2007-10-25 11:01:09 CEST
2007-10-25 11:01:09 CEST
REGULATED INFORMATION
Metso Oyj - Quarterly report
Metso s Interim Review January 1 - September 30, 2007
Metso's profitable growth continues
Highlights of the third quarter
* New orders worth EUR 1,440 million were received in
July-September, i.e. 9 percent more than in the corresponding
period of last year (EUR 1,321 million in Q3/06).
* The order backlog was EUR 4,519 million at the end of
September (EUR 3,737 million on Dec. 31, 2006 and EUR 4,574 million
on June 30, 2007).
* Net sales increased by 24 percent and totaled EUR 1,452
million (EUR 1,169 million in Q3/06).
* Earnings before interest, tax and amortization (EBITA)
were EUR 157.3 million, i.e. 10.8 percent of net sales (EUR 124.4
million and 10.6% in Q3/06).
* Operating profit (EBIT) was EUR 143.4 million, i.e. 9.9
percent of net sales (EUR 120.4 million and 10.3% in Q3/06).
* Earnings per share were EUR 0.66 (EUR 0.59 in Q3/06).
* Free cash flow was EUR 133 million (EUR 113 million in
Q3/06).
Jorma Eloranta, President and CEO of Metso Corporation, says "I am
pleased with Metso's overall third-quarter performance although we
faced currency headwinds and had certain one-off expenses. It has
been especially good to notice that Metso Paper's operational
performance is improving, thanks to our persistent measures to
continuously enhance the operational efficiency - even though we
still have work to do. Order intake in Metso Paper was low during the
third quarter, but it was a timing issue and we estimate the order
intake to be at a good level during the last quarter. Metso Minerals'
profitability was somewhat hit by exceptionally high, one-off
warranty repair costs and the weakening of the U.S. dollar. At Metso
Automation, profitability has improved nicely after the past few
quarters of capacity constraints and cost increases. For the first
nine months, our EBITA improved by 28 percent and operating profit by
20 percent compared to the same period last year."
Metso concluded its annual strategy review during the third quarter."Our profitable growth strategy has progressed steadily in the past
two years, and we continue to see a lot of opportunities to improve
our performance. We believe that this strategy can deliver fast
growth, strong profits and more value for our customers and
shareholders also in the years to come."
Eloranta confirms that Metso expects markets to continue to be
favorable well into 2008. "Our strong order backlog provides solid
bases for next year. We aim to deliver profitable growth for the last
quarter of 2007 and in 2008."
Metso's key figures
EUR million Q3/07 Q3/06 Change % Q1- Q1- Change % 2006
Q3/07 Q3/06
Net sales 1,452 1,169 24 4,354 3,417 27 4,955
Earnings before
interest, tax and 157.3 124.4 26 441.5 345.0 28 481.1
amortization (EBITA)
% of net sales 10.8 10.6 10.1 10.1 9.7
Operating profit 143.4 120.4 19 400.1 332.2 20 457.2
% of net sales 9.9 10.3 9.2 9.7 9.2
Earnings per share, 0.66 0.59 12 1.84 2.03 (9) 2.89
EUR
Adjusted earnings per
share, EUR 1) 0.66 0.59 12 1.84 1.63 13 2.28
Orders received 1,440 1,321 9 5,194 4,148 25 5,705
Order backlog at end 4,519 3,022 50 3,737
of period
Free cash flow 133 113 18 163 291 (44) 327
Return on capital
employed (ROCE), 24.5 22.1 22.2
annualized, %
Equity to assets
ratio at end of 36.6 38.0 36.1
period, %
Gearing at end of 33.8 16.6 30.8
period, %
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 asset, EUR 57 million was recognized in
Q2/2006 (impact to EPS EUR 0.40) and EUR 30 million in Q4/2006
(impact to EPS EUR 0.21).
Metso's third quarter 2007 review
Operating environment and demand for products in July-September
The market situation for Metso's products and services continued to
be favorable during the third quarter. Uncertainty on the
international financial markets and the weakening of the U.S. dollar
against the euro did not materially slow the investment activity of
Metso's customers.
The market situation for Metso Paper's products and services
continued much the same as in the year's first half. The demand for
new paper, board and tissue machines was good in Asia. Particularly
in China, 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, and satisfactory elsewhere. Chemical pulp
production capacity is growing quickly in these areas due to good
availability of cost competitive raw materials. The demand for power
plants using renewable energy sources continued to be excellent. The
demand for Metso Paper's aftermarket services was satisfactory.
The demand for Metso Minerals' mining products, metals recycling
equipment and aftermarket services remained excellent as in the
year's first half. Particularly in emerging countries, lively
investment in industrial and commercial facilities, infrastructure,
services and housing has continued. As a result, there has been high
demand for metals, and the mining industry has maintained a high
level of investment globally. With respect to construction, the
demand for Metso Minerals' aggregates production-related equipment
was overall good in the third quarter, although the slowdown in US
residential construction was reflected in a leveling off in growth in
the US market. Construction demand is driven by ongoing projects to
develop road networks and other transportation infrastructure in
different parts of the world, especially in the emerging markets.
The overall market situation for Metso Automation's products and
services continued to be mainly good in the pulp and paper industry.
With respect to the power, oil and gas industries, there was
continuing good demand for process automation systems and excellent
demand for flow control systems. Energy industry investments are
driven by the increased consumption of energy and high oil prices due
to global economic growth.
Orders received in July-September
The value of orders received by Metso during the third quarter
increased by 9 percent on the corresponding period of 2006, and
totaled EUR 1,440 million.
Metso Paper's order intake increased by 5 percent and the growth was
due to the Pulping and Power businesses acquired at the end of 2006.
The growth in orders received by the Power business line was limited,
however, by the high order backlog and high capacity utilization.
Geographically, the most important market areas were Europe and
Asia-Pacific. The largest orders received by Metso Paper in
July-September included a packaging board production line for Mondi
Packaging in Europe, a kraftliner board machine for Lee & Man Paper's
Hongmei mill in China and a biomass-fired power boiler for Kalmar
Energi Värme AB in Sweden. Several contract negotiations that were
underway in the third quarter are expected to be concluded before the
year-end.
