Metso Corporation Company release on July 24, 2008 at 12.00 p.m.
Emerging markets and services business driving Metso's growth
Highlights of the second quarter
* New orders worth EUR 1,740 million were received in April-June
(EUR 2,090 million in Q2/07). Metso Minerals' and Metso
Automation's new orders grew strongly while Metso Paper's new
orders clearly decreased from the corresponding period in 2007.
* At the end of June, the order backlog was 4 percent higher than
at the end of 2007, standing at EUR 4,494 million (EUR 4,341
million at December 31, 2007).
* Net sales grew 6 percent on the comparison period and totaled EUR
1,633 million (EUR 1,536 million in Q2/07).
* Earnings before interest, tax and amortization (EBITA) were EUR
166.5 million, i.e. 10.2 percent of net sales (EUR 162.3 million
and 10.6% in Q2/07).
* Operating profit (EBIT) was EUR 155.2 million, i.e. 9.5 percent
of net sales (EUR 148.3 million and 9.7% in Q2/07).
* Earnings per share were EUR 0.72 (EUR 0.68 in Q2/07).
* Free cash flow was EUR 59 million positive (EUR 52 million
negative in Q2/07).
* Return on capital employed (ROCE) before taxes was 23.4 percent
(24.3% in Q2/07)."Metso's overall development in the second quarter was in line with
our expectations. Emerging markets and services business continued to
drive our growth, and our operating profit continued to improve on a
rolling 12-month basis. We continue to work hard to bring results to
our customers and shareholders whatever the market situation," says
Jorma Eloranta, President and CEO of Metso Corporation."As indicated three months ago, we experienced strong bounce back in
mining orders during the second quarter; and in fact they were at a
record level. Our growing presence in the emerging markets and strong
focus on the services business gives us confidence that the
profitable growth in our minerals business will continue. Likewise,
in our automation business we continue to see steady performance
driven by strong demand in the energy industry.""On the other hand, in our paper and pulp business, the uncertainty
has increased and we have continued to face delays in the
decision-making in some large projects under negotiation. We expect,
however, the second half of the year to be stronger for Metso Paper
in order intake based on several letters of intent, which we expect
to turn into orders during the second half of 2008. What is more, the
streamlining measures we took last year in Metso Paper will start to
pay off during second half of this year and we have good reason to
believe that Metso Paper's profitability will improve."
Due to postponements in some of Metso Paper's projects under
negotiation, we estimate that in 2008 our net sales growth, at
comparable exchange rates, will stay below the earlier-estimated 10
percent. The new net sales growth estimate is in the range of 5-10
percent. The operating profit margin estimate for 2008 is unchanged
at about 10 percent," Eloranta says. "Consequently, we expect the
second half net sales and operating profit to be clearly better than
in the first six months, and 2008 to be again the best year ever for
Metso."
Metso's key figures
EUR million Q2/08 Q2/07 Change % Q1-Q2/08 Q1-Q2/07 Change 2007
%
Net sales 1,633 1,536 6 3,033 2,902 5 6,250
Net sales of 568 513 11 1,035 949 9 2,024
services business
% of net sales 35 34 35 33 33
Earnings before
interest, tax and
amortization
(EBITA) 166.5 162.3 3 300.2 284.2 6 635.4
% of net sales 10.2 10.6 9.9 9.8 10.2
Operating profit 155.2 148.3 5 274.8 256.7 7 579.8
% of net sales 9.5 9.7 9.1 8.8 9.3
Earnings per 0.72 0.68 6 1.27 1.18 8 2.69
share, EUR
Orders received 1,740 2,090 (17) 3,249 3,754 (13) 6,965
Order backlog at 4,494 4,574 (2) 4,341
end of period
Free cash flow 59 (52) n/a (40) 54 n/a 198
Return on capital
employed (ROCE)
before taxes,
annualized, % 23.4 24.3 26.1
Equity to assets
ratio at end of
period, % 28.9 34.3 37.7
Gearing at end of 79.5 43.3 33.4
period, %
Metso's second-quarter 2008 review
Operating environment and demand for products in April-June
In April-June, the market situation for Metso's products and services
continued to be favorable in the mining, construction and energy
customer segments and satisfactory in the pulp and paper segment.
Continuing uncertainty about the growth of the global economy slowed
the materialization of Metso Paper's new customer orders in the
second quarter. The demand for paper and board lines was slow, as it
had been during the first quarter. In the main market area, China,
decision schedules have been prolonged due to increased caution of
customers in the light of economic uncertainty and due to the
stricter investment policies set by the Chinese authorities. The
demand for tissue lines remained at a good level. The markets for
fiber lines were as active as they had been during the early part of
the year, but decisions on large projects are expected to be made
only in the latter half of 2008. In Europe and North America, the
demand was focused mainly on machine rebuilds and the services
business. The demand for power plants utilizing renewable energy
sources continued at a good level, but increased costs have delayed
customers' decision-making schedules. The demand for Metso Paper's
services business remained satisfactory.
Metso Minerals' market situation continued to be favorable during the
second quarter of 2008. As a result of the continuing rapid growth of
emerging economies, demand for metals and minerals remained high and
the investment activity of Metso's mining customers remained
excellent. In construction, the demand for Metso Minerals' equipment
relating to aggregates production continued to be good owing to road
network and other transportation infrastructure development projects
underway around the world. The demand for metals recycling equipment
continued at a good level. Demand for the services business remained
excellent.
In the power, oil and gas industry the demand for Metso Automation's
process automation systems was good and the demand for flow control
systems excellent. The increasing consumption of energy and high oil
prices ensured that investments in the energy industry remained at a
good level. In the pulp and paper industry, the demand for automation
was satisfactory and the demand for flow control systems was good.
Orders received in April-June
The orders received by Metso in April-June totaled EUR 1,740 million,
down by 17 percent from the comparison period. The value of orders of
both Metso Minerals and Metso Automation grew strongly, while the
value of Metso Paper's orders clearly decreased.
