2008-02-06 11:00:00 CET
2008-02-06 11:01:34 CET
REGULATED INFORMATION
Metso Oyj - Financial Statement Release
Metso Corporation's Financial Statements Release 2007 part 1/2
Strong growth and record profits
Highlights of 2007
* New orders worth EUR 6,965 million were received in 2007,
i.e. 22 percent more than in the previous year (EUR 5,705 million
in 2006). *)
* At year's end, the order backlog was EUR 4,341 million
(EUR 3,737 million at December 31, 2006).
* Net sales increased by 26 percent and totaled EUR 6,250
million (EUR 4,955 million). *)
* Earnings before interest, tax and amortization (EBITA)
were EUR 635.4 million, i.e. 10.2 percent of net sales (EUR 481.1
million and 9.7%).
* Operating profit (EBIT) was EUR 579.8 million, i.e. 9.3
percent of net sales (EUR 457.2 million and 9.2%).
* Earnings per share were EUR 2.69 (EUR 2.89, adjusted EPS:
EUR 2.28).
* Free cash flow was EUR 198 million (EUR 364 million).
* Return on capital employed (ROCE) was 26.1 percent
(22.5%).
* The Board proposes a dividend of EUR 3.00 per share (EUR
1.50). The proposed dividend consists of an ordinary dividend of
EUR 1.65 and an extra dividend of EUR 1.35.
Highlights of the last quarter of 2007
* New orders worth EUR 1,771 million were received in
October-December (EUR 1,557 million in Q4/06). *)
* Net sales increased by 23 percent and totaled EUR 1,896
million (EUR 1,538 million). *)
* Earnings before interest, tax and amortization (EBITA)
were EUR 193.9 million, i.e. 10.2 percent of net sales (EUR 136.1
million and 8.8%).
* Operating profit (EBIT) was EUR 179.7 million, i.e. 9.5
percent of net sales (EUR 125.0 million and 8.1%).
* Earnings per share were EUR 0.85 (EUR 0.86, adjusted EPS:
EUR 0.65).
*) The acquisition of the Pulping and Power businesses at the end of
2006 contributed to the increase in 2007."2007 was again the best year ever for Metso. Our net sales grew by
26 percent, our EBITA margin exceeded 10 percent, and we are also
proposing a record-breaking dividend. Our strong growth was driven by
good demand in emerging markets and the mining and energy industry.
About one half of the net sales growth derived from the successful
Pulping and Power acquisition", says Jorma Eloranta, President and
CEO of Metso Corporation."Going forward, we will seek further profitable growth by
strengthening our global presence, investing in services growth and
responding to our customers' environmental needs. We will also
continue strict cost control and development of our delivery
capability.""Our market outlook continues to be favourable, especially on the
emerging markets which already accounted for 43 percent of our 2007
order intake. Year-on-year, our order backlog rose by 16 percent, to
4.3 billion euros, the majority of which is for 2008 and some larger
deliveries extend to 2009 and 2010. We are confident of delivering
profitable growth in 2008 and beyond."
In 2008, Metso targets to achieve, at comparable exchange rates, net
sales growth of about 10 percent compared to 2007 and to reach an
operating profit margin level of about 10 percent.
Metso's key figures
EUR million Q4/07 Q4/06 Change % 2007 2006 Change %
Net sales 1,896 1,538 23 6,250 4,955 26
Earnings before interest,
tax and amortization 193.9 136.1 42 635.4 481.1 32
(EBITA)
% of net sales 10.2 8.8 10.2 9.7
Operating profit 179.7 125.0 44 579.8 457.2 27
% of net sales 9.5 8.1 9.3 9.2
Earnings per share, EUR 0.85 0.86 (1) 2.69 2.89 (7)
Adjusted earnings per 0.85 0.65 31 2.69 2.28 18
share, EUR 1)
Orders received 1,771 1,557 14 6,965 5,705 22
Order backlog at end of 4,341 3,737 16
period
Free cash flow 2) 0 54 (100) 198 364 (46)
Return on capital employed
(ROCE), annualized %: 26.1 22.5
Equity to assets ratio at
end of period, % 37.7 35.4
Gearing at end of period, % 33.4 31.3
In 2007, the accounting of actuarial gains and losses was changed to
comply with the amendment of IAS 19. The actuarial gains and losses
are recognized immediately in equity and the pension liability is
presented in the balance sheet in full. The previous years' data has
been restated accordingly.
1) In 2006, Metso recognized nonrecurring deferred tax assets
totaling EUR 87 million, which improved the earnings per share by EUR
0.61. Of the deferred tax assets, EUR 57 million was recognized in
Q2/2006 (impact on EPS: EUR 0.40) and EUR 30 million in Q4/2006
(impact on EPS: EUR 0.21).
2) The calculation of free cash flow has been revised: Only the
capital expenditure related to maintenance of production facilities,
and not the capital expenditure related to capacity increases, is
deducted from net cash provided by operating activities. The
comparison periods have been restated correspondingly.
Metso's fourth quarter 2007 review
Operating environment and demand for products in October-December
The market situation for Metso's products and services continued much
the same in the year's final quarter as it had been earlier in the
year. Uncertainty on the international financial markets did not
materially affect the demand for Metso's products and services.
The market situation for Metso Paper's products and services did not
change during last quarter of the pervious year. The demand for new
paper, board and tissue machines and for fiber lines remained at the
level of the previous quarters. The consumption of paper and board
continued to grow strongly in China, maintaining the area's new
investments at a good level. Several new pulping line projects were
under consideration, but no decisions on new investments were made
during the final quarter. The demand for power boilers utilizing
renewable energy sources continued to be excellent, particularly in
Metso's main market area, Europe. The decisions to shut down pulp and
paper mills in northern Europe and North America did not have a
material effect on the demand for Metso's services business
(previously aftermarket services).
Metso Minerals' favorable market situation continued during the
year's final quarter. Brisk economic growth and urbanization
continued to boost the demand for minerals, metals and aggregates in
emerging markets. Consequently the markets for mining products and
metals recycling equipment remained excellent, and the demand for
construction equipment was at a good level in the fourth quarter.