Metso Minerals' order intake grew by 17 percent. Orders increased
strongly in the Mining and Recycling business lines, while growth in
the Construction business line leveled off. Geographically, new
orders came from all market areas, but especially from Europe. The
largest orders received by Metso Minerals included minerals
processing equipment for Arcelor Mittal Steel's concentrator plants
in Ukraine, grinding equipment for Platmin Limited's platinum mine in
South Africa and crushing and screening equipment for Construtora
Norberto Odebrecht S.A.'s projects in Angola and Venezuela. Metso
Minerals also entered into a five-year service contract with Codelco
in Chile.
Metso Automation's third-quarter order intake was on par with the
corresponding period of last year. Growth was limited by the high
order backlog and high utilization of production capacity in the flow
control business. New orders received during July-September included
e.g. delivery of valves for Société Internationale de Dessalement's
desalination plant in Saudi Arabia.
Financial performance in July-September
Metso's third-quarter net sales grew by 24 percent on the
corresponding period last year and totaled EUR 1,452 million. Organic
growth was good in all business areas but strongest in Metso
Minerals. Also the Pulping and Power businesses acquired at the end
of 2006 contributed to the growth.
Metso's third-quarter earnings before interest, tax and amortization
(EBITA) were EUR 157.3 million, or 10.8 percent of net sales compared
with EUR 124.4 million or 10.6 percent of net sales for the
corresponding period last year. EBITA improved in all business areas.
EBITA margin improved in both Metso Paper and Metso Automation
whereas Metso Minerals' EBITA margin decreased. Metso's third-quarter
operating profit was EUR 143.4 million or 9.9 percent of net sales
(EUR 120.4 million and 10.3 percent in Q3/2006).
Metso's January-September 2007 Interim Review
Orders received and order backlog
In January-September, Metso's orders received grew by 25 percent on
the comparison period, and totaled EUR 5,194 million. Orders received
grew in all business areas, and two thirds of the increase was
attributable to the acquired Pulping and Power businesses. Excluding
the effect of exchange rate translation, the increase in orders
received would have been about three percentage points higher. The
growth 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. Growth in new orders was
strongest in Europe. Metso's order backlog increased by 21 percent on
the end of 2006 and was EUR 4,519 million at the end of September.
Orders received by business area
Q1-Q3/07 Q1-Q3/06
EUR million % of orders EUR % of orders
received million received
Metso Paper 2,271 44 1,599 38
Metso Minerals 2,314 44 1,950 47
Metso Automation 598 11 555 13
Valmet Automotive 64 1 81 2
Intra-Metso and other
orders received (53) (37)
Total 5,194 100 4,148 100
Orders received by market area
+-------------------------------------------------------------------+
| | Q1-Q3/07 | Q1-Q3/06 |
|----------------------+-----------------------+--------------------|
| | EUR | % of orders | EUR | % of |
| | million | received | million | orders |
| | | | | received |
|----------------------+---------+-------------+---------+----------|
| Europe | 2,321 | 45 | 1,522 | 37 |
|----------------------+---------+-------------+---------+----------|
| North America | 773 | 15 | 879 | 21 |
|----------------------+---------+-------------+---------+----------|
| South and Central | 611 | 12 | 519 | 12 |
| America | | | | |
|----------------------+---------+-------------+---------+----------|
| Asia-Pacific | 1,115 | 21 | 946 | 23 |
|----------------------+---------+-------------+---------+----------|
| Rest of the world | 374 | 7 | 282 | 7 |
|----------------------+---------+-------------+---------+----------|
| Total | 5,194 | 100 | 4,148 | 100 |
+-------------------------------------------------------------------+
Net sales
Metso's net sales for January-September grew by 27 percent on the
comparison period and totaled EUR 4,354 million. Excluding the effect
of exchange rate translation, the increase in net sales would have
been about 3 percentage points higher. Excluding the effect of the
Pulping and Power businesses acquired at the end of 2006, the
increase in net sales was approximately 12 percent. The main drivers
of organic growth were the continuing good market situation and
expanded market presence. Measured in euros, the net sales of the
aftermarket business increased by 20 percent and it accounted for 34
percent (37% in Q1-Q3/06) of Metso's net sales. The decrease in the
relative share of the aftermarket business was due to the acquired
Pulping and Power businesses, in which the share of the aftermarket
business is below Metso's average.
Net sales by business area
Q1-Q3/07 Q1-Q3/06
EUR million % of net EUR million % of net
sales sales
Metso Paper 2,016 46 1,375 40
Metso Minerals 1,837 42 1,569 45
Metso Automation 485 11 420 12
Valmet Automotive 64 1 81 3
Intra-Metso net sales (48) (28)
Total 4,354 100 3,417 100
Net sales by market area
Q1-Q3/07 Q1-Q3/06
EUR million % of net EUR million % of net sales sales
Europe 1,736 40 1,431 42
North America 786 18 749 22
South and Central 618 14 436 13
America
Asia-Pacific 1,029 24 623 18
Rest of the world 185 4 178 5
Total 4,354 100 3,417 100
Financial result
Metso's January-September earnings before interest, tax and
amortization (EBITA) were EUR 441.5 million, or 10.1 percent of net
sales (EUR 345.0 million and 10.1% in Q1-Q3/06). EBITA improved in
all business areas due to strong volume growth. At Metso Paper, all
business lines improved their operating results and the EBITA margin
increased. At Metso Minerals and Metso Automation, the EBITA margin
was at the level of the comparison year.
Metso's operating profit for January-September was EUR 400.1 million,
or 9.2 percent of net sales (EUR 332.2 million and 9.7% in Q1-Q3/06).
Operating profit includes a EUR 27 million amortization of intangible
assets related to the acquisition of the Pulping and Power
businesses.
Metso's net financial expenses for January-September were EUR 25
million (EUR 28 million). Net financial expenses include EUR 6
million of foreign exchange gains.
Metso's profit before taxes for January-September was EUR 375 million
(EUR 304 million). The profit attributable to shareholders for
January-September was EUR 261 million (EUR 287 million),
corresponding to earnings per share (EPS) of EUR 1.84 (EUR 2.03 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.
Metso's return on capital employed (ROCE) was 24.5 percent (22.1%)
and the return on equity (ROE) was 23.6 percent (29.5%).