The value of orders received by Metso Paper in April-June totaled EUR
498 million, which was a decrease of 55 percent from the record-high
comparison period. The decrease in orders received was attributable
to uncertainty in the market regarding the growth of the global
economy and to delays in some pulp and paper industry projects under
negotiation. The major orders received by Metso Paper in the second
quarter were a board line to China, a pulp mill rebuild for Sabah
Forest Industries in Malaysia and a fine paper machine for Fujian
Nanping Paper in China.
The orders received by Metso Minerals in the second quarter were up
by 29 percent on the corresponding quarter in 2007 and totaled EUR
1,030 million. Geographically, the growth of Metso Minerals' new
orders continued to be strong in the Asia-Pacific region and South
America. The largest orders during April-June included grinding
equipment to Minera Petaquilla, S.A. in Panama for its copper mine,
minerals processing equipment to Terrane Metals Corp. for its
copper-gold project in Canada and an iron ore induration machine to
Essar Steel Holdings Ltd in India. During the second quarter, Metso
Minerals also signed several notable service agreements with mining
companies such as a five-year agreement with Servicios Industriales
Peëoles, S.A. de C.V. in Mexico and a one-year agreement with
Mexicana de Cobre in Mexico.
The orders received by Metso Automation in April-June were up 12
percent on the comparison period, especially due to good demand for
automation for the energy, oil and gas industry, and totaled EUR 208
million. Metso Automation's largest orders were flow control systems
for the oil and gas industry in the Middle East and Asia.
Financial performance in April-June
Metso's net sales grew 6 percent compared with April-June 2007 and
were EUR 1,633 million. The services businesses' net sales grew 11
percent on the comparison period, and accounted for 35 percent (34%
in Q2/07) of Metso's second-quarter net sales.
Metso's second-quarter financial performance improved on the
comparison period. Earnings before interest, tax and amortization
(EBITA) were EUR 166.5 million or 10.2 percent of net sales (EUR
162.3 million and 10.6% in Q2/2007). Measured in euros, EBITA
improved at Metso Automation and Metso Minerals, but was down by 13
percent from the comparison period at Metso Paper. The EBITA margin
remained at the level of the comparison period at Metso Automation,
but was lower compared to last year at Metso Paper and Metso
Minerals. Metso's second-quarter operating profit was EUR 155.2
million, or 9.5 percent of net sales (EUR 148.3 million and 9.7% in
Q2/07). The profit attributable to shareholders was EUR 102 million
(EUR 97 million in Q2/07) in April-June, corresponding to earnings
per share (EPS) of EUR 0.72 (EUR 0.68 in Q2/07).
Metso's January-June 2008 Interim Review
Orders received and order backlog
The orders received by Metso in January-June totaled EUR 3,249
million, down 13 percent from the comparison period. Excluding the
impact of exchange rate changes, the value of orders received
decreased by 9 percent. The orders received by Metso Minerals and
Metso Automation improved on the comparison period, whereas orders
received by Metso Paper were clearly down from the comparison period.
The relatively strongest growth was in Metso Minerals' Mining and
Construction business lines. Relatively, the largest decreases in
orders received were in Metso Paper's Paper and Board and Power
business lines.
The three countries generating the largest total value of orders
received were the United States, China and Canada. The growth in new
orders was strongest in Canada. Emerging markets accounted for 45
percent (42%) of the orders received by Metso. At the end of June,
Metso's order backlog was EUR 4,494 million, which is 4 percent
stronger than at the end of 2007.
Orders received by business area
Q1-Q2/2008 Q1-Q2/2007
EUR million % of orders EUR % of orders
received million received
Metso Paper 1,039 32 1,756 46
Metso Minerals 1,770 54 1,569 42
Metso Automation 428 13 413 11
Valmet Automotive 42 1 47 1
Intra-Metso orders (30) (31)
received
Total 3,249 100 3,754 100
Orders received by market area
+-------------------------------------------------------------------+
| | Q1-Q2/2008 | Q1-Q2/2007 |
|----------------------+-----------------------+--------------------|
| | EUR | % of orders | EUR | % of |
| | million | received | million | orders |
| | | | | received |
|----------------------+---------+-------------+---------+----------|
| Europe | 1,159 | 36 | 1,606 | 43 |
|----------------------+---------+-------------+---------+----------|
| North America | 631 | 19 | 596 | 16 |
|----------------------+---------+-------------+---------+----------|
| South and Central | 426 | 13 | 442 | 12 |
| America | | | | |
|----------------------+---------+-------------+---------+----------|
| Asia-Pacific | 784 | 24 | 872 | 23 |
|----------------------+---------+-------------+---------+----------|
| Rest of the world | 249 | 8 | 238 | 6 |
|----------------------+---------+-------------+---------+----------|
| Total | 3,249 | 100 | 3,754 | 100 |
+-------------------------------------------------------------------+
Net sales
During January-June, Metso's net sales grew by 5 percent on the
comparison period, and totaled EUR 3,033 million. At comparable
exchange rates, Metso's net sales growth would have been
approximately 9 percent. At comparable exchange rates, the net sales
of Metso Minerals and Metso Automation grew by 17 percent and 16
percent respectively, while Metso Paper's net sales remained at the
level of the comparison period. The net sales of the services
business grew by 9 percent (at comparable exchange rates, the growth
would have been about 15 percent), accounting for 35 percent of
Metso's net sales (33% in Q1-Q2/07). Growth of the services business
was strongest in Metso Minerals, where it was 19 percent at
comparable exchange rates.
Measured by net sales, the three largest countries in the first half
of the year were the United States, China and Finland, which together
accounted for about 30 percent of total net sales.
