2007-07-26 11:01:47 CEST
2007-07-26 11:01:47 CEST
BIRTINGARSKYLDAR UPPLÝSNINGAR
Metso Oyj - Half Year financial report
Metso s Interim Review for January 1 - June 30, 2007
Another strong quarter for Metso
Highlights of the second quarter
* New orders worth EUR 2,090 million were received in April -
June, i.e. 50 percent more than in the corresponding period of last
year (EUR 1,390 million in Q2/06).
* The order backlog grew by 22 percent from the end of
December 2006 and was EUR 4,574 million at the end of June 2007
(EUR 3,737 million on Dec. 31, 2006).
* Net sales increased by 31 percent and totaled EUR 1,536
million (EUR 1,170 million in Q2/06).
* Earnings before interest, tax and amortization (EBITA) were
EUR 162.3 million, i.e. 10.6 percent of net sales (EUR 120.7
million and 10.3% in Q2/06).
* Operating profit (EBIT) was EUR 148.3 million, i.e. 9.7
percent of net sales (EUR 116.4 million and 10.0% in Q2/06).
* Earnings per share were EUR 0.68 (EUR 0.97 in Q2/06).
* Free cash flow was EUR 67 million negative (EUR 26 million
in Q2/06)."The second quarter was another strong quarter for Metso. We saw
brisk order intake in all our main businesses and our order backlog
strengthened to an all-time-high level. This, together with the
continuing favorable market outlook gives us exceptionally good
visibility not only for the current year but also for 2008," says
Jorma Eloranta, President and CEO, Metso Corporation.
Eloranta says that Metso's second-quarter financial performance was a
substantial improvement on the seasonally low first quarter. "The
growth in net sales was healthy both in Metso Minerals and Metso
Automation, which delivered strong organic growth of more than 20
percent. I am also pleased with our second-quarter operating profit
driven by strong volumes, which set a new quarterly record for Metso.
Our free cash flow during the second quarter was negative mainly
because of volume driven increase in receivables at the end of June.
I consider this to be primarily a timing issue related to project
deliveries," explains Eloranta.
Eloranta says that Metso's main operational priority is to ensure
that the delivery capability continues to meet robust demand and
healthy growth rates and competitiveness are sustained. "We are
implementing various expansion programs to enhance our delivery
capability and have increased our capital expenditure plans for 2007
to this end. We are also continuing our concerted efforts to develop
our aftermarket operations, strengthen our global presence and to
evaluate complementary acquisition candidates to accelerate Metso's
growth even further," concludes Eloranta.
Metso's key figures
EUR million Q2/07 Q2/06 Change % Q1- Q1- Change % 2006
Q2/07 Q2/06
Net sales 1,536 1,170 31 2,902 2,248 29 4,955
Earnings before
interest, tax and 162.3 120.7 34 284.2 220.6 29 481.1
amortization (EBITA)
% of net sales 10.6 10.3 9.8 9.8 9.7
Operating profit 148.3 116.4 27 256.7 211.8 21 457.2
% of net sales 9.7 10.0 8.8 9.4 9.2
Earnings per share, 0.68 0.97 (30) 1.18 1.44 (18) 2.89
basic, EUR
Orders received 2,090 1,390 50 3,754 2,827 33 5,705
Order backlog at end 4,574 2,864 60 3,737
of period
Free cash flow (67) 26 n.a. 30 178 (83) 327
Return on capital 24.0
employed (ROCE), 21.7 22.2
annualized, %
Equity to assets 34.9 37.2 36.1
ratio at end of
period, %
Gearing at end of 42.6 24.2 30.8
period, %
Metso's second quarter 2007 review
Operating environment and demand for products in April-June
The market situation for Metso's products and services continued to
be favorable during the second quarter.
Metso Paper's market situation was similar to that of the first
quarter. The demand for new paper, board and tissue machines remained
good in China, where continuing strong economic growth is fuelling
the demand for various paper and board grades. The demand for fiber
lines was good in South America and Asia, where pulp production
capacity continues to increase rapidly due to good availability of
cost competitive raw materials. In Europe and North America, the
demand focused mainly on machine rebuilds and aftermarket services.
Demand for power plants that use renewable energy sources was
excellent and resulted from worldwide industry attempts to increase
energy self-sufficiency and reduce climatic impacts.
The demand for Metso Minerals' mining products, metal recycling
equipment and aftermarket services remained excellent, as in the
first quarter. The continuing high level of investment in industrial
and commercial facilities, infrastructure, services and housing,
particularly in emerging countries, has maintained lively demand for
various metals. As a result, mining industry investments have
continued at an excellent level globally. In the construction
industry, the demand for Metso Minerals' aggregates
production-related equipment remained excellent in Europe and good in
other markets. Demand is driven especially by projects to develop
road networks and other transportation infrastructure in various
parts of the world.
Metso Automation's market situation was good in the fiber and paper
industry. In the power, oil and gas industry, the demand for process
automation systems was good and the demand for flow control systems
was excellent. Energy industry investments are driven by the
increased consumption of energy and high oil prices due to global
economic growth.
Orders received in April-June
Metso's order intake during the second quarter was at an all time
high, EUR 2,090 million, which is 50 percent more than during the
same period a year before. About one third of the growth was organic
and the rest was due to the acquisition of the Pulping and Power
businesses that was completed at the end of 2006.
At Metso Paper, the growth in new orders came through the acquired
businesses, especially the Power business line, which had a strong
quarter with new orders worth EUR 480 million. Metso Paper's largest
orders for April-June included pulp mill equipment for Votorantim
Celulose e Papel in Brazil and for Celulose Beira Industrial in
Portugal, and an order received for a printing paper line for Henan
Puyang Longfeng Paper in China. Metso Paper also received an order
for two biomass-fired power boilers for EDP Producão - Bioeléctrica
S.A. in Portugal.
Metso Minerals' order intake continued to grow at the healthy 27
percent pace. Orders increased strongly in all business lines and in
all geographical regions except Asia-Pacific, where no major orders
were received due to timing reasons. Metso Minerals' largest orders
were a materials handling solution for Companhia Brasileira de
Alumínio to Brazil and minerals processing equipment for Gold Reserve
for its gold-copper project in Venezuela.
Metso Automation's new orders in the second quarter were on par with
the same period a year earlier. Metso Automation's largest orders
were a process automation system for Henan Puyang Longfeng Paper in
China and an automationsystem modernization project for an oil
refinery in Brazil.
Financial performance in April-June
Metso's net sales in the second quarter grew 31 percent compared with
the corresponding period last year and were EUR 1,536 million. In
Metso Paper, the growth came from the acquired Pulping and Power
businesses. Metso Minerals and Metso Automation delivered strong
organic growth.
As expected, Metso's second-quarter financial performance improved
substantially on the first quarter. Earnings before interest, tax and
amortization (EBITA) were EUR 162.3 million or 10.6 percent of net
sales compared with EUR 120.7 million or 10.3 percent of net sales
for the corresponding period last year. EBITA and EBITA margin
improved for both Metso Paper and Metso Minerals, while Metso
Automation's EBITA improved but EBITA margin decreased slightly.
Metso's second-quarter operating profit was EUR 148.3 million or 9.7
percent of net sales compared with EUR 116.4 million or 10.0 percent
of net sales a year earlier.
Metso's January-June 2007 Interim Review
Orders received and order backlog
In the first half of the year, Metso's orders received grew by 33
percent on the comparison period, and were EUR 3,754 million. Orders
received grew in all business areas. The increase in orders was
proportionally strongest in Metso Paper's Power business line, Metso
Minerals' Recycling business line and Metso Automation's Flow Control
business line. Two thirds of the new orders increase was attributable
to the acquisition of the Pulping and Power businesses. Metso's order
backlog increased by 22 percent on the end of 2006 and was EUR 4,574
million at the end of June.