Cash flow and financing
Metso's net cash generated by operating activities for
January-September was EUR 260 million (EUR 368 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. In the
third quarter, net working capital remained at the level of the
second quarter. Metso's free cash flow for January-September was EUR
163 million (EUR 291 million) and for the third quarter EUR 133
million (EUR 113 million).
Net interest-bearing liabilities totaled EUR 521 million at the end
of September. Gearing was 33.8 percent. Metso's equity to assets
ratio was 36.6 percent. In April, Metso paid dividends of EUR 212
million for 2006.
Capital expenditure
Metso's gross capital expenditure for January-September was EUR 110
million excluding acquisitions (EUR 89 million). About one third of
the capital expenditure was related to investments increasing
capacity necessitated by strong volume growth.
In China, Metso is building a service center for Metso Paper in
Guangzhou, due for completion in 2008. An expansion of Metso Paper's
Service Center is ongoing in Wuxi, while Metso Automation has
completed an expansion of its valve production plant in Shanghai.
In India, Metso is expanding assembly capacity for mobile crushing
and vibrating equipment in Bawal and a foundry in Ahmedabad, as well
as office facilities, primarily for new engineering resources in New
Delhi. The capacity of the Brazilian crusher manufacturing plant is
also being extended.
In the United States, Metso is establishing a service center of Metso
Power in Charlotte, North Carolina.
In Finland, Metso is expanding its power boiler production facilities
at Lapua and increasing capacity in the paper machine roll production
line in Jyväskylä. A new assembly line for track-mounted crushing
plants was introduced in Tampere early in the year, and a research
center including a pilot plant and rock laboratory will be completed
by the end of the year. Metso is also increasing its valve production
capacity in the Helsinki production plant.
Metso is investing 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. A similar
investment is underway in Metso Minerals.
Metso estimates that gross capital expenditure for 2007 will be about
30 percent higher than in 2006. The growth will be due to investments
increasing capacity and the ERP investments of Metso Minerals and
Metso Automation.
Metso's research and development expenditure totaled EUR 79 million
(EUR 80 million) during January-September, or 1.8 percent of Metso's
net sales.
Holding in Talvivaara Mining Company Ltd
Metso's approximate 4 percent holding in Talvivaara Mining Company
Ltd is classified in the balance sheet as an available-for-sale
investment. At the end of September, Metso's holding was valued at
approximately EUR 36 million. In connection with Talvivaara's listing
in May, Metso undertook to retain its Talvivaara shares for at least
6 months. 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 July 2007, Metso agreed to sell the assets of its German press and
energy plants business to G. Siempelkamp GmbH & Co. KG. The business
was transferred to the buyer on September 28, 2007. The 65 employees
of Metso Panelboard GmbH were also transferred to Siempelkamp. The
transaction price was EUR 7 million and Metso booked a small gain on
sale in the third quarter.
In July 2007, Metso acquired Bender Holdings Limited and its
subsidiary companies in the 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.
As a result of the acquisition, Metso Paper became the global market
leader in Yankee cylinder grinding and coating services for tissue
machines.
In June 2007, Metso strengthened Metso Paper's aftermarket 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 metals recycling
technology provider, Bulk Equipment Systems and Technologies Inc.
(B.E.S.T. Inc), located in Cleveland, Ohio. The acquisition price was
approximately EUR 9 million. The company's net sales for 2006 were
EUR 8 million and it employs approximately 40 people.
In March 2007, Metso sold the majority of Metso Paper AG in Delémont,
Switzerland. Metso Paper remained as a minority shareholder. 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 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 holds to its previous estimate 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
have been realized sooner than expected, and it is estimated that
over one half of the annual savings will be achievable this year.
During January-September, about EUR 10 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 5 million was recognized in January-September.
During the first nine months, the global customer interface
organization was restructured and overlapping activities were
eliminated in Sweden and Finland. By the end of September these
measures had resulted in the reduction of about 130 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. In the first nine months, the amortization of
intangible assets amounted to EUR 27 million.
Personnel
Metso had 26,603 employees at the end of September. This was 925
employees more than at the end of last year (25,678 employees). The
increase in personnel was the most significant in the Asia-Pacific
region. In January-September, Metso had an average of 26,127
employees.
Personnel by region
Sep 30, 2007 Dec 31, 2006 Change %
Finland 9,332 9,281 1
Other Nordic countries 3,588 3,580 0
Other Europe 3,175 3,067 4
North America 3,811 3,715 3
South and Central America 2,627 2,439 8
Asia-Pacific 2,624 2,262 16
Rest of the world 1,446 1,334 8
Total personnel 26,603 25,678 4
BUSINESSES
Metso Paper
EUR million Change Q1-Q3/07 Q1-Q3/06 Change 2006
Q3/07 Q3/06 % %
Net sales 642 489 31 2,016 1,375 47 2,092
Earnings before
interest, tax and 48.2 32.3 49 133.0 83.5 59 105.6
amortization
(EBITA)
% of net sales 7.5 6.6 6.6 6.1 5.0
Operating profit 36.2 30.0 21 97.3 76.6 27 89.8
% of net sales 5.6 6.1 4.8 5.6 4.3
Orders received 515 491 5 2,271 1,599 42 2,276
Order backlog at 2,455 1,547 59 2,225
end of period
Personnel at end 11,774 9,445 25 11,558
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 for January-September increased by 47 percent
on the comparison period and totaled EUR 2,016 million. Growth
excluding the acquired Pulping and Power businesses was about 9
percent. All business lines delivered organic growth except for
Panelboard. Measured in euros, the volume of the aftermarket business
increased by 32 percent and it accounted for 30 percent of net sales
(33% in Q1-Q3/06). The majority of the growth in the aftermarket
business was attributable to the acquired Pulping and Power
businesses.
Metso Paper's EBITA was EUR 133.0 million, or 6.6 percent of net
sales (EUR 83.5 million and 6.1% in Q1-Q3/06). Profitability improved
in all business lines. The operating profit was EUR 97.3 million, or
4.8 percent of net sales (EUR 76.6 million and 5.6% in Q1-Q3/06). The
operating profit for January-September was weakened by a EUR 27
million amortization of intangible assets related to the acquisition
of the Pulping and Power businesses. The steep rise in the stainless
steel price had about a EUR 10 million negative impact on Metso
Paper's profitability during the first half year. However, the
stainless steel price has leveled off during 2007 and going forward
the impact on profitability is not estimated to be material. Metso
Paper's third-quarter operating profit includes EUR 6 million
expenses related to the restructuring of its operations in Como,
Italy. In the fourth quarter, Metso Paper is estimated to record over
EUR 10 million of one-time expenses related to the integration of the
acquired Pulping and Power businesses and other ongoing measures to
improve cost-competitiveness.