Net sales by business area
Q1-Q2/2008 Q1-Q2/2007
EUR million % of net EUR million % of net
sales sales
Metso Paper 1,349 44 1,374 47
Metso Minerals 1,321 43 1,188 40
Metso Automation 352 12 320 11
Valmet Automotive 42 1 47 2
Intra-Metso and other net
sales (31) (27)
Total 3,033 100 2,902 100
Net sales by market area
Q1-Q2/2008 Q1-Q2/2007
EUR million % of net EUR million % of net
sales sales
Europe 1,312 43 1,155 40
North America 460 15 548 19
South and Central 363 12 421 14
America
Asia-Pacific 729 24 657 23
Rest of the world 169 6 121 4
Total 3,033 100 2,902 100
Financial result
Metso's earnings before interest, tax and amortization (EBITA) for
January-June 2008 improved by 6 percent and totaled EUR 300.2
million, or 9.9 percent of net sales (EUR 284.2 million and 9.8% in
Q1-Q2/07). Despite increased raw material costs and the negative
impact of the weakened US dollar, Metso Minerals' and Metso
Automation's EBITA measured in euros improved. Metso Paper's EBITA
decreased slightly from the comparison period due to an exceptional
warranty cost close to EUR 10 million related to one customer
project, out of which most materialized in the second quarter. Metso
Minerals' and Metso Automation's EBITA margin rose slightly and Metso
Paper's EBITA margin decreased.
Metso's operating profit was EUR 274.8 million in the first
half-year, or 9.1 percent of net sales (EUR 256.7 million and 8.8% in
Q1-Q2/07).
Metso's net financial expenses for January-June were EUR 19 million
(EUR 18 million in Q1-Q2/07).
Metso's profit before taxes for January-June was EUR 256 million (EUR
238 million in Q1-Q2/07). Metso's tax rate is estimated to be
approximately 30 percent in 2008 (2007: 29.8 %).
The profit attributable to shareholders was EUR 180 million (EUR 167
million) in January-June, corresponding to earnings per share (EPS)
of EUR 1.27 (EUR 1.18 per share).
Metso's return on capital employed (ROCE) before taxes was 23.4
percent (24.3%) and return on equity (ROE) was 23.9 percent (23.9%).
Cash flow and financing
Metso's net cash generated by operating activities was EUR 17 million
in January-June (EUR 95 million). The increase in net working capital
leveled off in the second quarter and was EUR 67 million.
Cumulatively net working capital has increased EUR 254 million. The
increase in inventory in the second quarter, especially in Metso
Minerals, was offset by advances received. Growth in net sales,
however, increased trade receivables. Metso's free cash flow for the
second quarter was positive by EUR 59 million (EUR 52 million
negative). Cumulatively the free cash flow was EUR 40 million
negative (EUR 54 million positive).
Net interest-bearing liabilities totaled EUR 1,067 million at the end
of June (EUR 623 million). Gearing was 79.5 percent and the
equity-to-assets ratio was 28.9 percent. Following the Annual General
Meeting, Metso paid in April EUR 425 million in dividends, which
together with the growth in net working capital and high level of
investments, increased gearing.
Capital expenditure
Metso's gross capital expenditure for January-June was EUR 112
million excluding acquisitions (EUR 74 million in Q1-Q2/07). Nearly
one-half of the capital expenditure comprised growth investments
aimed at increasing capacity and strengthening Metso's global
presence.
A decision was made in the second quarter to expand Metso
Automation's production capacity and office facilities in Shanghai
and to build a service center for the paper industry's needs in
Shandong, China. Both of the investments support Metso's global
presence strategy by increasing production resources in Asia's
growing markets.
Furthermore, Metso has several investment projects underway to expand
production and service capacity. In China, a paper industry service
unit is being expanded in Guangzhou, while the production of crushing
units is being expanded in Tianjin. In the USA, Metso is
strengthening its boiler service operations by establishing a new
service center at Lancaster, South Carolina and extending the
existing service center at Fairmont, West Virginia. Additionally, a
new office space is being built for the Mining business line in York,
Pennsylvania. In India, an assembly line for crushing plants is being
expanded at Bawal, and a production capacity expansion for crusher
wear parts and pump castings is being expanded in Ahmedabad.
Furthermore, a significant Metso Industrial Park will be established
in Rajasthan. In Finland, Metso is completing a pilot machine rebuild
at the Paper Technology Center in Jyväskylä.
Investment projects are underway at Metso Minerals and Metso
Automation concerning enterprise resource planning (ERP) systems
covering their entire supply chains. The systems will be introduced
in stages during 2007-2010.
Metso estimates that in 2008 gross capital expenditure excluding
acquisitions will exceed EUR 200 million (EUR 159 million in 2007).
In May, Metso acquired the shares of Lignoboost AB, a research entity
of the Swedish company STFI-Packforsk AB. The transaction, which is
classified as a technology investment, includes all the intellectual
property rights as well as the LignoBoost brand and its related
know-how. In addition, Metso and STFI-Packforsk have signed a
research and development agreement related to LignoBoost technology.
The acquired company will become part of the Metso Power business
line. The acquisition opens an interesting biofuel business
opportunity within pulping processes.
In February, Metso signed an agreement with Mitsubishi Heavy
Industries (MHI) on the acquisition of its paper machinery
technology. The agreement was concluded in May and Metso Paper became
the sole owner globally of Beloit's paper machinery technology. MHI's
net sales impact is estimated to be around EUR 10 million during the
first year.
Metso's research and development expenses in January-June totaled EUR
66 million, representing 2.2 percent of Metso's net sales (EUR 57
million and 2.0% in Q1-Q2/07).
Acquisitions and divestments
In June, Metso announced that it would be acquiring Lachine Main
Plant, a heavy fabrication and machining facility in Canada, from GE
Energy. The transaction is expected to close in mid-August and
approximately 200 employees are expected to transfer to Metso. The
acquisition will increase Metso's supply capacity for large mining
equipment.
In June, Metso strengthened its engineering capabilities in India by
establishing a joint venture with EPT Engineering Services Pvt. Ltd.
Metso owns 51 percent of the new company called Metso Power India
Private Limited, which started operations in July 2008 in Chennai.
The new company will support Metso's growth strategy by providing
engineering services primarily for Metso Power and it will employ
about 50 people during its first year of operations. In the future,
the joint venture enables Metso to enter the growing Indian energy
production markets.