Metso Automation's market situation was much the same as it had been
in the previous nine months of the year. In the power, oil and gas
industries, the demand for process automation systems continued to be
good and the demand for flow control systems excellent. In the pulp
and paper industry, the market situation was satisfactory. Energy
industry investments are driven by the increased consumption of
energy due to global economic growth and by high oil prices.
Orders received in October-December
The value of orders received by Metso in October-December increased
by 14 percent on the corresponding period of 2006, and totaled EUR
1,771 million.
Metso Paper's order intake increased strongly, by 24 percent,
compared with the previous year's fourth quarter. Geographically, the
most important market areas were Europe and Asia-Pacific. The largest
orders received by Metso Paper in October-December included a power
boiler to a Stora Enso mill in Belgium, fine paper lines to the
Portucel Group in Portugal and to MCC Paper Yinhe in China and two
board machines to Nine Dragons Paper in China.
Metso Minerals' order intake grew by 8 percent on the high level of
the previous year's corresponding period. Growth in orders received
was strongest in the Construction business line. Geographically,
Metso Minerals' order intake growth was strongest in the United
States, Australia and South Africa. Orders received by Metso Minerals
in the final quarter of 2007 consisted of several orders from all
market areas. Metso Minerals signed a 5-year contract with SKF
Logistics Services over Metso's spare and wear parts logistics and
warehousing services in the European construction market.
Metso Automation's orders received in the final quarter were at the
level of the last year's corresponding period. Orders for automation
systems increased, but in the Flow Control business, order intake was
limited by high utilization of production capacity. The largest
orders in October-December included an automation solution to
Shouguang Chenming's mill in China and an automation system to
Talvivaara Mining Company in Sotkamo, Finland.
Financial performance in October-December
Metso's fourth-quarter net sales grew by 23 percent on the
corresponding period last year and totaled EUR 1,896 million. Growth
was good across all business areas. About half of the growth was
organic and half resulted from acquisitions.
Metso's fourth-quarter earnings before interest, tax and amortization
(EBITA) improved notably and were EUR 193.9 million, or 10.2 percent
of net sales compared with EUR 136.1 million or 8.8 percent of net
sales for the corresponding period last year. Metso's fourth-quarter
operating profit (EBIT) was EUR 179.7 million or 9.5 percent of net
sales (EUR 125.0 million and 8.1% in Q4/ 2006). The operating profit
improved in all business areas, and most substantially in Metso
Paper.
Financial Statements Release 2007
Operating environment and demand for products in January-December
The market situation for Metso's products and services was favorable
throughout the year. The uncertainty that characterized the financial
markets from the summer onwards had no material effect on the
investment decisions of Metso's customers. The weakening of the
United States economic outlook did not have material impact on
Metso's orders received as the share of the United States in Metso's
total order intake has decreased in recent years to just over 10
percent.
Order intake grew most substantially in Europe, where the rapid
increase in the importance of Eastern Europe and Russia was notable.
Growth was strong also in Asia, South Africa and the Middle East. In
the United States, Metso's volume of new orders received remained at
the level of the previous year.
The demand for paper and board machines was satisfactory during the
year, and is expected to continue along the same lines due to strong
economic growth in Asia. The steady growth in the consumption of
tissue, especially in emerging economies, kept the demand for tissue
machines at a satisfactory level. The demand for fiber lines remained
satisfactory, but no final decisions on complete pulp production
lines were made after the first half-year. Power boilers utilizing
renewable energy sources continued to be in high demand, but related
decision-making was limited by high capacity utilization among
suppliers. The demand for Metso Paper's services continued to be
satisfactory in both paper and board machines and in power plants.
Paper and board machines accounted for almost one half of orders
received, and power boilers for about one quarter.
The demand for Metso Minerals' construction equipment and solutions
was good. Demand was supported by ongoing development projects
concerning road networks and other transportation infrastructure
around the world and especially in emerging economies. The sales
growth of construction equipment and solutions was particularly
substantial in Eastern Europe and solid also in the United States,
where new orders remained at almost the previous year's level. The
construction equipment market is expected to continue to be good. The
demand for mining equipment and services was excellent in all market
areas. The investment plans of mining companies indicate that demand
will also remain strong in the future. The demand in the metals
recycling industry was excellent, thanks to increased recycling and
the high prices of metals, and this trend is expected to continue.
The mining industry accounted for over 50 percent of orders received,
construction for about one third and metals recycling for about 10
percent.
At Metso Automation, the market for process automation systems for
the pulp and paper industry was satisfactory all year, and growth is
expected to take place in the Eastern European, Chinese and South
American markets. Demand was satisfactory for pulp and paper industry
flow control solutions, and excellent in the power, oil and gas
industries. The markets for process automation systems in power
production were good and are expected to grow. The power, oil and gas
industries increased their share of orders received to over 50
percent.
Orders received and order backlog
In 2007, Metso's orders received grew by 22 percent on the previous
year, and totaled EUR 6,965 million. The Pulping and Power businesses
acquired at the end of 2006 contributed about one half to the
increase. Orders received grew in all business areas. Excluding the
effect of exchange rate translation, the increase in orders received
would have been about 3 percentage points higher. Metso's order
backlog increased by 16 percent on the end of 2006 and was EUR 4,341
million at the end of 2007.
Orders received by business area
2007 2006
EUR million % of orders EUR % of orders
received million received
Metso Paper 3,109 44 2,276 40
Metso Minerals 3,075 44 2,655 46
Metso Automation 763 11 717 12
Valmet Automotive 85 1 109 2
Intra-Metso and other (67) (52)
orders received
Total 6,965 100 5,705 100
Orders received by market area
+-------------------------------------------------------------------+
| | 2007 | 2006 |
|----------------------+-----------------------+--------------------|
| | EUR | % of orders | EUR | % of |
| | million | received | million | orders |
| | | | | received |
|----------------------+---------+-------------+---------+----------|
| Europe | 3,135 | 44 | 1,993 | 35 |
|----------------------+---------+-------------+---------+----------|
| North America | 1,033 | 15 | 1,099 | 19 |
|----------------------+---------+-------------+---------+----------|
| South and Central | 818 | 12 | 757 | 13 |
| America | | | | |
|----------------------+---------+-------------+---------+----------|
| Asia-Pacific | 1,514 | 22 | 1,503 | 27 |
|----------------------+---------+-------------+---------+----------|
| Rest of the world | 465 | 7 | 353 | 6 |
|----------------------+---------+-------------+---------+----------|
| Total | 6,965 | 100 | 5,705 | 100 |
+-------------------------------------------------------------------+
Net sales
Metso's net sales in 2007 grew by 26 percent on the comparison period
and totaled EUR 6,250 million. Excluding the effect of exchange rate
translation, the increase in net sales would have been about 3
percentage points higher. About half of the growth was organic and
the rest resulted from acquisitions. The net sales of the services
business (previously the aftermarket business) increased by 19
percent, and accounted for 33 percent of the Corporation's net sales
(35 percent in 2006). The decrease in the relative share of the
services was due to the acquired Pulping and Power businesses, in
which the share of the services is below Metso's average.