The value of orders received by Metso Paper increased by 42 percent
on the comparison period and totaled EUR 2,271 million. The order
intake of the Power business grew by over 70 percent in
January-September, although the third-quarter order intake was
limited by strong order backlog and high capacity utilization rates.
The order intake of the Panelboard and Tissue business lines clearly
declined from the comparison period. Excluding the effect of the
Pulping and Power businesses, Metso Paper's order intake was on par
with the comparison period. The most significant orders of
January-September included orders received from Mondi Packaging for a
packaging board line in Europe, from Oji Paper for a paper making
line in Japan, from Henan Puyang Longfeng Paper for a printing paper
line in China, from Votorantim Celulose e Papel for pulp mill
equipment in Brazil and from Celbi for pulp mill equipment in
Portugal. The end-of-September order backlog, EUR 2,455 million, was
10 percent higher than the order backlog at the end of 2006.
Metso Minerals
EUR million Q3/07 Q3/06 Change % Q1-Q3/07 Q1-Q3/06 Change 2006
%
Net sales 649 525 24 1,837 1,569 17 2,199
Earnings before
interest, tax and 86.3 76.7 13 251.9 211.0 19 302.1
amortization
(EBITA)
% of net sales 13.3 14.6 13.7 13.4 13.7
Operating profit 85.2 75.9 12 248.7 207.7 20 297.7
% of net sales 13.1 14.5 13.5 13.2 13.5
Orders received 745 636 17 2,314 1,950 19 2,655
Order backlog at 1,728 1,213 42 1,277
end of period
Personnel at end 10,194 9,158 11 9,433
of period
Metso Minerals' net sales for January-September increased by 17
percent on the comparison period and totaled EUR 1,837 million. Most
of the growth was derived from the Mining business line, but the net
sales of the Construction and Recycling business lines were also up
on the comparison period. Measured in euros, the volume of the
aftermarket business grew by 13 percent and it accounted for 42
percent of net sales (43% in Q1-Q3/06).
The January-September operating profit of Metso Minerals increased to
EUR 248.7 million, or 13.5 percent of net sales. Profitability
improved in the Mining and Recycling business lines. Continued
strengthening of the euro weakened Metso Minerals' operating profit
margin by close to one percentage point during the first nine months.
The third-quarter operating profit was negatively affected by
exceptional one-off warranty repair costs related to one mining
equipment project.
The value of orders received by Metso Minerals was up by 19 percent
and totaled EUR 2,314 million. Order intake growth was strongest in
the Recycling business line. New orders grew also in the Mining and
Construction business lines. During January-September construction
equipment orders in the United States were on par with the
corresponding period last year despite the uncertainty in the U.S.
housing market, because Metso is more exposed to transportation
infrastructure. The largest orders of January-September included
orders received from Boliden for a grinding system in Sweden, from
Alcoa for bulk materials handling equipment in Brazil, from Gold
Reserve Inc. for minerals processing equipment in Venezuela, from
Osisko Exploration for grinding equipment in Canada and from Arcelor
Mittal Steel for minerals handling equipment in Ukraine. The order
backlog increased by 35 percent on the end of 2006 and was EUR 1,728
million at the end of September.
Metso Automation
EUR million Q3/07 Q3/06 Change % Q1-Q3/07 Q1-Q3/06 Change 2006
%
Net sales 165 146 13 485 420 15 613
Earnings before
interest, tax and 26.2 20.5 28 65.7 56.1 17 88.3
amortization
(EBITA)
% of net sales 15.9 14.0 13.5 13.4 14.4
Operating profit 25.8 20.0 29 64.6 54.9 18 86.7
% of net sales 15.6 13.7 13.3 13.1 14.1
Orders received 185 183 1 598 555 8 717
Order backlog at 382 309 24 276
end of period
Personnel at end 3,523 3,315 6 3,352
of period
Metso Automation's net sales for January-September increased by 15
percent on the comparison period and totaled EUR 485 million. The
increase derived mainly from deliveries of flow control systems to
the energy industry, but deliveries of automation systems also
increased. Measured in euros, the volume of the aftermarket business
grew by 8 percent and it accounted for 22 percent of net sales (23%
in Q1-Q3/06).
Metso Automation's operating profit in January-September amounted to
EUR 64.6 million or 13.3 percent of net sales. The negative impact of
high raw material prices and increase in relative share of project
deliveries was offset by the growth in net sales. The operating
profit margin improvement during the third quarter was attributable
to good sales volume, improved pricing and more favorable sales mix.
The value of orders received by Metso Automation increased by 8
percent on the comparison period and was EUR 598 million. The
increase derived mainly from the Flow Control business line from the
power, oil and gas industries. In the third quarter, the intake of
new orders was limited by the high order backlog and high capacity
utilization rates in the Flow Control business line. The largest
orders of January-September included orders from the Chiyoda-Technip
Joint Venture for a valve delivery to Qatar, from Henan Puyang
Longfeng Paper for a process automation system in China and from
Petrobras for an automation system modernization project for its oil
refinery in Brazil. Metso Automation's order backlog was 38 percent
larger than at the end of 2006 and amounted to EUR 382 million at the
end of September.
Valmet Automotive
Valmet Automotive's net sales for January-September were EUR 64
million. Operating profit was EUR 7.1 million, or 11.1 percent of net
sales. About half of the operating profit is attributable to
non-recurring income. During January-September Valmet Automotive
manufactured an average of 111 cars per day.
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.
The general uncertainty in the financial markets is not estimated to
have a material impact on the overall demand for Metso's products and
services, although it may affect the timing of some customer projects
or demand in some geographical regions.
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, or on the price of the Metso share.
Metso share is delisted from the New York Stock Exchange
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 Receipts (ADR) on the New York Stock
Exchange was September 14, 2007. Trading in Metso's ADRs in the
United States continues on the OTC market under the trading symbol
MXCYY, and trading in Metso's ordinary shares continues normally on
the Helsinki Stock Exchange. On September 17, 2007, Metso submitted
Form 15F to the U.S. Securities and Exchange Commission (SEC) to
terminate its registration and reporting obligations. Metso expects
the process to be completed during 2007.