In May, Metso and Linde Group signed an agreement according to which
Metso Automation acquired MAPAG Valves GmbH, a German manufacturer of
butterfly valves. The deal was closed in June and the debt-free
purchase price was EUR 36 million. The company employs about 100
people. The company's net sales in 2008 are expected to be around EUR
36 million. The butterfly valves for demanding conditions are used in
the petrochemicals industry and in the handling of industrial gas and
natural gas.
In May, Metso acquired Kemotron A/S, a Danish manufacturer of
measurement systems. The company employs 13 people. The acquisition
strengthens Metso Automation's position as a supplier of
measurement-based control systems in the chemical pulping industry.
In April, Metso announced that it was increasing its ownership in the
Valmet-Xi'an Paper Machinery Co. Ltd. joint venture in China from
48.3 percent to 75 percent. It is expected that the regulatory
approval required for the agreement will be obtained by the end of
2008. Valmet-Xi'an employed about 1,100 employees at the end of June.
In May, Metso sold its Finnish-based spreader roll manufacturing
business and the related assets employing 20 people to a group of
Finnish investors.
In January, Metso concluded the divestment of its Panelboard
business. The panelboard press operations in Germany were divested to
G. Siempelkamp GmbH & Co. KG in September 2007, and an agreement was
concluded on the divestment of the panelboard operations in Nastola,
Finland and Sundsvall, Sweden to the German company Dieffenbacher
GmbH + Co. KG in January 2008.
Personnel
At the end of June, Metso had 28,069 employees, which was 1,232 more
than at the end of 2007 (26,837 employees on December 31, 2007).
About 550 were seasonal workers. The biggest increase was in the
Asia-Pacific region where the number of personnel increased by 372
employees from the end of the year. In the first half of the year,
Metso had an average of 27,323 employees.
Personnel by area
June 30, % of total June % of total Change Dec 31,
2008 personnel 30, personnel % 2007
2007
Finland 9,837 35 9,783 37 1 9,386
Other Nordic 3,566 13 3,587 14 (1) 3,602
countries
Other Europe 3,391 12 3,016 11 12 3,183
North America 3,890 14 3,773 14 3 3,865
South and
Central America 2,863 10 2,564 10 12 2,675
Asia-Pacific 3,077 11 2,497 9 23 2,705
Rest of the 1,445 5 1,389 5 4 1,421
world
Total 28,069 100 26,609 100 5 26,837
BUSINESSES
Metso Paper
+---------------------------------------------------------------------------+
|EUR million |Q2/08|Q2/07|Change %|Q1-Q2/|Q1-Q2/|Change %| 2007|
| | | | | 08| 07| | |
|------------------------+-----+-----+--------+------+------+--------+------|
|Net sales | 701| 708| (1)| 1,349| 1,374| (2)| 2,925|
|------------------------+-----+-----+--------+------+------+--------+------|
|Net sales of services | 230| 214| 8| 403| 385| 5| 834|
|business | | | | | | | |
|------------------------+-----+-----+--------+------+------+--------+------|
| | | | | | | | |
| % of net sales | 33| 30| | 30| 28| | 29|
|------------------------+-----+-----+--------+------+------+--------+------|
|Earnings before | | | | | | | |
|interest, tax and | | | | | | | |
|amortization (EBITA) | 41.7| 47.7| (13)| 80.7| 84.8| (5)| 184.5|
|------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 5.9| 6.7| | 6.0| 6.2| | 6.3|
|------------------------+-----+-----+--------+------+------+--------+------|
|Operating profit | 33.2| 35.7| (7)| 60.4| 61.1| (1)| 136.9|
|------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 4.7| 5.0| | 4.5| 4.4| | 4.7|
|------------------------+-----+-----+--------+------+------+--------+------|
|Orders received | 498|1,103| (55)| 1,039| 1,756| (41)| 3,109|
|------------------------+-----+-----+--------+------+------+--------+------|
|Order backlog at end of | | | | 2,040| 2,584| (21)| 2,363|
|period | | | | | | | |
|------------------------+-----+-----+--------+------+------+--------+------|
|Personnel at end of | | | |11,818|11,954| (1)|11,694|
|period | | | | | | | |
+---------------------------------------------------------------------------+
Metso Paper's net sales in January-June were at the level of the
comparison period, totaling EUR 1,349 million. Net sales increased on
the comparison period in the Power business line and decreased in the
Paper and Board, Tissue and Fiber business lines. Metso Paper's
services business grew by 5 percent on the comparison period (at
comparable exchange rates the growth was 9%). The services business
accounted for 30 percent of net sales (28% in Q1-Q2/07).
Metso Paper's EBITA for January-June was EUR 80.7 million, i.e. 6.0
percent of net sales (EUR 84.8 million and 6.2%).
Metso Paper's operating profit was EUR 60.4 million, i.e. 4.5 percent
of net sales (EUR 61.1 million and 4.4%). The operating profit
includes approximately EUR 13 million in amortization of intangible
assets related to the acquisition of the Pulping and Power businesses
and a close to EUR 10 million exceptional warranty cost related to
one customer project, out of which most materialized in the second
quarter. The amortization of intangible assets will decrease in the
remainder of the year when the acquired order backlog is amortized in
full, and is estimated to total approximately EUR 19 million in 2008
(EUR 36 million in 2007).
The integration of the acquired Pulping and Power businesses is
estimated to create additional synergy benefits of about EUR 6-10
million this year, in addition to the synergy benefits of EUR 14
million already realized in 2007. The non-recurring integration
expenses carried over to 2008 are expected to be EUR 1-2 million. The
positive impact on earnings related to the synergy benefits and
decided cost streamlining measures will be realized primarily in the
latter half of 2008.
The value of orders received by Metso Paper decreased by 41 percent
from the comparison period and was EUR 1,039 million. Orders received
by all business lines excluding the Tissue business line decreased
from the comparison period. This resulted from delays in some large
new projects and the postponement of orders to the second half-year.