The countries in which Metso had the highest net sales in 2007 were
the United States, Brazil, China, Finland and Sweden.
Net sales by business area
2007 2006
EUR million % of net EUR million % of net
sales sales
Metso Paper 2,925 46 2,092 42
Metso Minerals 2,607 41 2,199 44
Metso Automation 698 11 613 12
Valmet Automotive 85 2 109 2
Intra-Metso and other net
sales (65) (58)
Total 6,250 100 4,955 100
Net sales by market area
2007 2006
EUR million % of net EUR million % of net
sales sales
Europe 2,551 40 2,002 41
North America 1,049 17 1,012 20
South and Central 859 14 685 14
America
Asia-Pacific 1,488 24 991 20
Rest of the world 303 5 265 5
Total 6,250 100 4,955 100
Financial result
Metso's 2007 earnings before interest, tax and amortization (EBITA)
improved clearly and were EUR 635.4 million, or 10.2 percent of net
sales (EUR 481.1 million and 9.7% in 2006). EBITA improved in all
business areas, both in terms of euros and in relation to net sales.
This improvement was mainly due to increased delivery volumes, but
also to the profitability improvement measures taken at Metso Paper.
Metso's operating profit for 2007 was EUR 579.8 million, or 9.3
percent of net sales (EUR 457.2 million and 9.2% in 2006). Operating
profit includes a EUR 36 million amortization of intangible assets
related to the acquisition of the Pulping and Power businesses.
Metso's net financial expenses for 2007 were EUR 33 million (EUR 36
million). Net financial expenses include EUR 7 million in foreign
exchange gains.
Metso's profit before taxes was EUR 547 million (EUR 421 million).
The profit attributable to shareholders in 2007 was EUR 381 million
(EUR 409 million), corresponding to earnings per share (EPS) of EUR
2.69 (EUR 2.89 per share). In 2006, Metso recognized in the income
statement a nonrecurring deferred tax asset of EUR 87 million related
to its operations in the United States, which lowered the tax rate
for 2006 and improved EPS by EUR 0.61. Metso's tax rate for 2007 was
29.8 percent, and it is estimated to be at approximately 30 percent
in 2008.
Metso's return on capital employed (ROCE) was 26.1 percent (22.5%)
and return on equity (ROE) was 25.4 percent (30.9%).
Cash flow and financing
Metso's net cash generated by operating activities in 2007 was EUR
294 million (EUR 442 million). As a result of the strong growth of
the order backlog and net sales, inventories increased in all
business areas. Growth in inventories was partly offset by growth in
advances received and accounts payable. Net working capital increase
for the full year was EUR 286 million. Metso's free cash flow for
2007 was EUR 198 million (EUR 364 million).
Net interest-bearing liabilities totaled EUR 540 million at the end
of December (EUR 454 million). Metso's gearing was 33.4 percent and
the equity to assets ratio was 37.7 percent. In April, Metso paid out
dividends of EUR 212 million for 2006.
In October, Moody's Investor Service upgraded Metso's long-term
rating from Baa3 to Baa2 and estimated the rating outlook as stable.
In May, Standard & Poor's Rating Services upgraded the corporate
credit rating of Metso from BBB- to BBB and the short-term rating
from A-3 to A-2. Standard & Poor's also upgraded the rating of
Metso's senior unsecured debt from BB+ to BBB-. Standard & Poor's
estimated the rating outlook as stable.
Capital expenditure
In 2007 Metso's gross capital expenditure grew by 21 percent from
2006 and was EUR 159 million excluding acquisitions (EUR 131
million). The most significant investments were for extensions or
establishments of production plants and service centers, and for new
enterprise resource planning (ERP) systems. About one third of the
capital expenditure was related to investments increasing capacity
necessitated by strong volume growth.
Metso is investing in the expansion of its paper industry service
units in Guangzhou and Wuxi, China, and the boiler service units in
Lancaster, South Carolina, and in Fairmont, West Virginia, the United
States. During the year, Metso invested in the expansion of crusher
manufacturing in Tampere, Finland and in Tianjin, China. In India,
investments were made to increase assembly capacity in Bawal and to
expand foundry capacity in Ahmedabad. The units in Shanghai, China,
and Helsinki, Finland expanded their production capacity for flow
control equipment. In Finland, the roll delivery capacity in
Jyväskylä and the boiler rebuild and maintenance capacity in Lapua
were expanded. Additionally, extension of office facilities in New
Delhi, India is underway to cater for the needs of all Metso units
operating in India. In Brazil, Metso opened a new process technology
center to offer R&D and testing services relating to mineral
processing. A research center including a pilot plant and rock
laboratory for construction business was completed in Tampere late
last year.
An investment project for an ERP system covering the entire supply
chain was started at Metso Automation. The system will be introduced
in stages, starting in 2009. An ERP system is also being developed at
Metso Minerals.
It is estimated that, excluding acquisitions, Metso's gross capital
expenditure for 2008 will exceed EUR 200 million. The increase will
be due to the capacity-increasing investments necessitated by volume
growth and development of Metso's global presence.
Holding in Talvivaara Mining Company Ltd
Metso's 3.4 percent holding in Talvivaara Mining Company Ltd is
classified in the balance sheet as an available-for-sale investment.
In December 2007, Metso sold 1.2 million of the company's shares and
recognized a capital gain of almost EUR 5 million. At the end of
December, Metso's holding was valued at approximately EUR 31 million.
Metso's holding relates to a joint R&D project with Talvivaara Mining
Company to develop rock processing and bulk materials handling
processes.