Events after the review period
Metso Paper initiated measures in Finland to improve its
competitiveness
Metso Paper's Paper and Board business line initiated in October
personnel negotiations affecting certain Finnish units. The primary
aim of the negotiations is to agree on measures to enhance Metso
Paper's competitiveness. It is estimated that the personnel reduction
need is 170-220 employees in total. The measures will affect all
employee groups in the Anjalankoski, Hollola, Jyväskylä, Järvenpää,
Karhula, Turku and Valkeakoski units in Finland.
The personnel reductions relate to Metso Paper's reorganization
carried out in summer 2007, in which the units and functions of the
Paper and Finishing business line were merged organizationally. Now
the target is to eliminate overlapping operations and to develop and
strengthen sales and services closer to customers. The non-recurring
expenses related to the measures are estimated to be non-material to
Metso. A more precise estimate of the expenses and savings can be
made after the negotiations are concluded. The personnel negotiations
are being conducted at each location, and the actions decided on are
estimated to take place during the first half of 2008.
Short-term outlook
The favorable market outlook for Metso's products and services is
expected to continue.
It is expected that there will be no significant changes in Metso
Paper's market outlook in the fourth quarter or in the first half of
2008. It is estimated that the demand for new paper, board and tissue
lines as well as fiber lines will continue at the current level. In
China, the growth in paper and board consumption, which is the key
driver for new equipment investment among customers, is forecast to
remain brisk. Demand in Europe and North America is estimated to
focus mainly on machine rebuilds and aftermarket services. It is
anticipated that the demand for power plants utilizing renewable
energy sources will continue at an excellent level in Metso's main
market areas in Europe and North America. Metso Paper aims to
substantially grow its aftermarket business, and the demand for
aftermarket services is forecast to remain satisfactory.
Metso Minerals' market outlook for the year's final quarter continues
to be favorable. The demand for mining products, metals recycling
equipment and aftermarket services is also estimated to continue at
an excellent level in 2008. Investments in industrial and commercial
facilities, infrastructure, services and housing are expected 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 construction, the demand for Metso Minerals' equipment relating to
aggregates production is expected to continue to be good at least for
the first half of 2008. Construction demand is being bolstered by
ongoing projects to develop road networks and other transportation
infrastructure around the world.
Metso Automation's market outlook for the first half of 2008 shows no
change from the first nine months of this year. It is estimated that
pulp and paper industry demand will be good. 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.
It is estimated that Metso's net sales for 2007 will grow by
approximately 25 percent on 2006 and that the operating profit will
clearly improve. It is estimated that the EBITA margin improves to
about 10 percent and the operating profit margin will be around 9
percent. The operating profit margin in 2007 is affected by
approximately one percentage point due to the integration costs and
high amortization of intangible assets related to the acquisition of
the Pulping and Power businesses as well as one-time costs related to
the measures aimed at improving Metso Paper's cost competitiveness.
It is estimated that Metso's profitable growth will continue next
year.
The estimates concerning financial performance are based on Metso's
current business scope, order backlog and market outlook.
Helsinki, October 25, 2007
Metso Corporation's Board of Directors
The interim review is unaudited
CONSOLIDATED STATEMENTS OF INCOME
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2007 2006 2007 2006 2006
Net sales 1,452 1,169 4,354 3,417 4,955
Cost of goods sold (1,085) (857) (3,249) (2,480) (3,659)
Gross profit 367 312 1,105 937 1,296
Selling, general and (230) (189) (716) (611) (846)
administrative expenses
Other operating income and 6 (3) 9 6 6
expenses, net
Share in profits of associated 1 0 2 0 1
companies
Operating profit 144 120 400 332 457
% of net sales 9.9% 10.3% 9.2% 9.7% 9.2%
Financial income and expenses, (7) (10) (25) (28) (36)
net
Profit before taxes 137 110 375 304 421
Income taxes (43) (26) (114) (16) (11)
Profit (loss) 94 84 261 288 410
Profit (loss) attributable to 0 1 0 1 1
minority interests
Profit (loss) attributable to 94 83 261 287 409
equity shareholders
Profit (loss) 94 84 261 288 410
Earnings per share, 0.66 0.59 1.84 2.03 2.89
EUR
Adjusted earnings 0.66 0.59 1.84 1.63 2.28
per share, EUR 1)
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 asset, EUR 57 million was recognized in the
second quarter of 2006 (impact to EPS EUR 0.40) and EUR 30 million in
the last quarter of 2006 (impact to EPS EUR 0.21).