The largest orders in January-June included a fine paper machine for
Fujian Nanping Paper in China, a coated board line for Shandong Bohui
in China and Metso Power's evaporation plant for SCA Packaging's pulp
and paper mill in Sweden. The order backlog at the end of June, EUR
2,040 million, was 14 percent lower than the order backlog at the end
of 2007.
Metso Minerals
+---------------------------------------------------------------------------+
|EUR million |Q2/08|Q2/07|Change %|Q1-Q2/|Q1-Q2/|Change %| 2007|
| | | | | 08| 07| | |
|------------------------+-----+-----+--------+------+------+--------+------|
|Net sales | 738| 648| 14| 1,321| 1,188| 11| 2,607|
|------------------------+-----+-----+--------+------+------+--------+------|
|Net sales of services | 298| 265| 12| 562| 501| 12| 1,050|
|business | | | | | | | |
|------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 40| 41| | 43| 42| | 40|
|------------------------+-----+-----+--------+------+------+--------+------|
|Earnings before | | | | | | | |
|interest, tax and | | | | | | | |
|amortization (EBITA) |101.6| 96.9| 5| 186.0| 165.6| 12| 367.1|
|------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 13.8| 15.0| | 14.1| 13.9| | 14.1|
|------------------------+-----+-----+--------+------+------+--------+------|
|Operating profit |100.2| 95.7| 5| 183.3| 163.5| 12| 362.6|
|------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 13.6| 14.8| | 13.9| 13.8| | 13.9|
|------------------------+-----+-----+--------+------+------+--------+------|
|Orders received |1,030| 798| 29| 1,770| 1,569| 13| 3,075|
|------------------------+-----+-----+--------+------+------+--------+------|
|Order backlog at end of | | | | 2,067| 1,673| 24| 1,690|
|period | | | | | | | |
|------------------------+-----+-----+--------+------+------+--------+------|
|Personnel at end of | | | |11,215| 9,967| 13|10,446|
|period | | | | | | | |
+---------------------------------------------------------------------------+
Metso Minerals' net sales for January-June grew by 11 percent on the
comparison period and were EUR 1,321 million (at comparable exchange
rates the growth was 17%). Net sales increased across all business
lines, with the most substantial growth in the Mining business line.
Metso Minerals' services business developed favorably and grew by 12
percent (at comparable exchange rates 19%). Services business
accounted for 43 percent of net sales (42% in Q1-Q2/07).
The operating profit of Metso Minerals increased to EUR 183.3
million, which was 13.9 percent of net sales (EUR 163.5 million and
13.8%). The allocation of capacity to projects and products with
higher margins, especially in the Mining business line, and the
increased share of the services business contributed positively to
profitability.
Metso Minerals' orders received during the second quarter were EUR
1,030 million and clearly stronger than the first quarter, as
expected. The value of orders received increased by 13 percent on
January-June 2007, and totaled EUR 1,770 million. At comparable
exchange rates, the value of orders received increased approximately
19 percent. The volume of new orders received increased on the
comparison period in the Construction and Mining business lines,
whereas they decreased in the Recycling business line. Regionally
most of the new orders were received from Europe and North and South
America. The volume of orders received from emerging countries grew
by 21 percent and their contribution to Metso Minerals' new orders
rose to 48 percent (44%). Among the largest orders received in
January-June were orders received for grinding equipment to Minera
Petaquilla, S.A. in Panama for its copper mine, minerals processing
equipment to Terrane Metals Corp. for its copper-gold project in
Canada, an iron ore induration machine to Essar Steel Holdings Ltd in
India and another to the same customer for its Point Lisas Pellet
Plant in Trinidad and Tobago as well as a complete copper ore
beneficiation processing system for Zinkgruvan Mining AB in Sweden.
The order backlog was up by 22 percent on the end of 2007 and totaled
EUR 2,067 million at the end of June.
Metso Automation
+-----------------------------------------------------------------------------+
| |Q2/08|Q2/07|Change %|Q1-Q2/|Q1-Q2/|Change %|2007| |
|EUR million | | | | 08| 07| | | |
|--------------------------+-----+-----+--------+------+------+--------+------|
|Net sales | 194| 174| 11| 352| 320| 10| 698|
|--------------------------+-----+-----+--------+------+------+--------+------|
|Net sales of services | 40| 34| 17| 71| 63| 12| 140|
|business | | | | | | | |
|--------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | | | | | | | |
| | 22| 21| | 22| 21| | 22|
|--------------------------+-----+-----+--------+------+------+--------+------|
|Earnings before interest, | | | | | | | |
|tax and amortization | | | | | | | |
|(EBITA) | 26.3| 23.6| 11| 44.1| 39.5| 12| 100.4|
|--------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 13.6| 13.6| | 12.5| 12.3| | 14.4|
|--------------------------+-----+-----+--------+------+------+--------+------|
|Operating profit | 25.6| 23.3| 10| 43.0| 38.8| 11| 98.8|
|--------------------------+-----+-----+--------+------+------+--------+------|
| % of net sales | 13.2| 13.4| | 12.2| 12.1| | 14.2|
|--------------------------+-----+-----+--------+------+------+--------+------|
|Orders received | 208| 185| 12| 428| 413| 4| 763|
|--------------------------+-----+-----+--------+------+------+--------+------|
|Order backlog at end of | | | | 428| 365| 17| 332|
|period | | | | | | | |
|--------------------------+-----+-----+--------+------+------+--------+------|
|Personnel at end of period| | | | 3,870| 3,564| 9| 3,564|
+-----------------------------------------------------------------------------+
Metso Automation's net sales for January-June increased by 10 percent
on the comparison period (at comparable exchange rates 16%) and were
EUR 352 million. The growth stemmed mostly from deliveries of flow
control systems for the energy industry. Growth was driven by
investments in the energy industry for power production as well as
for oil and gas processing. The services business grew by 12 percent,
and accounted for 22 percent of net sales (21% in Q1-Q2/07).