Acquisitions and divestments
In March 2007, Metso acquired the North American metals recycling
technology provider, Bulk Equipment Systems and Technologies Inc.,
located in Cleveland, Ohio. The acquisition price was approximately
EUR 9 million. The company's net sales in 2006 were EUR 8 million and
it employs approximately 40 people.
In June 2007, Metso strengthened its services to the paper industry
by acquiring Mecanique et Dépannage Industries s.a.r.l. (MDI) in
France. MDI employs 30 people. The transaction price was less than
EUR 1 million.
In July 2007, Metso acquired Bender Holdings Limited and its
subsidiaries in the United Kingdom. As a result of the acquisition,
Metso became the global market leader in Yankee cylinder grinding and
coating services for tissue machines. The transaction price was EUR
16 million, excluding the acquired cash assets. The company employs
97 people and its net sales in 2006 amounted to approximately EUR 24
million.
In October 2007, Metso acquired Mueller Engineering Inc (MEI), the
leading provider of equipment and services for high voltage drive
systems to the North American metal recycling industry. The
acquisition price was approximately EUR 6 million. In 2006, MEI's netsales were EUR 10 million, and it employed some 20 people.
In March 2007, Metso sold the majority of Metso Paper AG in Delémont,
Switzerland. Metso remained as a minority shareholder. The company
has about 70 employees and annual net sales of approximately EUR 10
million.
In September 2007, Metso sold the assets of its German panelboard
press business to G. Siempelkamp GmbH & Co. KG. The 65 employees of
Metso Panelboard GmbH were transferred to Siempelkamp. The
transaction price was EUR 7 million. Metso booked a small gain on the
sale in the third quarter.
Changes in the corporate structure
Since the beginning of 2007, Metso has had three business areas.
Metso Paper's business was reorganized as of June 1, 2007 into the
following business lines: Paper and Board, Tissue, Fiber, Power and
Panelboard. The Panelboard business line was discontinued as a
separate business line in January 2008. The operations of Metso
Minerals were reorganized as of January 1, 2007 in accordance with
the three main customer segments into the Construction, Mining and
Recycling business lines. Metso Automation's business lines are Flow
Control and Process Automation Systems.
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 acquisition price was EUR 336
million, including EUR 6 million in expenses related to the
acquisition and EUR 53 million in net cash.
Integration of the acquired businesses into Metso Paper has proceeded
according to plan. Metso estimates that the annual cost savings
achievable through synergies will amount to EUR 20-25 million from
2008 onwards. The cost savings for the first year were realized
sooner than expected, and approximately EUR 14 million of the annual
savings materialized already in 2007. The nonrecurring expenses
resulting from integration of the acquired businesses are estimated
to be approximately EUR 10 million, of which EUR 9 million was
recognized in 2007.
As a result of integration, the number of employees was reduced by
about 160 by the end of December. The total number of redundancies
are estimated to be about 220 people.
The amortization of intangible assets resulting from the transaction
amounted to EUR 36 million in 2007. It is estimated that intangible
assets will be amortized by EUR 20 million in 2008, and by EUR 13
million annually thereafter until they are fully amortized.
Research and development
Metso's research and development focuses on environmental technology,
technology related to the services business and the development of
smart applications. In 2007, Metso's R&D expenses totaled EUR 117
million, i.e. 1.9 percent of net sales (EUR 109 million and 2.2%).
R&D employed 923 people (839) in 2007. Metso's personnel made almost
850 invention disclosures (710), which led to over 220 patent
applications (220). At the end of year, approximately 2,800 Metso
inventions were protected by patents (2,500).
The objectives of Metso Paper's product development are to lower
customers' production costs, decrease the environment impact of their
processes and improve energy efficiency. During the year, Metso Paper
introduced a renewed, more energy-efficient recovery boiler, and
developed a standardized, more cost-effective machine concept for
liner and fluting board production, especially for the Chinese
market. The Val product family developed for machine rebuilds was
expanded with forming solutions suitable for paper and board grades
and with the launch of a new calender that saves raw material. The
maintenance business was supported by the development of new roll
surfaces and service and analysis packages. New press technology,
which enhances press efficiency and reduces the energy used in paper
drying, was introduced for tissue machines.
The central themes of Metso Minerals' R&D operations are the
development of new business concepts and products related to
lifecycle services, and environmental technology. In addition, there
is a focus on enhancing equipment performance and combining process
technology and automation in current products. Materials technology
also plays a significant role in the development of lifecycle
services. Metso Minerals' product innovations included a Lokotrack
mobile crusher designed for use in construction projects, in which
the mobility and utilization rate of the crusher was improved. In the
recycling business, a Lindemann baling press was launched. The new
solution increases the capacity of recycling processes and makes
cutting more efficient.
Metso Automation seeks, through its product development projects, to
strengthen its position as a significant automation supplier for the
pulp and paper industry and to expand the product range for energy
and power generation customers. The product innovations included an
analyzer for the Kajaani product family that enhances the
productivity and quality of fiber processes and a new version of the
metsoDNA automation network that includes reporting and analysis
tools that improve the performance tracking of process controls and
field equipment. These properties will improve Metso Automation's
competitiveness also as an energy industry automation supplier. The
product innovations also include a valve for the Neles product family
that combines the best technological properties of linear seated
valves and rotary valves. The new paper grade measurement solutions
of the IQ product family complement earlier measurement systems.
Environment and environmental technology
The environmental impact of Metso's own production is minor and
relates mainly to the consumption of raw materials, the use of
energy, emissions to the air, water consumption and waste. Metso
seeks to reduce environmental hazards through continuous development
and by decreasing the use of power, materials and hazardous
substances.
Metso's R&D develops products and solutions that reduce the
environmental impact of Metso's customer industries. Many of Metso's
environmental technology solutions have been developed in close
cooperation with customers. Metso offers environmental solutions
related to energy efficiency, air quality, waste management,
recycling and recovery of raw materials, water efficiency, water
treatment and process optimization.
Environmental technology is a strategic growth area for Metso, and an
increasing proportion of net sales stems from environmental solutions
delivered to the customers. Over one half of Metso's net sales are
classified as environmental business, using the OECD definition.
Metso's strategy highlights the importance of environmental
solutions.