ASSETS
EUR million Sep 30, Sep 30 Dec 31,
2007 2006 2006
Non-current assets
Intangible assets
Goodwill 770 501 768
Other intangible assets 256 105 274
1,026 606 1,042
Property, plant and equipment
Land and water areas 54 57 57
Buildings and structures 215 217 221
Machinery and equipment 312 290 318
Assets under construction 47 28 19
628 592 615
Financial and other assets
Investments in associated companies 19 19 19
Available-for-sale equity investments 50 14 15
Loan and other interest bearing receivables 6 7 6
Available-for-sale financial assets 5 24 5
Deferred tax asset 213 187 228
Other non-current assets 26 33 33
319 284 306
Total non-current assets 1,973 1,482 1,963
Current assets
Inventories 1,479 1,135 1,112
Receivables
Trade and other receivables 1,277 962 1,218
Cost and earnings of projects under
construction in excess of advance billings 284 160 284
Loan and other interest bearing receivables 2 2 2
Available-for-sale financial assets 0 32 10
Tax receivables 35 20 16
1,598 1,176 1,530
Cash and cash equivalents 261 493 353
Total current assets 3,338 2,804 2,995
Assets held for sale - - -
TOTAL ASSETS 5,311 4,286 4,958
SHAREHOLDERS' EQUITY AND LIABILITIES
EUR million Sep 30, Sep 30, Dec 31,
2007 2006 2006
Equity
Share capital 241 241 241
Share premium reserve 77 76 77
Cumulative translation differences (58) (35) (45)
Fair value and other reserves 462 438 432
Retained earnings 814 641 763
Equity attributable to shareholders 1,536 1,361 1,468
Minority interests 5 7 6
Total equity 1,541 1,368 1,474
Liabilities
Non-current liabilities
Long-term debt 586 588 605
Post employment benefit obligations 151 151 157
Deferred tax liability 61 22 57
Provisions 37 27 53
Other long-term liabilities 2 2 2
Total non-current liabilities 837 790 874
Current liabilities
Current portion of long-term debt 101 163 93
Short-term debt 108 35 132
Trade and other payables 1,308 1,028 1,238
Provisions 211 187 213
Advances received 728 472 655
Billings in excess of cost and earnings of projects
under construction 375 213 222
Tax liabilities 102 30 57
Total current liabilities 2,933 2,128 2,610
Liabilities held for sale - - -
Total liabilities 3,770 2,918 3,484
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 5,311 4,286 4,958
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt 586 588 605
Short-term interest bearing debt 209 198 225
Cash and cash equivalents (261) (493) (353)
Other interest bearing assets (13) (65) (23)
Total 521 228 454
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2007 2006 2007 2006 2006
Cash flows from operating activities:
Profit (loss) 94 84 261 288 410
Adjustments to reconcile profit (loss)
to net cash provided by operating
activities
Depreciation 38 26 110 78 105
Provisions / Efficiency improvement (1) (1) (1) (4) (7)
programs
Interests and dividend income 10 7 26 22 26
Income taxes 43 26 114 16 11
Other (5) 3 5 6 7
Change in net working capital 12 18 (163) 16 (18)
Cash flows from operations 191 163 352 422 534
Interest paid and dividends received (5) (1) (12) (3) (24)
Income taxes paid (21) (19) (80) (51) (68)
Net cash provided by
(used in) operating activities 165 143 260 368 442
Cash flows from investing activities:
Capital expenditures on fixed assets (36) (32) (110) (88) (129)
Proceeds from sale of fixed assets 4 2 13 11 14
Business acquisitions, net of cash (37) (9) (47) (9) (277)
acquired
Proceeds from sale of businesses,
net of cash sold 7 - 9 - 13
(Investments in) proceeds from sale of
financial assets 10 10 13 113 154
Other - 1 - (1) (2)
Net cash provided by (used in) investing
activities (52) (28) (122) 26 (227)
Cash flows from financing activities:
Share options exercised - - 0 - 1
Redemption of own shares - - - - (11)
Dividends paid - - (212) (198) (198)
Net funding (62) (4) (34) (14) 35
Other - - 15 (6) (6)
Net cash provided by (used in) financing
activities (62) (4) (231) (218) (179)
Net increase (decrease) in cash and cash
equivalents 51 111 (93) 176 36
Effect from changes in exchange rates (3) - 1 (6) (6)
Cash and cash equivalents at beginning of 213 382 353 323 323
period
Cash and cash equivalents at end of 261 493 261 493 353
period
Free cash flow
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2007 2006 2007 2006 2006
Net cash provided by operating activities 165 143 260 368 442
Capital expenditures on fixed assets (36) (32) (110) (88) (129)
Proceeds from sale of fixed assets 4 2 13 11 14
Free cash flow 133 113 163 291 327
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 ests quity
Balance at Jan 1, 241 76 (9) 424 553 1,285 7 1,292
2006
Dividends - - - - (198) (198) - (198)
Share options - - - - - - - -
exercised
Translation - - (41) - - (41) - (41)
differences
Net investment
hedge gains
(losses) - - 14 - - 14 - 14
Cash flow hedges, - - - 12 - 12 - 12
net of tax
Available-for-sale
equity
investments, net - - - 1 - 1 - 1
of tax
Other - - 1 1 (1) 1 - 1
Net profit for the - - - - 287 287 0 287
period
Balance at Sep 30, 241 76 (35) 438 641 1,361 7 1,368
2006
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 - 0
Translation differences - - (13) - - (13) - (13)
Net investment hedge gains
(losses) - - 0 - - 0 - 0
Cash flow hedges, net of tax - - - 1 - 1 - 1
Available-for-sale equity
net of tax - - - 25 - 25 - 25
Share-based
payments, net of tax - - - 1 - 1 - 1
Redemption of own shares - - - - - - - -
Other - - - 3 2 5 (1) 4
Net profit for the period - - - - 261 261 0 261
Balance at Sep 30, 2007 241 77 (58) 462 814 1,536 5 1,541
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:
Carrying Fair value Fair
EUR million amount allocations 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 (96) 113 17
assets
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 paid in July 2007 (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 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 3 million, was allocated to intangible
assets, representing the calculated 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.
Metso Paper acquired on July 18, 2007 a UK based service provider
Bender Holdings Limited with its subsidiaries. The purchase price was
EUR 16 million, net of cash acquired. Approximately EUR 2 million of
the price was paid after the review period in early October 2007.
Bender group's net sales were about EUR 13 million and net income
about EUR 2 million in January - June 2007. A portion of the excess
purchase price, EUR 11 million, was allocated to intangible assets,
representing the calculated preliminary fair values of acquired new
technology, customer base and existing long-term contracts. The
remaining excess arising from the acquisition, EUR 6 million,
represents goodwill related to Metso's improved position in the
worldwide market for services provided to pulp and paper industry.
Information on acquisitions for January-September
2007 is as follows:
Carrying Fair value Fair
EUR million amount allocations value
Intangible assets 0 14 14
Property, plant and equipment 2 - 2
Inventories 1 - 1
Trade and other receivables 7 - 7
Deferred tax liabilities (1) (4) (5)
Other liabilities assumed (6) - (6)
Non-interest bearing net assets 3 10 13
Cash and cash equivalents acquired 4 - 4
Debt assumed (1) - (1)
Purchase price (30) - (30)
Goodwill 24 (10) 14
ASSETS PLEDGED AND CONTINGENT LIABILITIES
Dec 31,
EUR million Sep 30, 2007 Sep 30, 2006 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 8 10
Lease commitments 155 127 166
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR million Sep 30, Sep 30, Dec 31,
2007 2006 2006
Forward exchange rate 1,204 961 1,357
contracts
Interest rate and currency 1 1 1
swaps
Currency swaps 1 1 1
Interest rate swaps 143 183 143
Interest rate futures - - -
contracts
Option agreements
Bought 3 14 7
Sold 3 14 6
The notional amount of electricity forwards was 454 GWh as of Sep 30,
2007 and 467 GWh as of Sep 30, 2006.