Orders received by business area
Q1-Q2/07 Q1-Q2/06
EUR million % of orders EUR % of orders
received million received
Metso Paper 1,756 46 1,108 39
Metso Minerals 1,569 42 1,314 46
Metso Automation 413 11 372 13
Valmet Automotive 47 1 59 2
Intra-Metso and other (31) (26)
orders received
Total 3,754 100 2,827 100
Orders received by market area
Q1-Q2/07 Q1-Q2/06
EUR million % of orders EUR % of orders
received million received
Europe 1,606 43 1,070 37
North America 596 16 609 22
South and Central America 442 12 318 11
Asia-Pacific 872 23 643 23
Rest of the world 238 6 187 7
Total 3,754 100 2,827 100
Net sales
Metso's net sales for January-June grew by 29 percent on the
comparison period and totaled EUR 2,902 million. The increase would
have been 3 percentage points higher without the effect of exchange
rate translation. Excluding the effect of the Pulping and Power
businesses acquired at the end of 2006, the increase in net sales was
approximately 14 percent. The main drivers for organic growth were
the continuing good market situation and strengthened
competitiveness. Aftermarket operations accounted for 33 percent (37%
in Q1-Q2/06) of Metso's net sales. Decrease in the share of
aftermarket operations was mainly due to the acquired Pulping and
Power businesses, where the share of aftermarket business is below
Metso's average. Measured in euros, the net sales of aftermarket
operations increased by 17 percent.
Net sales by business area
Q1-Q2/07 Q1-Q2/06
EUR million % of net EUR million % of net
sales sales
Metso Paper 1,374 47 886 39
Metso Minerals 1,188 40 1,044 46
Metso Automation 320 11 274 12
Valmet Automotive 47 2 59 3
Intra-Metso net sales and (27) (15)
other
Total 2,902 100 2,248 100
Net sales by market area
Q1-Q2/07 Q1-Q2/06
EUR million % of net EUR million % of net
sales sales
Europe 1,155 40 939 42
North America 548 19 505 22
South and Central 421 14 287 13
America
Asia-Pacific 657 23 404 18
Rest of the world 121 4 113 5
Total 2,902 100 2,248 100
Financial result
Metso's earnings before interest, tax and amortization (EBITA) during
the first half of 2007 were EUR 284.2 million or 9.8 percent of net
sales (EUR 220.6 million or 9.8 percent in Q1-Q2/06). EBITA in euros
improved clearly in all business areas primarily due to strong volume
growth. EBITA margin improved both for Metso Paper and Metso
Minerals, while it decreased slightly for Metso Automation. At Metso
Paper, improvement came from all business lines. Metso Paper's
profitability was negatively affected during the first half by about
EUR 10 million because of a steep increase in stainless steel price.
Metso Minerals' profitability improved in all business lines, with
the greatest improvement recorded for the Mining business line. Metso
Automation's EBITA margin was negatively affected by the rise in raw
material and subcontracting prices and due to large share of project
deliveries.
Metso's operating profit was EUR 256.7 million or 8.8 percent of net
sales in January-June (EUR 211.8 million or 9.4 percent in Q1-Q2/06).
Operating profit includes a EUR 18 million amortization of intangible
assets related to the acquisition of the Pulping and Power businesses
and a EUR 3 million credit loss in Metso Paper.
Metso's net financial expenses were EUR 18 million in January-June
(EUR 18 million).
Metso's profit from continuing operations before taxes in the first
half-year was EUR 238 million (EUR 194 million). The profit
attributable to shareholders was EUR 167 million (EUR 204 million) in
January-June, corresponding to earnings per share (EPS) of EUR 1.18
(EUR 1.44 per share). In the comparison period, Metso recognized in
the income statement a nonrecurring deferred tax asset of EUR 57
million related to its U.S. operations, which lowered the tax rate
for 2006 and improved EPS by EUR 0.40. Metso's tax rate for 2007 is
estimated to be about 30 percent.
The return on capital employed (ROCE) was 24.0 percent (21.7%) and
the return on equity (ROE) was 23.5 percent (32.5%).
Cash flow and financing
Metso's net cash generated by operating activities during the first
six months was EUR 95 million (EUR 225 million). As a result of the
strong growth of the order backlog and net sales, both inventories
and receivables increased strongly in all business areas during the
second quarter. Growth in inventories was offset by growth in
advances received and accounts payable, but strong growth in
receivables, especially in June, had a negative impact on net working
capital, which increased by EUR 176 million in the second quarter.
Mainly because of timing and the volume-driven increase in
receivables in June, Metso's free cash flow was EUR 67 million
negative during the second quarter. Free cash flow for the first six
months was EUR 30 million (EUR 178 million).
Net interest-bearing liabilities totaled EUR 623 million at the end
of June. Gearing was 42.6 percent. Metso's equity to assets ratio was
34.9 percent. In April, Metso paid dividends of EUR 212 million for
2006.
In May, Standard & Poor's Ratings Services upgraded the long-term
credit rating of Metso Corporation to BBB from BBB- and the
short-term rating to A-2 from A-3. The rating on Metso's senior
unsecured debt was upgraded to BBB- from BB+. The outlook on rating
is considered stable.
The current Moody's Investor Service rating for Metso's long-term
credit is Baa3. The outlook on rating is considered stable.
Capital expenditure
Metso's gross capital expenditure in the first half-year was EUR 74
million excluding acquisitions (EUR 57 million). About one third of
the capital expenditure was related to capacity increasing
investments necessitated by strong volume growth.
In the second quarter, Metso decided to establish a service center
for Metso Paper at Guangzhou, China. The service center will start
its operations in 2008. Also in China, Metso Paper's Service Center
in Wuxi and Metso Automation's valve production plant in Shanghai are
being expanded.
In India, Metso is expanding mobile crusher assembly capacity in
Bawal. The capacity of the Brazilian crusher manufacturing plant is
also being expanded.
In Finland, Metso is expanding its power boiler production facilities
at Lapua and increasing the capacity in the paper machine roll
production line in Jyväskylä. A new assembly line for mobile crushers
was introduced in Tampere early in the year, and a crusher pilot
plant and test laboratory are still under construction.
Metso has also decided to invest in an enterprise resource planning
(ERP) solution covering the entire supply chain within Metso
Automation. The investment is due to be completed by the turn of
2009-2010. Similar investment is underway in Metso Minerals.
Metso estimates that the gross capital expenditure in 2007 will be
about 30 percent higher than in 2006. The growth will be due to
capacity increasing investments, as well as the ERP investments of
Metso Minerals and Metso Automation.
Metso's research and development expenditure totaled EUR 57 million
(EUR 54 million) during January-June, i.e. 2.0 percent of Metso's net
sales.
Holding in Talvivaara Mining Company Ltd
Metso has an approximate 4 percent holding in Talvivaara Mining
Company Ltd, which was listed on the London Stock Exchange in May
2007. Metso's holding, which is classified in the balance sheet as an
available-for-sale investment, was valued at approximately EUR 29
million at the end of June. In connection with the listing, Metso has
undertaken to retain its Talvivaara shares for at least 6 months.
Metso's holding relates to joint R&D project with Talvivaara Mining
Company in the development of rock processing and bulk materials
handling processes.
Acquisitions and divestments
In June 2007, Metso strengthened Metso Paper's maintenance service
business by acquiring Mecanique et Depannage Industries s.a.r.l.
(MDI) from France. MDI employs 30 people.
In March 2007, Metso acquired the North American metal recycling
technology provider, Bulk Equipment Systems and Technologies Inc.
(B.E.S.T. Inc), located in Cleveland, Ohio. The acquisition price,
approximately EUR 9 million, was paid in April. The company's net
sales in 2006 were EUR 8 million and it employs approximately 40
people. The company is integrated in Metso Minerals' Recycling
business line.
In March 2007, Metso sold the majority of Metso Paper AG in Delémont,
Switzerland. Metso Paper remained as a minority shareholder in the
company. Metso Paper AG is a supplier of roll logistic systems,
solutions and services. The company has about 70 employees and annual
net sales of approximately EUR 10 million.