Excluding the impact of exchange rate changes, the growth of the
services business would have been around 17 percent.
Metso Automation's profitability remained at the level of the
comparison period. The operating profit was EUR 43.0 million, or 12.2
percent of net sales (EUR 38.8 million and 12.1% in Q1-Q2/07). The
growth in delivery volumes and the fact that Metso Automation has
been able to transfer the cost increases from 2007 to end-product
prices contributed positively to profitability.
The value of orders received by Metso Automation increased by 4
percent on the comparison period and totaled EUR 428 million. The
volume of orders received from the power, oil and gas industry
increased, and their contribution to Metso Automation's new orders
rose to 59 percent (57%). Major orders during January-June were flow
control systems for the oil and gas industry in the Middle East and
Asia, valve deliveries for the Qatar Petroleum and Shell GTL
(gas-to-liquids) project in Qatar and an extensive automation package
for Shandong Bohui's new board line in China. Metso Automation's
order backlog was 29 percent higher than at the end of 2007 and
totaled EUR 428 million.
Valmet Automotive
Valmet Automotive's net sales in January-June totaled EUR 42 million.
The operating profit was EUR 1.9 million, or 4.5 percent of net
sales. During January-June, Valmet Automotive manufactured an average
of 108 vehicles per day. At the end of June, Valmet Automotive
employed 779 people.
Valmet Automotive's current assembly contract with Porsche will end
in 2012, but this is not expected to have any short-term impact on
Valmet Automotive's operations. Valmet Automotive continues
discussions regarding the production of new car models.
Short-term risks of business operations
Continuing uncertainty about global economic growth, currency rates
and a prolonged weak period in the financial markets may reduce the
demand for Metso's products and services. In particular, uncertainty
may affect the timing and implementation of Metso Paper's larger
customer projects.
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 orders for Metso Paper's new machinery.
During the first half of the year, the decision schedules of paper
and board machine projects in China were prolonged due to increased
caution of customers in the light of economic uncertainty and due to
the stricter investment policies set by the country's authorities. If
this situation continues or becomes more serious, it could have a
material adverse effect on Metso Paper's orders received in the
coming months.
The delivery times for Metso's products have been lengthened because
of strong growth in order backlog, especially in the Metso Power
business line, Metso Minerals and Metso Automation. During prolonged
delivery times there is a risk that material and other costs may rise
significantly and have a greater impact on Metso's profitability than
currently anticipated. The scarcity of certain components and
subcontractor resources, particularly with respect to heavy mining
equipment and valves, may also lengthen delivery times. Long lead
times may also have an impact on Metso's capability to win new
orders.
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.
Short-term outlook
The market situation for Metso's products and services is expected to
continue to be favorable during the second half of the year in the
mining, construction and energy customer segments and satisfactory in
the pulp and paper segment. However, uncertainty about the
development of the global economy may have an impact on the
decision-making schedules of certain new customer projects and on the
demand in certain geographical areas, particularly at Metso Paper.
The demand for Metso Paper's new paper, board and fiber lines is
expected to remain at the current satisfactory level in second half
of the year. The decision-making schedules of paper and board machine
projects may continue to be longer than last year due to economic
uncertainty. The market for fiber lines is expected to be active and
decisions on large projects are expected to be made in the second
half of the year. For tissue lines the demand is estimated to be
good. In Europe and North America, the demand is expected to focus
mainly on machine rebuilds and the services business. The demand for
power plants utilizing renewable energy sources is expected to
continue at a good level in Metso's main market areas, Europe and
North America. Metso Paper aims to grow its services business, and
the demand for services is expected to remain satisfactory.
Metso Minerals' favorable market situation is expected to continue in
the second half of 2008. As a result of the continuing rapid growth
of emerging economies, the demand and prices for metals and minerals
are expected to remain high and the investment activity of Metso's
mining customers to remain excellent. In construction, the demand for
Metso Minerals' equipment relating to aggregates production is
expected to continue to be good. Construction demand is sustained by
road network and other transportation infrastructure development
projects underway around the world. The demand for metals recycling
equipment is expected to be at a good level. Demand for the services
business is estimated to remain excellent.
The demand for Metso Automation's products is expected to be
satisfactory in the pulp and paper industry in the second half of
2008. In the power, oil and gas industry, the demand for process
automation systems is expected to be good and the demand for flow
control systems excellent. The increasing consumption of energy and
high oil prices will boost energy industry investments.
Due to postponements in some of Metso Paper's projects under
negotiation, Metso estimates that in 2008 its net sales growth, at
comparable exchange rates, will stay below the earlier-estimated 10
percent. The new net sales growth estimate for 2008 is in the range
of 5-10 percent, at comparable exchange rates. The operating profit
margin estimate for 2008 is unchanged at about 10 percent.
The profit performance estimates are based on Metso's current
outlook, order backlog and business scope.
