirect economic impacts (GRI 203-2)

Large mines and processing plant investments – built with Outotec technology – considerably boost the development of the host country and its economy. They may create hundreds or thousands of new jobs, while also leading to the establishment of new industrial plants and growth of businesses along the value chain from natural resource extraction to finished products. In such greenfield plant deliveries by Outotec, the indirect economic impacts are considered significant. Outotec has been active in developing the resource based industries in many developing countries, such as Mongolia, Kazakhstan, and Zambia, to mention a few. 

As the majority of Outotec’s manufacturing is sourced from external suppliers, we play an important role in supporting local businesses. This generates employment and wealth in local communities. In large projects, as many as several hundred local engineers and other specialists, contractors and service providers work for us. A single large project can consist of over 10 million working hours at customer's site. Most of this work is done by local suppliers or subcontractors.

In 2017, Outotec’s largest projects under implementation in terms of number of contractors were in the United Arab Emirates, Brazil, Peru and Bahrain. In terms of money, the largest shares – each amounting to EUR 10–50 million – were spent in Australia, Brazil, Canada, Chile, China, Mexico, the USA and South Africa. The remaining spend was distributed among 38 countries.

Where Outotec has long-term service contracts with customers, maintenance and service personnel are normally hired locally and we train them for their specific tasks after the plant has been built.  Often Outotec technologies help to improve the environmental conditions of the communities surrounding customers’ plants, which improves the living conditions of people, contributes to a healthier population and boosts agriculture and small businesses. One example of measuring the environmental impacts is described in our case about the reduction of sulfur dioxide emissions verified by satellite data.

We have also calculated the financial impact of the annual emissions avoided by Outotec’s customers, in total 6.2 million tonnes CO2e, using seven Outotec technologies. The CO2 European Emission Allowances Commodity Price (Dec 31, 2017) was EUR 5.76/tonne CO2. By using this price, the value of the emissions avoided was approximately EUR 36 million. Using similar calculating method, the financial impact of our own emissions was EUR 159,000, and that of our supply chain EUR 2.9 million. 

R&D activities generate jobs and enhance skills

Outotec also contributes to local communities through university cooperation and subcontracting R&D work, which generates local jobs and enhances skills and knowledge development. Ongoing research and development activities run together with our external partners received EUR 2.5 million in public funding. We additionally subcontracted work packages out to universities and mainly small and medium sized enterprises for more than twice this sum, over EUR 7.7 million. We also cooperate with local universities to enhance the skills and knowledge of students and decision-makers and train future plant operators and service personnel.

Non-discriminatory tax policy

As a globally operating company, Outotec engages in a variety of tax laws, regulations, practices and interpretations. The international tax environment is challenging to navigate, however we are committed to being a responsible, compliant tax payer in each country where we operate. We pursue transparency and fairness in our tax practices, and do not engage in aggressive tax planning. Our tax management has a proactive approach. 

In 2017, Outotec paid a total of EUR 2.5 million (EUR 6.4 million) in corporate income taxes. The following table below lists the corporate income tax rates for Outotec in the countries where we were subject to corporate income taxation in 2017. In Finland, Outotec paid EUR 1.6 million (EUR 2.3 million) in income taxes, and in other countries EUR 0.9 million (EUR 4.1 million). Outotec’s effective tax rate was 87% (11%). The US tax reform had a one-time negative effect of EUR 6 million to the tax rate in 2017. Without this one-time item, our effective tax rate would have been 45%.

Also, Outotec pays, collects and remits other taxes and tax-like payments, such as value added and sales taxes, payroll taxes and capital taxes. Our total tax contribution varies depending on the geographical distribution of sales, which in turn is affected by our product mix and locations of customer projects. We have transparent communication with the tax authorities in every country where we operate. 

Outotec engages in large projects, however there may be only one project ongoing in a country.

Due to the confidential nature of the information and the varying quantities of projects worldwide we cannot disclose country specific financial information. Also, the destinations of our sales typically do not correspond with the places in which the work and sales activities are performed, value created, and where the income must be reported and taxes paid. Providing country-specific tax information would not give a comprehensive picture of the fairness of the tax distribution in Outotec’s case.  

Corporate income tax rates by country in 2017

Country

Effective income tax, %

Australia

30

Austria

25

Bahrain

0

Brazil

34

Bulgaria

10

Canada

25.8

Chile

25.5

China

25

Finland

20

Germany

29.2

Ghana

25

Greece

29

India

30.9

Indonesia

25

Kazakhstan

20

Mexico

30

Mongolia

10 – 25

Morocco

10 – 31

Mozambique

32

Namibia

32

Netherlands

20 – 25

New Caledonia

30

Norway

24

Peru

29.5

Philippines

30

Poland

19

Qatar

10

Russia

20

Saudi Arabia

20

Serbia

15

South Africa

28

Spain

25

Sri Lanka

28

Sweden

22

Turkey

20

United Arab Emirates

0

United Kingdom

19

United States

38

Zambia

35

Related policies