The notional amount of nickel forwards to hedge stainless steel
prices was 378 tons as of Sep 30, 2007. In the comparison period
Metso had not entered into nickel forwards.
The notional amounts indicate the volumes in the use of derivatives,
but do not indicate the exposure to risk.
KEY RATIOS
1-9/ 1-9/ 1-12/
2007 2006 2006
Earnings per share, EUR 1.84 2.03 2.89
Adjusted earnings per share, 1.84 1.63 2.28
EUR 1)
Equity/share at end of period, 10.85 9.61 10.38
EUR
Return on equity (ROE), % 23.6 29.5 30.3
(annualized)
Return on capital employed 24.5 22.1 22.2
(ROCE), % (annualized)
Equity to assets ratio at end 36.6 38.0 36.1
of period, %
Gearing at end of period, % 33.8 16.6 30.8
Free cash flow 163 291 327
Free cash flow/share, EUR 1.15 2.05 2.31
Gross capital expenditure 110 89 131
(excl. business acquisitions)
Business acquisitions, net of 47 9 277
cash acquired
Depreciation and amortization 110 78 105
Number of outstanding shares 141,489 141,594 141,359
at end of period (thousands)
Average number of shares 141,450 141,594 141,581
(thousands)
Average number of diluted 141,450 141,646 141,600
shares (thousands)
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 asset, EUR 57 million was recognized in the
second quarter of 2006 (impact to EPS EUR 0.40) and EUR 30 million in
the last quarter of 2006 (impact to EPS EUR 0.21).
EXCHANGE RATES USED
1-9/ 1-9/ 1-12/ Sep 30, Sep 30, Dec 31,
2007 2006 2006 2007 2006 2006
USD (US dollar) 1.3515 1.2499 1.2630 1.4179 1.2660 1.3170
SEK (Swedish krona) 9.2383 9.3024 9.2533 9.2147 9.2797 9.0404
GBP (Pound sterling) 0.6780 0.6854 0.6819 0.6968 0.6777 0.6715
CAD (Canadian dollar) 1.4782 1.4059 1.4267 1.4122 1.4136 1.5281
BRL (Brazilian real) 2.6877 2.7181 2.7375 2.6037 2.7517 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 million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 642 489 2,016 1,375 2,733 2,092
Metso Minerals 649 525 1,837 1,569 2,467 2,199
Metso Automation 165 146 485 420 678 613
Valmet Automotive 17 22 64 81 92 109
Corporate office and other - 2 - 7 3 10
Corporate office and others 17 24 64 88 95 119
total
Intra Metso net sales (21) (15) (48) (35) (81) (68)
Metso total 1,452 1,169 4,354 3,417 5,892 4,955
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 4.2 (3.2) 2.8 (0.6) (7.6) (11.0)
Metso Minerals 2.0 (0.1) 3.4 5.4 14.1 16.1
Metso Automation 0.2 (0.4) 0.3 (0.1) 0.7 0.3
Valmet Automotive 0.0 0.0 0.0 0.0 0.0 0.0
Corporate office and other (0.1) 0.4 2.5 1.5 1.4 0.4
Corporate office and others (0.1) 0.4 2.5 1.5 1.4 0.4
total
Metso total 6.3 (3.3) 9.0 6.2 8.6 5.8
SHARE IN PROFITS OF ASSOCIATED COMPANIES
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 0.0 0.3 0.5 1.0 1.2 1.7
Metso Minerals 0.0 0.0 0.0 0.1 0.0 0.1
Metso Automation 0.3 0.3 1.3 0.6 1.5 0.8
Valmet Automotive - - - - - -
Corporate office and other 0.0 (0.3) 0.0 (1.3) (0.4) (1.7)
Corporate office and others 0.0 (0.3) 0.0 (1.3) (0.4) (1.7)
total
Metso total 0.3 0.3 1.8 0.4 2.3 0.9
OPERATING PROFIT (LOSS)
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 36.2 30.0 97.3 76.6 110.5 89.8
Metso Minerals 85.2 75.9 248.7 207.7 338.7 297.7
Metso Automation 25.8 20.0 64.6 54.9 96.4 86.7
Valmet Automotive 1.7 1.7 7.1 10.7 8.1 11.7
Corporate office and other (5.5) (7.2) (17.6) (17.7) (28.6) (28.7)
Corporate office and others (3.8) (5.5) (10.5) (7.0) (20.5) (17.0)
total
Metso total 143.4 120.4 400.1 332.2 525.1 457.2
OPERATING PROFIT (LOSS), % OF NET SALES
% 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 5.6 6.1 4.8 5.6 4.0 4.3
Metso Minerals 13.1 14.5 13.5 13.2 13.7 13.5
Metso Automation 15.6 13.7 13.3 13.1 14.2 14.1
Valmet Automotive 10.0 7.7 11.1 13.2 8.8 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 9.9 10.3 9.2 9.7 8.9 9.2
EBITA
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 48.2 32.3 133.0 83.5 155.1 105.6
Metso Minerals 86.3 76.7 251.9 211.0 343.0 302.1
Metso Automation 26.2 20.5 65.7 56.1 97.9 88.3
Valmet Automotive 1.7 1.7 7.1 10.7 8.1 11.7
Corporate office and other (5.1) (6.8) (16.2) (16.3) (26.5) (26.6)
Corporate office and others (3.4) (5.1) (9.1) (5.6) (18.4) (14.9)
total
Metso total 157.3 124.4 441.5 345.0 577.6 481.1
EBITA, % OF NET SALES
% 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 7.5 6.6 6.6 6.1 5.7 5.0
Metso Minerals 13.3 14.6 13.7 13.4 13.9 13.7
Metso Automation 15.9 14.0 13.5 13.4 14.4 14.4
Valmet Automotive 10.0 7.7 11.1 13.2 8.8 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 10.8 10.6 10.1 10.1 9.8 9.7
ORDERS RECEIVED
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 10/2006- 1-12/
2007 2006 2007 2006 9/2007 2006
Metso Paper 515 491 2,271 1,599 2,948 2,276
Metso Minerals 745 636 2,314 1,950 3,019 2,655
Metso Automation 185 183 598 555 760 717
Valmet Automotive 17 22 64 81 92 109
Corporate office and other - 6 - 11 4 15
Corporate office and others 17 28 64 92 96 124
total
Intra Metso orders received (22) (17) (53) (48) (72) (67)
Metso total 1,440 1,321 5,194 4,148 6,751 5,705
QUARTERLY INFORMATION
NET SALES
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2006 2006 2007 2007 2007
Metso Paper 489 717 666 708 642
Metso Minerals 525 630 540 648 649
Metso Automation 146 193 146 174 165