Acquisition and integration of the Pulping and Power businesses
Metso closed the acquisition of Aker Kvaerner's Pulping and Power
businesses on December 29, 2006. The parties have reached an
agreement on the balance sheet value of the acquired businesses and
the earlier estimated acquisition price (EUR 341 million) was revised
to EUR 336 million, including EUR 6 million in expenses related to
the acquisition and EUR 53 million in net cash.
Metso estimates that the annual cost savings achievable through
synergies will amount to EUR 20-25 million after integration. About
one third of these are expected to be realized during 2007. During
the first half-year about EUR 6 million of synergy benefits were
realized. The nonrecurring expenses resulting from integration of the
acquired businesses are estimated to be less than EUR 10 million, of
which EUR 3 million was recognized in the first half and the rest are
expected to be recorded in the remaining two quarters in 2007.
Integration of the acquired businesses into Metso Paper has proceeded
according to plan. During the first half-year, the global customer
interface organization was restructured and employee negotiations
were completed regarding the pruning of overlapping activities in
Sweden and Finland. By the end of June these measures resulted into
the reduction of about 100 employees.
The amortization of intangible assets resulting from the transaction
is estimated to be EUR 37 million in 2007, EUR 20 million in 2008 and
after that EUR 13 million annually until the intangible assets have
been fully amortized. The rest of the transaction price exceeding the
balance sheet value will remain as goodwill, which is not amortized.
In the first half-year, the amortization of intangible assets
amounted to EUR 18 million.
Personnel
Metso had 26,609 employees at the end of June, about 300 of who were
seasonal workers. This was 993 employees more than at the end of the
first quarter (25,616 employees). In the first half-year, Metso had
an average of 25,968 employees.
Personnel by area
June 30, 2007 Dec 31, 2006 Change %
Finland 9,783 9,281 5
Other Nordic countries 3,587 3,580 0
Other Europe 3,016 3,067 (2)
North America 3,773 3,715 2
South and Central America 2,564 2,439 5
Asia-Pacific 2,497 2,262 10
Rest of the world 1,389 1,334 4
Total personnel 26,609 25,678 4
BUSINESSES
Metso Paper
EUR million Q2/07 Q2/06 Change Q1-Q2/07 Q1-Q2/06 Change 2006
% %
Net sales 708 469 51 1,374 886 55 2,092
Earnings before
interest, tax and 47.7 27.4 74 84.8 51.2 66 105.6
amortization
(EBITA)
% of net sales 6.7 5.8 6.2 5.8 5.0
Operating profit 35.7 25.1 42 61.1 46.6 31 89.8
% of net sales 5.0 5.4 4.4 5.3 4.3
Orders received 1,103 564 96 1,756 1,108 58 2,276
Order backlog at 2,584 1,540 68 2,225
end of period
Personnel at end 11,954 9,328 28 11,558
of period
Aker Kvaerner's Pulping and Power businesses were acquired as of
December 29, 2006, and the acquired balance sheet was consolidated to
Metso on December 31, 2006. The acquired businesses had no effect to
Metso's income statement for 2006 and are therefore not included in
the comparative segment information except for order backlog and
personnel as at December 31, 2006.
In January-June, Metso Paper's net sales increased by 55 percent on
the comparison period and totaled EUR 1,374 million.
About two thirds of the net sales growth was attributable to the
Pulping and Power businesses acquired at the end of 2006. The
aftermarket business accounted for 28 percent of net sales (35% in
Q1-Q2/06). The decline in the share of aftermarket business was due
to the acquired Pulping and Power businesses, where the share of
aftermarket business is below Metso Paper's average. Measured in
euros, the volume of aftermarket business increased by 26 percent,
and the growth was attributable mainly to the acquired Pulping and
Power businesses.
Metso Paper's EBITA was EUR 84.8 million, i.e. 6.2 percent of net
sales (EUR 51.2 million or 5.8% in Q1-Q2/06). The operating profit
was EUR 61.1 million, i.e. 4.4 percent of net sales (EUR 46.6 million
or 5.3% in Q1-Q2/06). The operating profit for the first half-year
includes a EUR 18 million amortization of intangible assets related
to the acquisition of the Pulping and Power businesses and a EUR 3
million credit loss. The estimated negative impact of the steep rise
in stainless steel price during the first half-year was about EUR 10
million.
The value of orders received by Metso Paper increased by 58 percent
on the comparison period and totaled EUR 1,756 million. The order
intake of the Power business line almost doubled and the order intake
of the Paper and Board business lines grew by about one fourth. On
the other hand, in the Panelboard and Tissue business lines, order
intake declined clearly. Excluding the effect of the Pulping and
Power businesses, Metso Paper's volume of new orders grew by 3
percent. Among the most significant orders in January-June were
orders received from Oji Paper for a paper making line in Japan, from
Henan Puyang Longfeng Paper for a printing paper line in China, and
for pulp mill equipment from VCP in Brazil and Celbi in Portugal. A
long-term maintenance agreement was signed in the review period with
Plattling Papier's mill in Germany. This is Metso Paper's first
extensive service agreement for a production plant still under
construction.
The end-of-June order backlog, EUR 2,584 million, was 16 percent
higher than the order backlog at the end of 2006.
Metso Minerals
EUR million Q2/07 Q2/06 Change % Q1-Q2/07 Q1-Q2/06 Change 2006
%
Net sales 648 541 20 1,188 1,044 14 2,199
Earnings before
interest, tax and 96.9 72.8 33 165.6 134.3 23 302.1
amortization
(EBITA)
% of net sales 15.0 13.5 13.9 12.9 13.7
Operating profit 95.7 71.6 34 163.5 131.8 24 297.7
% of net sales 14.8 13.2 13.8 12.6 13.5
Orders received 798 628 27 1,569 1,314 19 2,655
Order backlog at 1,673 1,101 52 1,277
end of period
Personnel at end 9,967 9,124 9 9,433
of period
In January-June, Metso Minerals' net sales increased by 14 percent on
the comparison period and totaled EUR 1,188 million. The majority of
the growth was derived from the Mining business line. The net sales
of the Construction business line were also up on the comparison
period. The Recycling business line's net sales were on par with the
comparison period. Metso Minerals' aftermarket business accounted for
42 percent of net sales (43% in Q1-Q2/06). Measured in euros, the
volume of the aftermarket business grew by 12 percent.
The operating profit of Metso Minerals was EUR 163.5 million, or 13.8
percent of net sales. All business lines improved profitability, with
the Mining business line recording the strongest improvement as a
result of robust volume growth.
The value of orders received by Metso Minerals was up by 19 percent
and totaled EUR 1,569 million. Order intake grew strongly in all
business lines. Among the largest orders in January-June were orders
received for a grinding system from Boliden in Sweden, for bulk
materials handling equipment from Alcoa in Brazil, for minerals
processing equipment to Gold Reserve Inc. in Venezuela and grinding
equipment from Osisko Exploration in Canada. The order backlog
increased by 31 percent on the end of 2006 and was EUR 1,673 million
at the end of June.
Metso Automation
EUR million Q2/07 Q2/06 Change % Q1-Q2/07 Q1-Q2/06 Change 2006
%
Net sales 174 140 24 320 274 17 613
Earnings before
interest, tax and 23.6 19.9 19 39.5 35.6 11 88.3
amortization
(EBITA)
% of net sales 13.6 14.2 12.3 13.0 14.4
Operating profit 23.3 19.6 19 38.8 34.9 11 86.7
% of net sales 13.4 14.0 12.1 12.7 14.1
Orders received 185 181 2 413 372 11 717
Order backlog at 365 272 34 276
end of period
Personnel at end 3,564 3,341 7 3,352
of period
Metso Automation's net sales increased by 17 percent in January-June
and totaled EUR 320 million. The increase derived almost entirely
from deliveries of flow control systems to the energy industry. The
aftermarket business accounted for 21 percent of net sales (23% in
Q1-Q2/06). Measured in euros, the volume of the aftermarket business
grew by 7 percent.