Risks and business uncertainties
Metso's operations are affected by various strategic, operational,
hazard and financial risks. Metso takes measures to manage and limit
the potential adverse effects of these risks. However, if such risks
materialized, they could have material adverse impact on Metso's
business, financial situation and operating result or on the value of
shares and other securities.
Metso's risk assessments take into consideration the probability and
effects of the risks on net sales and financial results. The risk
level is estimated to be currently acceptable in proportion to the
type and scope of Metso's operations. This section features a brief
description of Metso's most significant strategic and operational
risks.
Business cycles in the global economy and customer industries affect
the demand for Metso's products and the company's financial
situation. In particular, development of economies in the BRIC
countries (Brazil, Russia, India and China) has a significant
influence on Metso's growth potential. For example, as China is the
primary market for new paper and board machines, any major variations
in demand in China affect Metso Paper's profitability. Metso's wide
geographical scope of operations and several different customer
industries even out business cycle changes in the long run. In
general, orders of new equipment are more susceptible to cyclical
changes than the services business. Consequently, Metso is actively
growing its services business. In recent years, Metso has increased
the flexibility of its cost structure by subcontracting more and
focusing in its own operations on producing and assembling key
components.
Metso has its own manufacturing and subcontracting networks in many
emerging economies. Sudden political, economic and/or legislative
changes, especially in the BRIC countries, can interrupt business.
Metso's operations are also affected by the environmental legislation
of various countries, which may complicate the sale of Metso's
products and increase costs. On the other hand, the tighter
environmental standards introduced by new legislation open up
possibilities to offer customers new solutions that improve
energy-efficiency, reduce emissions and promote recycling.
Metso's technology risks are related to technological competence,
research and product development. The use of new technology may
temporarily increase quality-related costs. Metso protects its
products and business-related intellectual property rights through
patents and trademarks.
By continuously assessing human resources and organizational
structures, Metso aims to ensure organizational efficiency and
competence and to avoid and manage risks such as unsuitable
recruiting, imbalance in the age structure and excessive personnel
turnover.
The supply problems of raw material suppliers may increase the costs
and availability of the raw materials used in Metso's products. For
example, steel and iron scrap are among the most important raw
materials, and their prices and availability vary depending on the
market demand. Substantial fluctuations in the prices of steel and
iron scrap may have an adverse effect on Metso's operations.
Increases in the prices of electricity, oil and metals mainly serve
to boost the demand for Metso's products, but such price fluctuations
may indirectly have an adverse effect, if they decrease the
investment willingness of customers. The direct risks associated with
raw materials procurement have decreased in recent years, because
Metso has increasingly focused on manufacturing and assembling core
components. On the other hand, outsourcing has increased the
importance of and risks related to suppliers and subcontractors. The
delivery times for Metso's products have lengthened due to the strong
growth in orders received. Because of this, the risk exists that
material and other costs may increase substantially during the
delivery period and affect Metso's profitability to a larger extent
than what is estimated today. In the current situation of strong
demand, the short supply of certain components and the scarcity of
subcontractor resources, particularly at Metso Minerals and Metso
Automation, may also result in extended delivery times.
Metso's operations partly consist of large-scale project deliveries.
These may involve project-specific risks concerning delivery
schedules, equipment start-up, production capacity and end-product
quality. In some projects, risks may also arise from new technology
included in the deliveries. However, the risks related to any single
project are not generally substantial, considering the scope of the
company's business. General uncertainty on the financial markets is
not estimated to have a material effect on the demand for Metso's
products and services. This uncertainty may, however, affect the
timing of certain customer projects or the demand in certain
geographical areas.
Securing the continuity of Metso's operation requires that sufficient
financing be ensured under all circumstances. Of the financial risks
that affect Metso's profit, currency exchange rate risks are the most
substantial. Exchange rate changes affect the business, although the
geographical diversity of operations decreases the significance of
any single currency. Exchange rate changes can have a direct impact
in situations in which the invoicing currency is different from the
currency of the costs.
Subpoena from the United States 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. During 2007 Metso recognized
about EUR 4 million in costs from the investigation.
Personnel
At the end of the year, Metso employed 26,837 people. This was 1,159
more than at the end of 2006 (25,678 people). The number of personnel
grew most in emerging markets where Metso is actively increasing its
presence. In 2007, Metso employed an average of 26,269 people.
The main drivers behind personnel increases have been the investments
in delivery and service capability required by strong growth. Metso
Paper's personnel increased in Asia-Pacific due to production
capacity expansions, but this was offset by personnel decreases in
Europe and North America due to efficiency improvement measures.
Metso Minerals' number of personnel grew strongly in Finland, France,
Chile, the United States, India and Russia as a result of growth
investments. Metso Automation's personnel increased mainly through
the rises in the production capacity of the Flow Control business
line in Finland and China.
The salaries and wages of Metso employees are determined on the basis
of local collective and individual agreements, employee performance
and job evaluations. Basic salaries and wages are complemented by
performance-based compensation systems. In 2007, the total amount of
salaries and wages paid was EUR 1,036 million (EUR 914 million in
2006). The increase was primarily due to the acquisition of Pulping
and Power businesses.
Personnel by area
2007 2006
Dec 31 % of total Dec 31 % of total Change %
personnel personnel
Finland 9,386 35 9,281 36 1
Other Nordic countries 3,602 14 3,580 14 1
Other Europe 3,183 12 3,067 12 4
North America 3,865 14 3,715 14 4
South and Central 2,675 10 2,439 10 10
America
Asia-Pacific 2,705 10 2,262 9 20
Rest of the world 1,421 5 1,334 5 7
Total 26,837 100 25,678 100 5
Financial targets and dividend policy
Metso's financial targets remained unchanged in 2007. The average
annual net sales growth target is more than 10 percent. Growth will
be attained both organically and through value-enhancing
complementary acquisitions. Major acquisitions with a significant
impact on Metso will come on top of this 10 percent growth target.
The operating profit margin target (EBIT-%) is more than 10 percent.
Furthermore, Metso's target is that its key financial indicators,
capital structure and cash flow metrics will support solid investment
grade credit ratings. Metso's dividend policy is to distribute at
least 50 percent of annual earnings per share as dividends or in
other forms of repatriation of capital.