Helsinki, July 24, 2008
Metso Corporation's Board of Directors
CONSOLIDATED STATEMENTS OF INCOME The
Interim Review is unaudited
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 2007
Net sales 1,633 1,536 3,033 2,902 6,250
Cost of goods sold (1,210) (1,138) (2,248) (2,164) (4,702)
Gross profit 423 398 785 738 1,548
Selling, general and
administrative
expenses (266) (248) (515) (486) (972)
Other operating
income and expenses,
net (2) (3) 4 3 1
Share in profits of
associated companies 0 1 1 1 3
Operating profit 155 148 275 256 580
% of net sales 9.5% 9.7% 9.1% 8.8% 9.3%
Financial income and
expenses, net (10) (10) (19) (18) (33)
Profit before taxes 145 138 256 238 547
Income taxes (43) (41) (76) (71) (163)
Profit 102 97 180 167 384
Profit attributable
to minority interests 0 0 0 0 3
Profit attributable
to equity
shareholders 102 97 180 167 381
Profit 102 97 180 167 384
Earnings per share,
EUR 0.72 0.68 1.27 1.18 2.69
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND
EXPENSE
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 2007
Cash flow hedges, net of tax 5 1 9 (1) (2)
Available-for-sale equity investments, net
of tax 0 20 0 20 22
Currency translation on subsidiary net
investments 15 8 (50) 16 (29)
Net investment hedge gains (losses), net of
tax (5) 2 8 (6) (2)
Defined benefit plan actuarial gains
(losses), net of tax - - - - (1)
Other 0 0 0 0 2
Net income (expense) recognized directly in
equity 15 31 (33) 29 (10)
Profit 102 97 180 167 384
Total recognized income (expense) for the
period 117 128 147 196 374
Total recognized income (expense)
attributable to minority interests 0 0 0 0 3
Total recognized income (expense)
attributable to equity shareholders 117 128 147 196 371
Total recognized income (expense) for the
period 117 128 147 196 374
CONSOLIDATED BALANCE SHEET
ASSETS
June 30, June 30, Dec 31,
EUR million 2008 2007 2007
Non-current assets
Intangible assets
Goodwill 774 767 772
Other intangible assets 269 257 251
1,043 1,024 1,023
Property, plant and equipment
Land and water areas 54 55 54
Buildings and structures 212 220 216
Machinery and equipment 312 313 315
Assets under construction 85 38 49
663 626 634
Financial and other assets
Investments in associated companies 19 18 19
Available-for-sale equity investments 44 43 45
Loan and other interest bearing receivables 12 6 5
Available-for-sale financial investments 5 5 5
Deferred tax asset 119 223 144
Other non-current assets 22 35 22
221 330 240
Total non-current assets 1,927 1,980 1,897
Current assets
Inventories 1,616 1,383 1,410
Receivables
Trade and other receivables 1,221 1,267 1,274
Cost and earnings of projects under
construction in excess of advance billings 400 307 374
Loan and other interest bearing receivables 2 2 2
Available-for-sale financial assets 0 10 0
Tax receivables 33 22 30
1,656 1,608 1,680
Cash and cash equivalents 361 213 267
Total current assets 3,633 3,204 3,357
Assets held for sale - - -
TOTAL ASSETS 5,560 5,184 5,254
SHAREHOLDERS' EQUITY AND
LIABILITIES
EUR million June 30, 2008 June 30, 2007 Dec 31, 2007
Equity
Share capital 241 241 241
Share premium reserve 77 77 77
Cumulative translation
differences (118) (35) (76)
Fair value and other
reserves 471 462 456
Retained earnings 666 688 910
Equity attributable to
shareholders 1,337 1,433 1,608
Minority interests 7 5 7
Total equity 1,344 1,438 1,615
Liabilities
Non-current liabilities
Long-term debt 850 586 700
Post employment benefit
obligations 169 193 177
Deferred tax liability 42 59 41
Provisions 44 48 37
Other long-term liabilities 4 2 2
Total non-current
liabilities 1,109 888 957
Current liabilities
Current portion of long-term
debt 92 106 22
Short-term debt 505 167 97
Trade and other payables 1,331 1,333 1,307
Provisions 212 201 222
Advances received 632 673 637
Billings in excess of cost
and earnings
of projects under
construction 279 315 331
Tax liabilities 56 63 66
Total current liabilities 3,107 2,858 2,682
Liabilities held for sale - - -
Total liabilities 4,216 3,746 3,639
TOTAL SHAREHOLDERS' EQUITY
AND LIABILITIES 5,560 5,184 5,254
NET INTEREST BEARING
LIABILITIES
Long-term interest bearing
debt 850 586 700
Short-term interest bearingdebt 597 273 119
Cash and cash equivalents (361) (213) (267)
Other interest bearing
assets (19) (23) (12)
Total 1,067 623 540
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 2007
Cash flows from operating
activities:
Profit 102 97 180 167 384
Adjustments to reconcile profit to net cash
provided by operating activities
Depreciation 34 36 71 72 148
Interests and dividend income 15 10 24 16 32
Income taxes 43 41 76 71 163
Other 4 6 4 10 (4)
Change in net working capital (67) (176) (254) (175) (286)
Cash flows from operations 131 14 101 161 437
Interest paid and dividends received (6) (7) (10) (7) (29)
Income taxes paid (39) (35) (74) (59) (114)
Net cash provided by (used in)
operating activities 86 (28) 17 95 294
Cash flows from investing
activities:
Capital expenditures on fixed assets (70) (42) (112) (74) (159)
Proceeds from sale of fixed assets 2 3 3 9 16
Business acquisitions, net of cash
acquired (39) (10) (39) (10) (55)
Proceeds from sale of businesses,
net of cash sold 1 - 3 2 9
(Investments in) proceeds from sale
of financial assets - - 7 3 13
Other (1) - (7) - -
Net cash provided by (used in)
investing activities (107) (49) (145) (70) (176)
Cash flows from financing
activities:
Share options exercised - - - 0 0
Dividends paid (425) (212) (425) (212) (212)
Net funding 397 113 637 28 (5)
Other 13 15 15 15 15
Net cash provided by (used in)
financing activities (15) (84) 227 (169) (202)
Net increase (decrease) in cash and
cash equivalents (36) (161) 99 (144) (84)
Effect from changes in exchange
rates 8 3 (5) 4 (2)
Cash and cash equivalents at