Metso Automation's operating profit amounted to EUR 38.8 million or
12.1 percent of net sales. The slight decrease in operating profit
margin was primarily due to a rise in raw material and subcontracting
prices and an increase in the share of project deliveries.
The value of orders received by Metso Automation increased by 11
percent on the comparison period and was EUR 413 million. The
increase came mainly from orders of the Flow Control business line
for the power, oil and gas industries. Major orders during
January-June were valve order from the Chiyoda-Technip Joint Venture
to Qatar, process automation system to Henan Puyang Longfeng Paper to
China and automation system modernization project to an oil refinery
in Brazil. Due to the strong order intake in the first half-year,
Metso Automation's order backlog was substantially strongerthan in
the comparison period. The order backlog increased by 32 percent on
the end of 2006 and was EUR 365 million at the end of June.
Valmet Automotive
Valmet Automotive's net sales in January-June were EUR 47 million.
Operating profit was EUR 5.4 million, or 11.5 percent of net sales.
In the first half-year, Valmet Automotive manufactured an average of
114 cars per day. Valmet Automotive's number of personnel has been
adjusted to correspond with the current production level.
Short-term risks of business operations
China is the primary market for new paper and board machines and thus
any substantial changes in demand on the Chinese market may have a
material adverse effect on Metso Paper's profitability. Metso seeks
to mitigate these risks by developing its global aftermarket
operations and increasing the flexibility of its delivery chain.
The delivery times for Metso products have been lengthened because of
strong growth in order intake and backlog. Therefore, there is a risk
that material and other costs may rise significantly during the
delivery time and have a greater impact on Metso's profitability than
currently anticipated. In the current strong demand situation, the
scarcity of certain components and subcontractor resources,
particularly at Metso Minerals and Metso Automation, may also
lengthen delivery times.
Metso strives to manage and limit the potential adverse effects of
these and other risks. However, if the risks materialize, they could
have a significant adverse effect on Metso's business, financial
position and results of operations or on the price of the Metso
share.
Events after the review period
Metso has acquired Bender Holdings Limited in United Kingdom
In July 2007, Metso acquired Bender Holdings Limited and its
subsidiary companies in United Kingdom to further strengthen Metso
Paper's aftermarket business. The company employs 97 persons and its
net sales in 2006 amounted to approximately EUR 24 million. With the
acquisition, Metso Paper becomes the global market leader in Yankee
cylinder grinding and coating services for tissue machines.
Metso has agreed to divests its German panelboard press business
In July 2007, Metso has agreed to divest Metso panelboard GmbH,
Hannover, Germany-based supplier of continuous press and energy
plants for the panelboard industry, to G. Siempelkamp GmbH & Co. KG
of Germany. The transaction is estimated to be closed by the end of
September 2007. Metso Panelboard GmbH employs approximately 65
people. In connection with the divestment, the parties have agreed to
pursue cooperation where Metso's front-end, forming and panelhandling
technologies will be combined with Siempelkamp's continuous press
technology.
Metso seeks to delist and deregister from the United States
On July 26, 2007, Metso decided to apply for delisting of its
American Depositary Shares from the New York Stock Exchange in the
United States, and deregister from the U.S. Securities and Exchange
Commission and terminate Metso's reporting obligations under the
Exchange Act. However, Metso plans to maintain its ADR facility, and
following the delisting Metso's ADSs are expected to be traded
over-the-counter in the United States. Metso believes that the
reasons why the New York Stock Exchange listing was originally sought
in mid 1990's are no longer valid since the capital markets have
become more global. Metso's ordinary shares will continue to trade on
the Helsinki Stock Exchange.
Metso's intention to delist from the New York Stock Exchange does not
imply a reduced focus on its international shareholders or on its
international or U.S. markets. Metso intends to continue its high
standard of corporate governance, transparency in financial reporting
and internal controls subsequent to effectiveness of the NYSE
delisting and SEC deregistration. Metso expects to complete the
delisting and deregistering process during 2007.
Short-term outlook
The favorable market outlook for Metso's products and services is
expected to continue for the rest of 2007. Metso's record-high order
backlog also provides exceptionally good visibility for 2008, which
is estimated to be another solid growth year for Metso.
Metso Paper's market situation is estimated to continue much the same
as in the year's first half. The demand for new paper and board
machines is expected to be good in Asia and satisfactory elsewhere.
The demand for new fiber lines is expected to be good in South
America and satisfactory elsewhere. The demand for tissue machines is
estimated to be satisfactory. The demand for power plants is
estimated to be excellent. The demand for Metso Paper's aftermarket
services is expected to remain satisfactory.
Metso Minerals' favorable market outlook is expected to continue.
Demand is anticipated to remain excellent in the mining and metals
recycling industries, and at a good level in the construction
industry. The demand for aftermarket services is expected to remain
excellent.
Metso Automation's market outlook in the pulp and paper industry isestimated to be good. In the power, oil and gas industries, demand is
expected to be good in process automation systems and excellent in
flow control systems.
Thanks to the strong order backlog, continuing favorable market
situation and expanded business scope, it is estimated that Metso's
net sales for 2007 will grow by more than 20 percent on 2006 and that
the operating profit will clearly improve. It is estimated that the
operating profit margin in 2007 will be slightly below Metso's target
of over 10 percent. This is primarily due to factors related to the
acquisition of the Pulping and Power businesses - namely the high
first-year amortization of intangible assets, the costs of
integration and the fact that synergy benefits will not fully
materialize in the first year.
The estimates concerning financial performance are based on Metso's
current business scope, order backlog and market outlook.