Valmet Automotive 22 28 28 19 17
Corporate office and other 2 3 - - -
Corporate office and others total 24 31 28 19 17
Intra Metso net sales (15) (33) (14) (13) (21)
Metso total 1,169 1,538 1,366 1,536 1,452
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2006 2006 2007 2007 2007
Metso Paper (3.2) (10.4) 1.9 (3.3) 4.2
Metso Minerals (0.1) 10.7 1.2 0.2 2.0
Metso Automation (0.4) 0.4 0.5 (0.4) 0.2
Valmet Automotive 0.0 0.0 0.0 0.0 0.0
Corporate office and other 0.4 (1.1) 2.2 0.4 (0.1)
Corporate office and others total 0.4 (1.1) 2.2 0.4 (0.1)
Metso total (3.3) (0.4) 5.8 (3.1) 6.3
OPERATING PROFIT (LOSS)
EUR million 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ 2006 2006 2007 2007 2007
Metso Paper 30.0 13.2 25.4 35.7 36.2
Metso Minerals 75.9 90.0 67.8 95.7 85.2
Metso Automation 20.0 31.8 15.5 23.3 25.8
Valmet Automotive 1.7 1.0 4.4 1.0 1.7
Corporate office and other (7.2) (11.0) (4.7) (7.4) (5.5)
Corporate office and others total (5.5) (10.0) (0.3) (6.4) (3.8)
Metso total 120.4 125.0 108.4 148.3 143.4
EBITA
EUR million 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2006 2006 2007 2007 2007
Metso Paper 32.3 22.1 37.1 47.7 48.2
Metso Minerals 76.7 91.1 68.7 96.9 86.3
Metso Automation 20.5 32.2 15.9 23.6 26.2
Valmet Automotive 1.7 1.0 4.4 1.0 1.7
Corporate office and other (6.8) (10.3) (4.2) (6.9) (5.1)
Corporate office and others total (5.1) (9.3) 0.2 (5.9) (3.4)
Metso total 124.4 136.1 121.9 162.3 157.3
CAPITAL EMPLOYED
EUR million Sep 30, Dec 31, Mar 31, June 30, Sep 30,
2006 2006 2007 2007 2007
Metso Paper 292 631 572 651 607
Metso Minerals 955 967 983 1,049 1,063
Metso Automation 130 149 156 190 202
Valmet Automotive 31 23 23 23 29
Corporate office and other 745 534 555 409 434
Corporate office and others 776 557 578 432 463
total
Metso total 2,153 2,304 2,289 2,322 2,335
ORDERS RECEIVED
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2006 2006 2007 2007 2007
Metso Paper 491 677 653 1,103 515
Metso Minerals 636 705 771 798 745
Metso Automation 183 162 228 185 185
Valmet Automotive 22 28 28 19 17
Corporate office and other 6 4 - - -
Corporate office and others total 28 32 28 19 17
Intra Metso orders received (17) (19) (16) (15) (22)
Metso total 1,321 1,557 1,664 2,090 1,440
ORDER BACKLOG
EUR million Sep 30, Dec 31, Mar 31, June 30, Sep 30,
2006 2006 2007 2007 2007
Metso Paper 1,547 2,225 2,190 2,584 2,455
Metso Minerals 1,213 1,277 1,497 1,673 1,728
Metso Automation 309 276 356 365 382
Valmet Automotive - - - - -
Corporate office and other 7 - - - -
Corporate office and others 7 - - - -
total
Intra Metso order backlog (54) (41) (44) (48) (46)
Metso total 3,022 3,737 3,999 4,574 4,519
PERSONNEL Sep 30, Dec 31, Mar 31, June 30, Sep 30,
2006 2006 2007 2007 2007
Metso Paper 9,445 11,558 11,469 11,954 11,774
Metso Minerals 9,158 9,433 9,545 9,967 10,194
Metso Automation 3,315 3,352 3,379 3,564 3,523
Valmet Automotive 1,082 1,013 899 782 777
Corporate office and other 342 322 324 342 335
Corporate office and others 1,424 1,335 1,223 1,124 1,112
total
Metso total 23,342 25,678 25,616 26,609 26,603
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 September, 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 204,539
Metso shares held by a 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 January-September, excluding Metso shares held by the
company, was 141,450,391.
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 6,834 million on September 30, 2007.
Credit ratings
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.
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 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-September was 267 million, equivalent to a
turnover of EUR 11,106 million. The share price on September 30, 2007
was EUR 48.30. The highest quotation during the review period was EUR
49.84 and the lowest EUR 34.79.
The trading of Metso ADRs (American Depository Receipts) on the New
York Stock Exchange was terminated on September 14, by which time
approximately 6 million Metso ADRs, equivalent to a turnover of USD
344 million, had been traded. The price of an ADR on September 14,
2007 was USD 63.70. The highest quotation during the January 1 -
September 14 period was USD 65.94 and the lowest USD 44.37.
Disclosures of changes in holdings
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
or third quarter of 2007.
Metso's financial reporting for 2008
Metso's financial statements release for 2007 will be published on
February 6, 2008. The 2008 interim reports for January-March,
January-June and January-September will be published on April 23,
July 24 and October 28 respectively.
For further information, please contact:
Jorma Eloranta, President and CEO, Metso Corporation, tel. +358
(0)204 84 3000
Olli Vaartimo, Executive Vice President and CFO, Metso Corporation,
tel. +358 (0)204 84 3010
Johanna Sintonen, Vice President, Investor Relations, Metso
Corporation, tel. +358 (0)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 l
Executive Vice President and CFO
Kati Renvall
Vice President, Corporate Communications
Distribution:
Helsinki Stock Exchange
New York Stock Exchange
The media
www.metso.com
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