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. It was also decided 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 Metso 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 Metso'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 21, 2007.
The resulting increase in share capital of EUR 59,500 was entered in
the Finnish Trade Register on March 29, 2007. The shares became
subject to trading on the OMX Nordic Exchange Helsinki 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 2007, Metso's share capital was EUR 240,982,843.80 and
the number of shares was 141,754,614. The number of shares includes
60,841 Metso shares held by the parent company and 206,539 Metso
shares held by a limited partnership consolidated in Metso's
consolidated financial statements. Together these represent 0.19
percent of all the shares and votes. The average number of shares
outstanding in 2007, excluding Metso shares held by the company, was
141,460,012.
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 Metso shares held by the
company, was EUR 5,282 million on December 31, 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 shares.
The share ownership plan for the year 2006 was allocated 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 2007 to allocate the
2007 share ownership plan to a total of 81 Metso managers. The
potential reward from the plan was to be based on the operating
profit for 2007 of Metso and its business areas. The share ownership
plan was to cover a maximum of 125,500 Metso shares in 2007. Members
of the Metso Executive Team were to 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 exceeded
EUR 48, the number of shares to be granted under the 2007 plan would
be decreased by a corresponding ratio. Payment of the potential
rewards will be decided during the first quarter of 2008.
Metso's Board of Directors decided in February 2008 on the number of
shares to be allocated for 2008 and the criteria for earning them.
The potential reward from the plan will be based on the operating
profit of Metso and its business areas for 2008. In 2008, the share
ownership plan will cover a maximum of 130,000 Metso shares,
corresponding to 0.09 percent of all Metso shares. Metso's entire
Executive Team is covered by the 2008 share ownership plan, and a
maximum of 26,000 shares has been allocated to Executive Team
members. The maximum reward from the plan is limited to each person's
annual salary, which is calculated for the plan's purposes by
multiplying the person's monthly base salary for the share
distribution month by a factor of 12.5. The payment of rewards, if
any, will be decided during the first quarter of 2009.
Metso's listing on the NYSE, SEC registration and related reporting
obligations have been terminated
In July, 2007 Metso decided to apply for the delisting of its share
and deregistration in the United States. The final day for trading in
Metso's American Depositary Shares (ADS) on the New York Stock
Exchange was September 14, 2007.
Metso filed a Form 15F with the U.S. Securities and Exchange
Commission (SEC) on September 17, 2007 to terminate its reporting
obligations under the U.S. Securities Exchange Act. Termination
became effective on December 17, 2007.
Metso maintains its American Depositary Receipt (ADR) facility with
the Bank of New York, and Metso's ADSs are traded over-the-counter
(OTC) under the symbol "MXCYY" in the United States. Metso's ordinary
shares will continue to trade on the OMX Nordic Exchange Helsinki.
Metso publishes in English on its website (www.metso.com) materials
that are required to be made public pursuant to Finnish law, or
required to be publicly filed with its primary trading market or
required to be distributed to securities holders.
BUSINESSES
Metso Paper
+-------------------------------------------------------------------+
| EUR million | Q4/07 | Q4/06 | Change | 2007 | 2006 | Change |
| | | | % | | | % |
|---------------+-------+-------+--------+--------+--------+--------|
| Net sales | 909 | 717 | 27 | 2,925 | 2,092 | 40 |
|---------------+-------+-------+--------+--------+--------+--------|
| Earnings | | | | | | |
| before | | | | | | |
| interest, tax | 51.5 | 22.1 | 133 | 184.5 | 105.6 | 75 |
| and | | | | | | |
| amortization | | | | | | |
| (EBITA) | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| % of net | 5.7 | 3.1 | | 6.3 | 5.0 | |
| sales | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| Operating | 39.6 | 13.2 | 200 | 136.9 | 89.8 | 52 |
| profit | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| % of net | 4.4 | 1.8 | | 4.7 | 4.3 | |
| sales | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| Orders | 838 | 677 | 24 | 3,109 | 2,276 | 37 |
| received | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| Order backlog | | | | 2,363 | 2,225 | 6 |
| at end of | | | | | | |
| period | | | | | | |
|---------------+-------+-------+--------+--------+--------+--------|
| Personnel at | | | | 11,694 | 11,558 | 1 |
| end of period | | | | | | |
+-------------------------------------------------------------------+
Aker Kvaerner's Pulping and Power businesses were acquired on
December 29, 2006, and the acquired balance sheet was consolidated to
Metso on December 31, 2006. The acquired businesses had no effect on
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.
Metso Paper's net sales grew by 40 percent on the comparison year and
totaled EUR 2,925 million. About one-third of the growth was organic,
and two-thirds were related to the acquisition of the Pulping and
Power businesses. Organic growth was strongest at the Paper and Board
and the Power business lines.
Metso Paper's services business grew by 31 percent. Excluding the
acquired Pulping and Power business and the effect of exchange rate
translation, the growth of the services business was about 8 percent.
The services business accounted for 29 percent of net sales (30% in
2006). During 2007, Metso Paper carried out acquisitions supporting
the services business, invested in service centers in China, and
signed a large-scale service agreement with a Plattling Papier paper
mill it had delivered in Germany.
The favorable development of Metso Paper's profitability continued,
and EBITA for the entire year was EUR 184.5 million, or 6.3 percent
of net sales (EUR 105.6 million and 5.0% in 2006). The improvement
was mainly due to strong volume growth and effective control of fixed
costs.
Metso Paper's operating profit was EUR 136.9 million, or 4.7 percent
of net sales (EUR 89.8 million and 4.3% in 2006). The operating
profit in 2007 was weakened by the EUR 36 million amortization of
intangible assets related to the acquisition of the Pulping and Power
businesses.
The value of orders received by Metso Paper increased by 37 percent
on the comparison period and totaled EUR 3,109 million. The order
intake growth was very strong in the Power business line, in which
the value of orders received exceeded EUR 800 million in 2007. Orders
received by the Paper and Board business line also increased notably,
while the orders received by the Fiber and Tissue business lines
decreased from the comparison year. The most significant orders for
the year included pulp mill equipment for Votorantim Celulose e Paper
in Brazil and Celbi in Portugal, a printing paper line for Henan
Puyang Longfeng Paper in China, and an uncoated fine paper production
line for the Portucel Group in Portugal. At the end of the year, the
order backlog was EUR 2,363 million, which was 6 percent more than at
the end of 2006.