Helsinki, July 26, 2007
Metso Corporation's Board of Directors
The interim review is unaudited
CONSOLIDATED STATEMENTS OF INCOME
EUR million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Net sales 1,536 1,170 2,902 2,248 4,955
Cost of goods sold (1,138) (845) (2,164) (1,623) (3,659)
Gross profit 398 325 738 625 1,296
Selling, general and
administrative expenses (248) (216) (486) (422) (846)
Other operating income
and expenses, net (3) 8 3 9 6
Share in profits of
associated companies 1 0 1 0 1
Operating profit 148 117 256 212 457
% of net sales 9.7% 10.0% 8.8% 9.4% 9.2%
Financial income and
expenses, net (10) (11) (18) (18) (36)
Profit on continuing
operations before tax 138 106 238 194 421
Income taxes on
continuing operations (41) 31 (71) 10 (11)
Profit on continuing
operations 97 137 167 204 410
Profit (loss) on
discontinued operations - - - - -
Profit (loss) 97 137 167 204 410
Profit (loss)
attributable to
minority interests 0 0 0 0 1
Profit (loss)
attributable to equity
shareholders 97 137 167 204 409
Profit (loss) 97 137 167 204 410
Earnings per share from
continuing operations,
EUR
Basic 0.68 0.97 1.18 1.44 2.89
Diluted 0.68 0.97 1.18 1.44 2.89
Earnings per share from
discontinued
operations, EUR
Basic - - - - -
Diluted - - - - -
Earnings per share from
continuing and
discontinued
operations, EUR
Basic 0.68 0.97 1.18 1.44 2.89
Diluted 0.68 0.97 1.18 1.44 2.89
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, June 30, Dec 31,
EUR million 2007 2006 2006
Non-current assets
Intangible assets
Goodwill 767 492 768
Other intangible assets 257 100 274
1,024 592 1,042
Property, plant and equipment
Land and water areas 55 58 57
Buildings and structures 220 208 221
Machinery and equipment 313 275 318
Assets under construction 38 25 19
626 566 615
Financial and other assets
Investments in associated companies 18 19 19
Available-for-sale equity investments 43 13 15
Loan and other interest bearing
receivables 6 8 6
Available-for-sale financial assets 5 34 5
Deferred tax asset 213 212 228
Other non-current assets 35 47 33
320 333 306
Total non-current assets 1,970 1,491 1,963
Current assets
Inventories 1,383 1,031 1,112
Receivables
Trade and other receivables 1,267 1,017 1,218
Cost and earnings of projects under
construction
in excess of advance billings 307 162 284
Loan and other interest bearing
receivables 2 2 2
Available-for-sale financial assets 10 32 10
Tax receivables 22 15 16
1,608 1,228 1,530
Cash and cash equivalents 213 382 353
Total current assets 3,204 2,641 2,995
Assets held for sale - - -
TOTAL ASSETS 5,174 4,132 4,958
SHAREHOLDERS' EQUITY AND
LIABILITIES
June 30,
EUR million June 30, 2007 2006 Dec 31, 2006
Equity
Share capital 241 241 241
Share premium reserve 77 76 77
Cumulative translation
differences (35) (35) (45)
Fair value and other reserves 462 440 432
Retained earnings 712 558 763
Equity attributable to
shareholders 1,457 1,280 1,468
Minority interests 5 6 6
Total equity 1,462 1,286 1,474
Liabilities
Non-current liabilities
Long-term debt 586 583 605
Post employment benefit
obligations 159 154 157
Deferred tax liability 59 22 57
Provisions 48 29 53
Other long-term liabilities 2 2 2
Total non-current liabilities 854 790 874
Current liabilities
Current portion of long-term debt 106 160 93
Short-term debt 167 26 132
Trade and other payables 1,333 973 1,238
Provisions 201 178 213
Advances received 673 434 655
Billings in excess of cost and
earnings of projects
under construction 315 242 222
Tax liabilities 63 43 57
Total current liabilities 2,858 2,056 2,610
Liabilities held for sale - - -
Total liabilities 3,712 2,846 3,484
TOTAL SHAREHOLDERS' EQUITY AND
LIABILITIES 5,174 4,132 4,958
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt 586 583 605
Short-term interest bearing debt 273 186 225
Cash and cash equivalents (213) (382) (353)
Other interest bearing assets (23) (76) (23)
Total 623 311 454
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2007 2006 2007 2006 2006
Cash flows from
operating activities:
Profit (loss) 97 137 167 204 410
Adjustments to
reconcile profit (loss)
to net cash provided by
operating activities
Depreciation 36 26 72 52 105
Provisions / Efficiency
improvement
programs 0 (1) 0 (3) (7)
Interests and dividend
income 10 7 16 15 26
Income taxes 41 (31) 71 (10) 11
Other 6 2 10 3 7
Change in net working
capital (176) (64) (175) (2) (18)
Cash flows from
operations 14 76 161 259 534
Interest paid and
dividends received (7) (3) (7) (2) (24)
Income taxes paid (35) (17) (59) (32) (68)
Net cash provided by
(used in) operating
activities (28) 56 95 225 442
Cash flows from
investing activities:
Capital expenditures on
fixed assets (42) (30) (74) (56) (129)
Proceeds from sale of
fixed assets 3 - 9 9 14
Business acquisitions,
net of cash
acquired (10) - (10) - (277)
Proceeds from sale of
businesses, net
of cash sold - - 2 - 13
(Investments in)
proceeds from sale of
financial assets 0 70 3 103 154
Other - (3) - (2) (2)
Net cash provided by
(used in) investing
activities (49) 37 (70) 54 (227)
Cash flows from
financing activities:
Share options exercised - - 0 - 1
Redemption of own
shares - - - - (11)
Dividends paid (212) (198) (212) (198) (198)
Net funding 113 (2) 28 (10) 35
Other 15 (1) 15 (6) (6)
Net cash provided by
(used in) financing
activities (84) (201) (169) (214) (179)
Net increase (decrease)
in cash and cash
equivalents (161) (108) (144) 65 36
Effect from changes in
exchange rates 3 (4) 4 (6) (6)
Cash and cash
equivalents at
beginning of period 371 494 353 323 323
Cash and cash
equivalents at end of
period 213 382 213 382 353
Free cash flow
EUR million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Net cash provided by
operating activities (28) 56 95 225 442
Capital expenditures on
fixed assets (42) (30) (74) (56) (129)
Proceeds from sale of
fixed assets 3 - 9 9 14
Free cash flow (67) 26 30 178 327
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Cumu- Fair Equity
Share lative value attri-
pre- trans- and Re- butable Mi-
mium lation other tained to nority Total
Share re- adjust- re- earn- share- inter- e-
EUR million capital serve ments serves ings holders est quity
Balance at Jan 1,
2006 241 76 (9) 424 553 1,285 7 1,292
Dividends - - - - (198) (198) - (198)
Share options
exercised - - - - - - - -
Translation
differences - - (43) - - (43) - (43)
Net investment
hedge gains
(losses) - - 15 - - 15 - 15
Cash flow hedges,
net of tax - - - 14 - 14 - 14
Available-for-sale
equity
investments, net
of tax - - - 1 - 1 - 1
Other - - 2 1 (1) 2 (1) 1
Net profit for the
period - - - - 204 204 0 204
Balance at June
30, 2006 241 76 (35) 440 558 1,280 6 1,286
Balance at Dec 31,
2006 241 77 (45) 432 763 1,468 6 1,474
Dividends - - - - (212) (212) - (212)
Share options
exercised 0 0 - - - 0 - 0
Translation
differences - - 16 - - 16 - 16
Net investment
hedge gains
(losses) - - (6) - - (6) - (6)
Cash flow hedges,
net of tax - - - (1) - (1) - (1)
Available-for-sale
equity
investments, net
of tax - - - 20 - 20 - 20
Share-based
payments, net of
tax - - - 1 - 1 - 1
Redemption of own
shares - - - - - - - -
Other - - - 10 (6) 4 (1) 3
Net profit for the
period - - - - 167 167 0 167
Balance at June
30, 2007 241 77 (35) 462 712 1,457 5 1,462
ACQUISITIONS
Acquisition of Pulping and Power
businesses of Aker Kvaerner
Metso acquired the Pulping and Power businesses of Aker Kvaerner on
December 29, 2006.
In the beginning of July 2007, the parties agreed on the final asset
values of the businesses and the purchase price was revised to EUR
336 million including EUR 6 million in expenses related to the
acquisition and EUR 53 million of net cash.
The purchase price adjustment of EUR 23 million was settled in July.
Goodwill arising from the acquisition decreased by EUR 6 million and
amounted to EUR 266 million after the fair value allocations.
Part of the excess purchase price, EUR 154 million, was allocated to
intangible assets, representing the calculated fair values of
acquired customer base, technology and order backlog. The remaining
goodwill arising from the acquisition is based on significant synergy
benefits and widened business portfolio offering Metso potential to
expand its
operations into new markets and customer segments.
Details of the acquired net assets and goodwill are as follows:
Fair value
EUR million Carrying amount allocations Fair value
Intangible assets 5 154 159
Property, plant and equipment 25 - 25
Inventories 52 - 52
Trade and other receivables 186 - 186
Other assets 29 - 29
Minority interests - - -
Advances received (214) - (214)
Deferred tax liabilities (4) (41) (45)
Other liabilities assumed (175) - (175)
Non-interest bearing net
assets (96) 113 17
Cash and cash equivalents 248 - 248
Debt assumed (195) - (195)
Purchase price (330) - (330)
Costs related to acquisition (6) - (6)
Goodwill 379 (113) 266
Purchase price settled in cash (307)
Settlement of acquired debt (195)
Costs related to acquisition (6)
Cash and cash equivalents
acquired 248
Cash outflow in 2006 (260)
Purchase price adjustment
payable as of 30.6.2007
(paid in July) (23)
Total cash outflow on
acquisition (283)
Other acquisitions
Metso Minerals acquired North American metal recycling provider, Bulk
Equipment Systems and Technologies Inc (B.E.S.T. Inc), on March 30,
2007. The acquisition price, which was paid in April, was
approximately EUR 9 million. The company's net sales were about EUR 2
million and net income approximately EUR 0.2 million in January-March
2007. Part of the excess purchase price, EUR 2 million, was allocated
to intangible assets, representing the calculated preliminary fair
values of acquired customer base, brands, new technology and order
backlog. The remaining excess arising from the acquisition, EUR 7
million, represents goodwill related to Metso's improved position in
the North American metal recycling market.
On June 27, 2007, Metso Paper acquired Mecanique et Depannage
Industries s.a.r.l. (MDI), a French company supplying maintenance
services to the paper industry. MDI employs 30 people.
Information on acquisitions for January-June 2007 is as follows
(there were no acquisitions in the comparison period January-June
2006):
Fair value
EUR million Carrying amount allocations Fair value
Intangible assets - 2 2
Property, plant and
equipment 0 - 0
Inventories 1 0 1
Trade and other
receivables 1 - 1
Deferred tax
liabilities - (1) (1)
Other liabilities
assumed (1) - (1)
Non-interest bearing
net assets 1 1 2
Cash and cash
equivalents acquired 0 - -
Debt assumed 0 - -
Purchase price (10) - (10)
Goodwill 9 (1) 8
ASSETS PLEDGED AND CONTINGENT
LIABILITIES
June 30,
EUR million June 30, 2007 2006 Dec 31, 2006
Mortgages on corporate debt 9 3 14
Other pledges and contingencies
Mortgages 2 2 2
Pledged assets 0 0 0
Guarantees on behalf of
associated company obligations - - -
Other guarantees 9 5 6
Repurchase and other commitments 8 10 10
Lease commitments 153 124 166
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL
INSTRUMENTS
June 30,
EUR million June 30, 2007 2006 Dec 31, 2006
Forward exchange rate contracts 1,269 981 1,357
Interest rate and currency swaps 1 1 1
Currency swaps 1 1 1
Interest rate swaps 143 183 143
Interest rate futures contracts - - -
Option agreements
Bought 3 19 7
Sold 1 25 6
The notional amount of electricity forwards was 464 GWh as of June
30, 2007 and 493
GWh as of June 30, 2006.
The notional amounts indicate the volumes in the use of derivatives,
but do not
indicate the exposure to risk.
KEY RATIOS
1-6/2007 1-6/2006 1-12/2006
Earnings per share from continuing
operations, EUR 1.18 1.44 2.89
Earnings per share from discontinued
operations, EUR - - -
Earnings per share from continuing and
discontinued operations, EUR 1.18 1.44 2.89
Equity/share at end of period, EUR 10.29 9.04 10.38
Return on equity (ROE), % (annualized) 23.5 32.5 30.3
Return on capital employed (ROCE), %
(annualized) 24.0 21.7 22.2
Equity to assets ratio at end of period,
% 34.9 37.2 36.1
Gearing at end of period, % 42.6 24.2 30.8
Free cash flow 30 178 327
Free cash flow/share 0.21 1.25 2.31
Gross capital expenditure of continuing
operations (excl. business acquisitions) 74 57 131
Business acquisitions, net of cash
acquired 10 0 277
Depreciation and amortization of
continuing operations 72 52 105
Number of outstanding shares at end of
period
(thousands) 141,494 141,594 141,359
Average number of shares (thousands) 141,429 141,594 141,581
Average number of diluted shares
(thousands) 141,429 141,643 141,600
EXCHANGE RATES
USED
1-6/ 1-6/ 1-12/ June 30, June 30, Dec 31,
2007 2006 2006 2007 2006 2006
USD (US dollar) 1.3341 1.2369 1.2630 1.3505 1.2713 1.3170
(Swedish
SEK krona) 9.2290 9.3237 9.2533 9.2525 9.2385 9.0404
(Pound
GBP sterling) 0.6756 0.6888 0.6819 0.6740 0.6921 0.6715
(Canadian
CAD dollar) 1.4988 1.3970 1.4267 1.4245 1.4132 1.5281
(Brazilian
BRL real) 2.7201 2.6983 2.7375 2.5966 2.7479 2.8105
BUSINESS AREA
INFORMATION
Metso Ventures Business Area was dismantled as of January 1, 2007.
Two of Metso's
three foundries were transferred to Metso Paper and one to Metso
Minerals. Metso Panelboard became
part of Metso Paper. Valmet Automotive is reported as part of
Corporate Office and others group.
Comparative segment information for 2006 is presented according to
the new organization structure.
Aker Kvaerner's Pulping and Power businesses were acquired as of
December 29, 2006 and the acquired
balance sheet was consolidated to Metso as of December 31, 2006. The
acquired businesses had no effect
to Metso's income statement for 2006 and are therefore not included
in the comparative segment information
except for capital employed, order backlog and personnel as at
December 31, 2006.
NET SALES
EUR 4-6/ 4-6 1-6/ 1-6 7/2006- 1-12/
million 2007 /2006 2007 /2006 6/2007 2006
Metso
Paper 708 469 1,374 886 2,580 2,092
Metso
Minerals 648 541 1,188 1,044 2,343 2,199
Metso
Automation 174 140 320 274 659 613
Valmet
Automotive 19 28 47 59 97 109
Corporate
office
and other - 2 - 5 5 10
Corporate
office and
others
total 19 30 47 64 102 119
Intra
Metso net
sales (13) (10) (27) (20) (75) (68)
Metso
total 1,536 1,170 2,902 2,248 5,609 4,955
OTHER OPERATING
INCOME (+) AND
EXPENSES (-), NET
EUR 4-6/ 4-6/ 1-6/ 1-6/ 7/2006 1-12/
million 2007 2006 2007 2006 -6/2007 2006
Metso
Paper (3.3) 1.7 (1.4) 2.6 (15.0) (11.0)
Metso
Minerals 0.2 3.2 1.4 5.5 12.0 16.1
Metso
Automation (0.4) 0.1 0.1 0.3 0.1 0.3
Valmet
Automotive 0.0 0.0 0.0 0.0 0.0 0.0
Corporate
office
and other 0.4 2.9 2.6 1.1 1.9 0.4
Corporate
office and
others
total 0.4 2.9 2.6 1.1 1.9 0.4
Metso
total (3.1) 7.9 2.7 9.5 (1.0) 5.8
SHARE IN PROFITS OF
ASSOCIATED
COMPANIES
EUR 1-12/
million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 2006
Metso
Paper 0.1 0.4 0.5 0.7 1.5 1.7
Metso
Minerals 0.0 0.1 0.0 0.1 0.0 0.1
Metso
Automation 1.0 0.1 1.0 0.3 1.5 0.8
Valmet
Automotive - - - - - -
Corporate
office
and other 0.0 (0.4) 0.0 (1.0) (0.7) (1.7)
Corporate
office and
others
total 0.0 (0.4) 0.0 (1.0) (0.7) (1.7)
Metso
total 1.1 0.2 1.5 0.1 2.3 0.9
OPERATING
PROFIT
(LOSS)
EUR
million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 1-12/2006
Metso
Paper 35.7 25.1 61.1 46.6 104.3 89.8
Metso
Minerals 95.7 71.6 163.5 131.8 329.4 297.7
Metso
Automation 23.3 19.6 38.8 34.9 90.6 86.7
Valmet
Automotive 1.0 4.0 5.4 9.0 8.1 11.7
Corporate
office
and other (7.4) (3.9) (12.1) (10.5) (30.3) (28.7)
Corporate
office and
others
total (6.4) 0.1 (6.7) (1.5) (22.2) (17.0)
Metso
total 148.3 116.4 256.7 211.8 502.1 457.2
OPERATING
PROFIT
(LOSS), %
OF NET
SALES
% 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 1-12/2006
Metso
Paper 5.0 5.4 4.4 5.3 4.0 4.3
Metso
Minerals 14.8 13.2 13.8 12.6 14.1 13.5
Metso
Automation 13.4 14.0 12.1 12.7 13.7 14.1
Valmet
Automotive 5.3 14.3 11.5 15.3 8.4 10.7