In 2007, Metso Paper carried out a number of measures to improve cost
competitiveness and increase the efficiency of the production
structure. This resulted in decisions to reduce the company's
personnel by almost 700 persons, mainly in Europe and North America.
Of the reductions, some 250 affect the Finnish operations, about 350
the Swedish operations, 50 the rest of Europe and a further 40 North
America. At the same time, the number of personnel increased in Asia
by 240 people, strengthening Metso Paper's presence in emerging
markets, close to its customers. About 220 of the personnel
reductions are related to the integration of the Pulping business.
The personnel negotiations related to the reductions have mainly been
completed and the related decisions have been made. The nonrecurring
costs resulting from these measures recorded in 2007 were
approximately EUR 27 million, of which about EUR 9 million were
related to the integration of the acquired Pulping business and the
remaining EUR 18 million to other efficiency improvement measures.
About EUR 17 million of these nonrecurring costs were realized in the
fourth quarter, and slightly less than EUR 5 million of this was
related to the integration of the acquired Pulping business.
Metso Minerals
EUR million Q4/07 Q4/06 Change % 2007 2006 Change %
Net sales 770 630 22 2,607 2,199 19
Earnings before interest,
tax and amortization
(EBITA) 115.2 91.1 26 367.1 302.1 22
% of net sales 15.0 14.5 14.1 13.7
Operating profit 113.9 90.0 27 362.6 297.7 22
% of net sales 14.8 14.3 13.9 13.5
Orders received 761 705 8 3,075 2,655 16
Order backlog at end of 1,690 1,277 32
period
Personnel at end of period 10,446 9,433 11
Metso Minerals' net sales rose by 19 percent on the comparison year
and totaled EUR 2,607 million. The growth was strongest in the Mining
business line. Net sales of the Construction business line also
increased clearly, by over 10 percent on the previous year. The
Recycling business line's growth was slightly below 10 percent. Metso
Minerals' services business grew by 12 percent, and accounted for 40
percent of the net sales (43% in 2006).
The operating profit of Metso Minerals increased to EUR 362.6 million
and was 13.9 percent of net sales (EUR 297.7 million and 13.5%). This
improvement was mainly due to the strong growth in net sales,
offsetting the negative impact of cost increases and the growth in
the relative share of project deliveries. All business lines improved
their operating profit on the preceding year. It is estimated that
the continued strengthening of the euro decreased Metso Minerals'
operating margin for 2007 by almost one percentage point.
The value of orders received by Metso Minerals increased by 16
percent and totaled EUR 3,075 million. The growth in order intake was
strong across all business lines. From the beginning of 2007, Metso
Minerals applied a new customer-oriented operating model, which had a
favorable impact especially on the order intake of the Construction
business line. Geographically, the growth was strongest in Eastern
Europe, South Africa and China. The largest orders in 2007 included
bulk materials handling equipment for Alcoa in Brazil, a grinding
system for Boliden in Sweden, grinding equipment for Osisko
Exploration in Canada, minerals processing equipment for Gold Reserve
in Venezuela, and minerals processing equipment for Arcelor Mittal
Steel in the Ukraine. The order backlog increased by 32 percent on
the end of 2006 and was EUR 1,690 million at the end of 2007.
Metso Automation
+-------------------------------------------------------------------+
| EUR million | Q4/07 | Q4/06 | Change | 2007 | 2006 | Change |
| | | | % | | | % |
|-----------------+-------+-------+--------+-------+-------+--------|
| Net sales | 213 | 193 | 10 | 698 | 613 | 14 |
|-----------------+-------+-------+--------+-------+-------+--------|
| Earnings before | | | | | | |
| interest, tax | | | | | | |
| and | 34.7 | 32.2 | 8 | 100.4 | 88.3 | 14 |
| amortization | | | | | | |
| (EBITA) | | | | | | |
|-----------------+-------+-------+--------+-------+-------+--------|
| % of net | 16.3 | 16.7 | | 14.4 | 14.4 | |
| sales | | | | | | |
|-----------------+-------+-------+--------+-------+-------+--------|
| Operating | 34.2 | 31.8 | 8 | 98.8 | 86.7 | 14 |
| profit | | | | | | |
|-----------------+-------+-------+--------+-------+-------+--------|
| % of net | 16.1 | 16.5 | | 14.2 | 14.1 | |
| sales | | | | | | |
|-----------------+-------+-------+--------+-------+-------+--------|
| Orders received | 165 | 162 | 2 | 763 | 717 | 6 |
|-----------------+-------+-------+--------+-------+-------+--------|
| Order backlog | | | | 332 | 276 | 20 |
| at end of | | | | | | |
| period | | | | | | |
|-----------------+-------+-------+--------+-------+-------+--------|
| Personnel at | | | | 3,564 | 3,352 | 6 |
| end of period | | | | | | |
+-------------------------------------------------------------------+
Metso Automation's net sales increased by 14 percent on the
comparison year and totaled EUR 698 million. The growth mainly
originated from deliveries of flow control systems for the energy
industry. Deliveries of automation systems were at the previous
year's level. The services business grew by 8 percent and accounted
for 22 percent of net sales (23% in 2006).
Metso Automation's operating profit improved notably to EUR 98.8
million and was 14.2 percent of net sales. This improvement was
mainly due to the strong growth in net sales, offsetting the negative
impact of increases in raw material prices and the growth in the
relative share of project deliveries.
The value of new orders received by Metso Automation increased by 6
percent on the comparison period and totaled EUR 763 million. The
growth mainly originated from orders with the power, oil and gas
industry. In the second half of the year, order intake in the Flow
Control business was limited by the strong order backlog and the high
capacity utilization. The largest orders in 2007 included valves for
the Chiyoda-Technip Joint Venture in Qatar, automation modernization
for the REVAP refinery of Petrobras in Brazil, and an automation
solution for Shouguang Chenming's mill in China. Metso Automation's
order backlog was 20 percent stronger than at the end of 2006 and
totaled EUR 332 million.
Valmet Automotive
Valmet Automotive's net sales were EUR 85 million in 2007. The
operating profit was EUR 8 million, or 9.4 percent of net sales.