Corporate
office
and other n/a n/a n/a n/a n/a n/a
Corporate
office and
others
total n/a n/a n/a n/a n/a n/a
Metso
total 9.7 10.0 8.8 9.4 9.0 9.2
EBITA
EUR
million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 1-12/2006
Metso
Paper 47.7 27.4 84.8 51.2 139.2 105.6
Metso
Minerals 96.9 72.8 165.6 134.3 333.4 302.1
Metso
Automation 23.6 19.9 39.5 35.6 92.2 88.3
Valmet
Automotive 1.0 4.0 5.4 9.0 8.1 11.7
Corporate
office
and other (6.9) (3.4) (11.1) (9.5) (28.2) (26.6)
Corporate
office and
others
total (5.9) 0.6 (5.7) (0.5) (20.1) (14.9)
Metso
total 162.3 120.7 284.2 220.6 544.7 481.1
EBITA, %
OF NET
SALES
% 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 1-12/2006
Metso
Paper 6.7 5.8 6.2 5.8 5.4 5.0
Metso
Minerals 15.0 13.5 13.9 12.9 14.2 13.7
Metso
Automation 13.6 14.2 12.3 13.0 14.0 14.4
Valmet
Automotive 5.3 14.3 11.5 15.3 8.4 10.7
Corporate
office
and other n/a n/a n/a n/a n/a n/a
Corporate
office and
others
total n/a n/a n/a n/a n/a n/a
Metso
total 10.6 10.3 9.8 9.8 9.7 9.7
ORDERS
RECEIVED
EUR
million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 7/2006-6/2007 1-12/2006
Metso
Paper 1,103 564 1,756 1,108 2,924 2,276
Metso
Minerals 798 628 1,569 1,314 2,910 2,655
Metso
Automation 185 181 413 372 758 717
Valmet
Automotive 19 28 47 59 97 109
Corporate
office
and other - 3 - 5 10 15
Corporate
office and
others
total 19 31 47 64 107 124
Intra
Metso
orders
received (15) (14) (31) (31) (67) (67)
Metso
total 2,090 1,390 3,754 2,827 6,632 5,705
QUARTERLY INFORMATION
NET SALES
EUR million 4-6/2006 7-9/2006 10-12/2006 1-3/2007 4-6/2007
Metso Paper 469 489 717 666 708
Metso Minerals 541 525 630 540 648
Metso Automation 140 146 193 146 174
Valmet Automotive 28 22 28 28 19
Corporate office and
other 2 2 3 - -
Corporate office and
others total 30 24 31 28 19
Intra Metso net sales (10) (15) (33) (14) (13)
Metso total 1,170 1,169 1,538 1,366 1,536
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 4-6/2006 7-9/2006 10-12/2006 1-3/2007 4-6/2007
Metso Paper 1.7 (3.2) (10.4) 1.9 (3.3)
Metso Minerals 3.2 (0.1) 10.7 1.2 0.2
Metso Automation 0.1 (0.4) 0.4 0.5 (0.4)
Valmet
Automotive 0.0 0.0 0.0 0.0 0.0
Corporate office
and other 2.9 0.4 (1.1) 2.2 0.4
Corporate office
and others total 2.9 0.4 (1.1) 2.2 0.4
Metso total 7.9 (3.3) (0.4) 5.8 (3.1)
OPERATING PROFIT (LOSS)
EUR million 4-6/2006 7-9/2006 10-12/2006 1-3/2007 4-6/2007
Metso Paper 25.1 30.0 13.2 25.4 35.7
Metso Minerals 71.6 75.9 90.0 67.8 95.7
Metso Automation 19.6 20.0 31.8 15.5 23.3
Valmet
Automotive 4.0 1.7 1.0 4.4 1.0
Corporate office
and other (3.9) (7.2) (11.0) (4.7) (7.4)
Corporate office
and others total 0.1 (5.5) (10.0) (0.3) (6.4)
Metso total 116.4 120.4 125.0 108.4 148.3
EBITA
EUR million 4-6/2006 7-9/2006 10-12/2006 1-3/2007 4-6/2007
Metso Paper 27.4 32.3 22.1 37.1 47.7
Metso Minerals 72.8 76.7 91.1 68.7 96.9
Metso Automation 19.9 20.5 32.2 15.9 23.6
Valmet
Automotive 4.0 1.7 1.0 4.4 1.0
Corporate office
and other (3.4) (6.8) (10.3) (4.2) (6.9)
Corporate office
and others total 0.6 (5.1) (9.3) 0.2 (5.9)
Metso total 120.7 124.4 136.1 121.9 162.3
CAPITAL EMPLOYED
June 30, Sep 30, Mar 31, June 30,
EUR million 2006 2006 Dec 31, 2006 2007 2007
Metso Paper 300 292 631 572 651
Metso Minerals 939 955 967 983 1,049
Metso Automation 132 130 149 156 190
Valmet
Automotive 28 31 23 23 23
Corporate office
and other 656 745 534 555 409
Corporate office
and others total 684 776 557 578 432
Metso total 2,055 2,153 2,304 2,289 2,322
ORDERS RECEIVED
EUR million 4-6/2006 7-9/2006 10-12/2006 1-3/2007 4-6/2007
Metso Paper 564 491 677 653 1,103
Metso Minerals 628 636 705 771 798
Metso Automation 181 183 162 228 185
Valmet
Automotive 28 22 28 28 19
Corporate office
and other 3 6 4 - -
Corporate office
and others total 31 28 32 28 19
Intra Metso orders
received (14) (17) (19) (16) (15)
Metso total 1,390 1,321 1,557 1,664 2,090
ORDER BACKLOG
June 30, Sep 30, Mar 31, June 30,
EUR million 2006 2006 Dec 31, 2006 2007 2007
Metso Paper 1,540 1,547 2,225 2,190 2,584
Metso Minerals 1,101 1,213 1,277 1,497 1,673
Metso Automation 272 309 276 356 365
Valmet
Automotive - - - - -
Corporate office
and other 3 7 - - -
Corporate office
and others total 3 7 - - -
Intra Metso order
backlog (52) (54) (41) (44) (48)
Metso total 2,864 3,022 3,737 3,999 4,574
PERSONNEL
June 30, Sep 30, Mar 31, June 30,
2006 2006 Dec 31, 2006 2007 2007
Metso Paper 9,328 9,445 11,558 11,469 11,954
Metso Minerals 9,124 9,158 9,433 9,545 9,967
Metso Automation 3,341 3,315 3,352 3,379 3,564
Valmet
Automotive 1,077 1,082 1,013 899 782
Corporate office
and other 351 342 322 324 342
Corporate office
and others total 1,428 1,424 1,335 1,223 1,124
Metso total 23,221 23,342 25,678 25,616 26,609
Notes to the Interim Review
This interim review has been prepared in accordance with IAS 34
'Interim Financial Reporting'. The same accounting principles have
been applied as in the annual financial statements.
New accounting standards
IFRS 7
In August 2005, IASB issued IFRS 7 'Financial Instruments:
Disclosures' which requires the company to disclose information
enabling users of its financial statements to evaluate the
significance of financial instruments to its financial position and
performance. Metso adopted the standard and the related amendments to
IAS 1 'Presentation of Financial Statements' from January 1, 2007.
IFRS 8
In November 2006, the IASB issued IFRS 8 'Operating segments' which
requires the application of the 'management approach' in segment
reporting. This would result in uniformity between the disclosed
information and the principles for evaluating the financial
performance of segments followed internally by the management. Metso
will evaluate the effects of IFRS 8 on the consolidated financial
statements. The standard will come into force in the financial years
beginning after January 1, 2009, but may already be applied in
earlier financial years.
Subpoena from U.S. Department of Justice requiring Metso to produce
documents
In November 2006, Metso Minerals Industries, Inc., which is Metso
Minerals' U.S. subsidiary, received a subpoena from the Antitrust
Division of the United States Department of Justice calling for Metso
Minerals Industries, Inc. to produce certain documents. The subpoena
relates to an investigation of potential antitrust violations in the
rock crushing and screening equipment industry. Metso is cooperating
fully with the Department of Justice.
Decisions of the Annual General Meeting
On April 3, 2007 the Annual General Meeting of Metso Corporation
approved the accounts for 2006 as presented by the Board of Directors
and discharged the members of the Board of Directors and the
President and CEO from liability for the 2006 financial year. In
addition, the Annual General Meeting approved the proposals of the
Board of Directors to amend the Articles of Association and to
authorize the Board of Directors to resolve on a repurchase of the
Corporation's own shares and on a share issue.
The Annual General Meeting decided to establish a Nomination
Committee of the Annual General Meeting to prepare proposals for the
following Annual General Meeting in respect of the composition of the
Board of Directors and the remuneration of directors. The Nomination
Committee consists of representatives appointed by the four biggest
shareholders along with the Chairman of the Board of Directors as an
expert member.
Matti Kavetvuo was re-elected as the Chairman of the Board and Jaakko
Rauramo was re-elected as the Vice Chairman of the Board. Eva
Liljeblom, Professor at the Swedish School of Economics and Business
Administration, Helsinki, Finland, was elected as a new member of the
Board. The Board members re-elected were Svante Adde, Maija-Liisa
Friman, Christer Gardell and Yrjö Neuvo. The term of office of Board
members lasts until the end of the following Annual General Meeting.
The Annual General Meeting decided that the annual remuneration of
Board members would be EUR 80,000 for the Chairman, EUR 50,000 for
the Vice Chairman and the Chairman of the Audit Committee and EUR
40,000 for the members, and that the meeting fee, including committee
meetings, would be EUR 500 per meeting.
PricewaterhouseCoopers Oy, Authorized Public Accountants, was
re-elected to act as the Auditor of the Corporation until the end of
the next Annual General Meeting.
The Annual General Meeting decided to pay a dividend of EUR 1.50 per
share for the financial year which ended on December 31, 2006. The
dividend was paid to shareholders who were entered in the company's
shareholder register maintained by the Finnish Central Securities
Depository on the record date for dividend payment, April 10, 2007.
The dividend was paid on April 17, 2007.
Board committees
At its assembly meeting the Board of Directors elected from its midst
the members of the Audit Committee and Compensation Committee.
The Board's Audit Committee consists of Maija-Liisa Friman
(Chairman), Svante Adde and Eva Liljeblom. The Board of Directors
assigned Svante Adde as the financial expert of the Audit Committee.
The Board's Compensation Committee consists of Matti Kavetvuo
(Chairman), Jaakko Rauramo, Christer Gardell and Yrjö Neuvo.
Shares, options and share capital
A total of 35,000 shares were subscribed with Metso Corporation's
2003A stock options during the period February 8 - March 15, 2007.
The resulting increase in share capital of EUR 59,500.00 was entered
in the Finnish Trade Register on March 29, 2007. The shares became
subject to trading on the Helsinki Stock Exchange together with the
existing shares on March 30, 2007. The right to receive dividends and
other shareholder rights of the new shares commenced on the
registration date.
At the end of June, the parent company held 60,841 Metso shares, in
addition to which a partnership included in Metso's consolidated
financial statements held 200,039 Metso shares. Together these shares
represent 0.18 percent of all the shares and votes.
After cancellations and exercised options there remains a total of
100,000 year 2003A options in Metso's stock options program, all of
them held by Metso's subsidiary, Metso Capital Ltd.
Metso's market capitalization excluding the own shares was EUR 6,200
million on June 30, 2007.
Share ownership plan
Metso has a share ownership plan for 2006-2008. The maximum number of
shares to be allocated to the 2006-2008 incentive plan is 360,000
Metso Corporation shares.
The share ownership plan for the year 2006 was directed to 60 Metso
managers. Based on the 2006 earnings period, 99,961 shares
corresponding to 0.07 percent of Metso shares were distributed at the
end of March 2007. Members of Metso's Executive Team received 25,815
shares.
Metso's Board of Directors decided in February to direct the 2007
share ownership plan to a total of 84 Metso managers. The potential
reward from the plan will be based on the operating profit for 2007
of Metso Corporation and its business areas. The share ownership plan
will cover a maximum of 125,500 Metso shares in 2007. Members of the
Metso Executive Team will be allocated a maximum of 26,500 shares of
this total. If the average trade-weighted price of the Metso share
during the first two full weeks of March 2008 exceeds EUR 48, the
number of shares to be granted under the 2007 plan will be decreased
by a corresponding ratio. Payment of the potential rewards will be
decided during the first quarter of 2008.
The maximum number of shares to be allocated for the 2008 earnings
period as well as the share value limit will be decided by Metso's
Board of Directors at the beginning of 2008.
Shares traded on the Helsinki and New York Stock Exchanges
The number of Metso Corporation shares traded on the Helsinki Stock
Exchange in January-June was 196 million, equivalent to a turnover of
EUR 7,826 million. The share price on June 30, 2007 was EUR 43.82.
The highest quotation was EUR 44.80 and the lowest EUR 34.79.
The number of Metso ADRs (American Depository Receipts) traded on the
New York Stock Exchange was 3.8 million, equivalent to a turnover of
USD 209 million. The price of an ADR on June 30, 2007 was USD 58.94.
The highest quotation was USD 61.90 and the lowest USD 44.37.
Disclosures of changes in holdings
The following is a brief account of the shareholders' disclosures
received by Metso with respect to changes in holdings in the company.
J.P. Morgan Chase & Co. announced that the funds they managed held
6,996,732 Metso shares/ADRs on February 12, 2007 corresponding to
4.94 percent of the paid up share capital of Metso Corporation.
No disclosures of changes in holdings were received during the second
quarter of 2007.
Publication dates for Metso's Interim Reviews in 2007
Interim Review for January - September on October 25, 2007.
For further information, please contact:
Jorma Eloranta, President and CEO, Metso Corporation, tel. +358 204
84 3000
Olli Vaartimo, Executive Vice President and CFO, Metso Corporation,
tel. +358 204 84 3010
Johanna Sintonen, Vice President, Investor Relations, Metso
Corporation, tel. +358 204 84 3253
It should be noted that certain statements herein which are not
historical facts, including, without limitation, those regarding
expectations for general economic development and the market
situation, expectations for customer industry profitability and
investment willingness, expectations for company growth, development
and profitability and the realization of synergy benefits and cost
savings, and statements preceded by "expects", "estimates","forecasts" or similar expressions, are forward-looking statements.
These statements are based on current decisions and plans and
currently known factors. They involve risks and uncertainties which
may cause the actual results to materially differ from the results
currently expected by the company.
Such factors include, but are not limited to:
(1) general economic conditions, including fluctuations in exchange
rates and interest levels which influence the operating environment
and profitability of customers and thereby the orders received by the
company and their margins
(2) the competitive situation, especially significant technological
solutions developed by competitors
(3) the company's own operating conditions, such as the success of
production, product development and project management and their
continuous development and improvement
(4) the success of pending and future acquisitions and restructuring.
Metso Corporation
Olli Vaartimo
Executive Vice President and CFO
Kati Renvall
Vice President,
Corporate
Communications
Metso is a global engineering and technology corporation with 2006
net sales of approximately EUR 5 billion. Its 26,000 employees in
more than 50 countries serve customers in the pulp and paper
industry, rock and minerals processing, the energy industry and
selected other industries.
www.metso.com
Distribution:
Helsinki Stock Exchange
New York Stock Exchange
The media
www.metso.com
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