About half of the operating profit is attributable to non-recurring
income. During the year, Valmet Automotive manufactured an average of
110 vehicles per day and a total number of cars manufactured during
2007 is 24,006 (32,393 cars in 2006). At the end of 2007, the number
of Valmet Automotive's personnel was 789, which was 224 less than one
year before, when the number of personnel was adjusted to meet the
needs of production.
Events after the review period
Panelboard divestment to conclusion
Metso successfully concluded the divestment of the Panelboard
business at the beginning of 2008. The German panelboard press
business was divested to Siempelkamp earlier in September 2007, and
in January 2008 an agreement was concluded on the divestment of the
panelboard operations in Nastola, Finland and Sundsvall, Sweden to
Dieffenbacher GmbH & Co. KG.
According to the agreement made with German Dieffenbacher, all the
panelboard operations' 60 employees in Finland and 40 employees in
Sweden will be transferred to Dieffenbacher. The refiner-related
operations in Sundsvall, Sweden, will remain in Metso's ownership and
are not included in the transaction. This unit with its 40 employees
will continue to supply fiber preparation technology to the global
MDF industry as part of Metso Paper.
As a result of the two divestments, some 160 Panelboard employees
were transferred to the acquiring companies. After the divestments,
around EUR 20-30 million of the former Panelboard's total net sales
of EUR 100-150 million remain with Metso. The Panelboard business
line was discontinued as a separate business line in January 2008.
Metso's Nomination Committee proposes seven members to the Board
The Nomination Committee established by Metso's Annual General
Meeting, proposes to the next Annual General Meeting, which will be
held on April 2, 2008, that the number of Board members is seven.
The Nomination Committee proposes that from the current Board members
Maija-Liisa Friman, Christer Gardell, Matti Kavetvuo, Yrjö Neuvo and
Jaakko Rauramo be re-elected. Matti Kavetvuo is proposed to continue
as Chairman of the Board and Jaakko Rauramo as Vice Chairman. It is
also proposed that Jukka Viinanen and Arto Honkaniemi shall be
elected as new members of the Metso Board.
The Nomination Committee proposes the following annual fees to be
paid: Chairman of the Board EUR 92,000, Vice Chairman of the Board
EUR 56,000 and other Board members EUR 45,000. In addition, a fee of
EUR 600 per meeting is paid to all members for the Board and Board
committee meetings they attend.
The Nomination Committee notes that a personnel representative will
participate as an external expert in the Metso Board meetings also in
the next Board term within the limitations imposed by the Finnish
law. The new Board will invite the personnel representative as its
external expert in April 2008.
Metso's Nomination Committee consisted of Chairman Pekka Timonen
(State of Finland) and members Mikko Koivusalo (Varma Mutual Pension
Insurance Company), Harri Sailas (Ilmarinen Mutual Pension Insurance
Company) and Lars Förberg (Cevian Capital). Matti Kavetvuo, Chairman
of Metso's Board, served as the Nomination Committee's expert member.
Short-term outlook
The favorable market situation for Metso's products and services is
expected to continue. However, general uncertainty about the growth
of the global economy may have an impact on the realization of
certain customer projects and the demand in certain geographical
areas.
No significant changes are expected in Metso Paper's market situation
in 2008. The demand for new paper, board and tissue machines and
fiber lines is expected to remain at the current level, although
issues related to our customers' financing and required permits may
in some cases have an impact on timing of projects. In China, the
main factor affecting customer investments in new equipment is the
growth of paper and board consumption, which is estimated to continue
at a rapid rate. In Europe and North America, demand is expected to
focus mainly on machine rebuilds and services. The demand for power
plants utilizing renewable energy sources is estimated to continue at
an excellent level in Metso's main market areas; Europe and North
America. Metso Paper aims to substantially grow its services
business, and the demand for services is expected to remain
satisfactory.
Metso Minerals' favorable market situation is expected to continue in
2008. The demand for mining products, metal recycling equipment and
services business is expected to continue at an excellent level.
Investments in industrials and commercial facilities, infrastructure,
services and housing are forecast to remain buoyant, particularly in
emerging economies. As a result, it is expected that the demand for
metals will remain strong and that the investment activity of Metso's
customers will remain excellent. In the construction sector, demand
for Metso Minerals' equipment relating to aggregates production is
estimated to remain good. Construction demand will be bolstered by
ongoing development projects concerning road networks and other
transportation infrastructure around the world.
The demand for Metso Automation's products in the pulp and paper
industry is expected to be good in 2008. In the power, oil and gas
industries, the demand for process automation systems is expected to
be good and the demand for flow control systems excellent. Energy
industry investments are driven by the increased consumption of
energy and high oil prices due to global economic growth.
In 2008, Metso targets to achieve, at comparable exchange rates, net
sales growth of about 10 percent compared to 2007 and to reach an
operating profit margin level of about 10 percent.
The profit performance estimates are based on Metso's current market
outlook, order backlog and business scope.
Board of Directors' proposal for the distribution of profit
The Parent Company's distributable funds totaled EUR 713,240,970.52
on December 31, 2007, of which the net profit for the year was EUR
518,795,581.49.
The Board proposes to the Annual General Meeting that a dividend of
EUR 3.00 per share be distributed for the year ended on December 31,
2007, and that the rest be retained and carried further. The proposed
EUR 3.00 dividend consists of an ordinary dividend of EUR 1.65 and an
extra dividend of EUR 1.35.
It is proposed that the record date for the payment of dividends will
be April 7, 2008 and that the dividend will be paid on April 15,
2008. All the shares outstanding on the dividend record date will be
entitled to a dividend, except for the treasury shares held by the
Parent Company.
Annual General Meeting 2008
The Annual General Meeting of Metso Corporation will be held at 3
p.m. on Wednesday, April 2, 2008 at the Marina Congress Center in
Helsinki.
Metso's financial reporting in 2008
Metso will publish three interim reviews in 2008 as follows:
Interim report for January-March on April 23, 2008,
Interim review for January-June on July 24, 2008 and
Interim review for January-September on October 28, 2008.
The Annual Report for 2007 will be published during the week starting
on March 10, 2008.
Helsinki, February 6, 2008
Metso Corporation's Board of Directors
This release is continued in part 2/2
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