beginning of period 389 371 267 353 353
Cash and cash equivalents at end of
period 361 213 361 213 267
Free cash flow
EUR million 4-6/2008 4-6/2007 1-6/2008 1-6/2007 1-12/2007
Net cash provided by
operating activities 86 (28) 17 95 294
Capital expenditures on
maintenance investments (29) (27) (60) (50) (112)
Proceeds from sale of
fixed assets 2 3 3 9 16
Free cash flow 59 (52) (40) 54 198
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Cumu- Equity
lative Fair attrib-
Share- trans- value Re- utable
pre- lation and to Minor-
mium ad- other tained share- ity
Share re- just- re- earn- hold- inter- Total
EUR million capital serve ments serves ings ers ests equity
Balance at Jan 1,
2007 241 77 (45) 432 739 1,444 6 1,450
Cash flow hedges,
net of tax - - - (1) - (1) - (1)
Available-for-sale
equity
investments, net
of tax - - - 20 - 20 - 20
Currency
translation
on subsidiary net
investments - - 16 - - 16 - 16
Net investment
hedge
gains (losses),
net of tax - - (6) - - (6) - (6)
Defined benefit
plan
actuarial gains
(losses), net of
tax - - - - - - - -
Other - - - - - - - -
Net income
(expense)
recognized
directly in equity - - 10 19 - 29 - 29
Net profit for the
period - - - - 167 167 0 167
Total recognized
income
(expense) for the
period - - 10 19 167 196 0 196
Dividends - - - - (212) (212) - (212)
Share options
exercised 0 0 - - - - - -
Redemption of own
shares - - - - - - - -
Share-based
payments,
net of tax - - - 1 - 1 - 1
Other - - - 10 (6) 4 (1) 3
Balance at June
30, 2007 241 77 (35) 462 688 1,433 5 1,438
Balance at Jan 1,
2008 241 77 (76) 456 910 1,608 7 1,615
Cash flow hedges,
net of tax - - - 9 - 9 - 9
Available-for-sale
equity
investments, net
of tax - - - 0 - 0 - 0
Currency
translation on
subsidiary net
investments - - (50) - - (50) - (50)
Net investment
hedge
gains (losses),
net of tax - - 8 - - 8 - 8
Defined benefit
plan
actuarial gains
(losses), net of
tax - - - - - - - -
Other - - - - - - - -
Net income
(expense)
recognized
directly in equity - - (42) 9 - (33) - (33)
Net profit for the
period - - - - 180 180 - 180
Total recognized
income
(expense) for the
period - - (42) 9 180 147 - 147
Dividends - - - - (425) (425) - (425)
Share options
exercised - - - - - - - -
Redemption of own
shares - - - - - - - -
Share-based
payments,
net of tax - - - 4 - 4 - 4
Other - - - 2 1 3 - 3
Balance at June
30,
2008 241 77 (118) 471 666 1,337 7 1,344
ACQUISITIONS
Acquisitions in 2008
Metso Automation acquired in June Mapag Valves GmbH, a German
manufacturer of butterfly valves. The debt-free acquisition price was
EUR 36 million. Excess purchase price of EUR 13 million was allocated
to intangible assets, representing the fair values of the acquired
technology, customer base and order backlog. The remaining excess
purchase price of EUR 8 million represents goodwill associated to
Metso's improved market position in new and rapidly growing
industrial markets
In May, Metso Automation acquired Kemotron A/S, a Danish manufacturer
of advanced measurement systems mainly to the pulp, paper and
chemical industry. The purchase price was about EUR 3 million.
Had these acquisitions taken place on January 1, 2008, Metso's net
sales and net profit would have increased by EUR 13 million and EUR 1
million, respectively.
Summary information on acquisitions made in January-June 2008 is as
follows:
Fair value
EUR million Carrying amount allocations Fair value
Intangible assets 0 13 13
Property, plant and
equipment 4 - 4
Inventories 12 - 12
Trade and other
receivables 10 - 10
Deferred tax
liabilities 0 (4) (4)
Other liabilities
assumed (7) - (7)
Non-interest bearing
net assets 19 9 28
Cash and cash
equivalents acquired 0 - 0
Debt assumed (10) - (10)
Purchase price (29) - (29)
Goodwill 20 (9) 11
Purchase price settled
in cash (29)
Settlement of acquired
debt (10)
Cash and cash
equivalents acquired 0
Cash outflow on
acquisitions (39)
ASSETS PLEDGED AND CONTINGENT
LIABILITIES
June 30, June 30, Dec 31,
EUR million 2008 2007 2007
Mortgages on corporate debt 4 9 9
Other pledges and contingencies
Mortgages 1 2 2
Pledged assets 0 0 0
Guarantees on behalf of
associated company obligations - - -
Other guarantees 3 9 11
Repurchase and other commitments 7 8 8
Lease commitments 143 153 142
NOTIONAL AMOUNTS OF DERIVATIVE
FINANCIAL INSTRUMENTS
June 30, June 30, Dec 31,
EUR million 2008 2007 2007
Forward exchange rate contracts 1,511 1,269 1,387
Interest rate and currency swaps - 1 0
Currency swaps - 1 -
Interest rate swaps 143 143 143
Option agreements
Bought 16 3 -
Sold 16 1 -
The notional amount of electricity forwards was 437 GWh as of
June 30, 2008 and 464 GWh as of June 30, 2007.
The notional amount of nickel forwards to hedge stainless steel
prices was 354 tons as of June 30, 2008. 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
1-6/2008 1-6/2007 1-12/2007
Earnings per share, EUR 1.27 1.18 2.69
Equity/share at end of period, EUR 9.44 10.13 11.36
Return on equity (ROE), % (annualized) 23.9 23.9 25.4
Return on capital employed (ROCE) before
tax, % (annualized) 23.4 24.3 26.1
Return on capital employed (ROCE) after
tax, % (annualized) 17.3 17.8 19.0
Equity to assets ratio at end of period,
% 28.9 34.3 37.7
Gearing at end of period, % 79.5 43.3 33.4
Free cash flow (40) 54 198
Free cash flow/share (0.28) 0.38 1.40
Gross capital expenditure (excl. business
acquisitions) 112 74 159
Business acquisitions, net of cash
acquired 39 10 55
Depreciation and amortization 71 72 148
Number of outstanding shares at end of
period (thousands) 141,625 141,494 141,487
Average number of shares (thousands) 141,566 141,429 141,460
EXCHANGE RATES
USED
1-6/ 1-6/ 1-12/ June 30, June 30, Dec 31,
2008 2007 2007 2008 2007 2007
USD (US dollar) 1.5444 1.3341 1.3797 1.5764 1.3505 1.4721
(Swedish
SEK krona) 9.4034 9.2290 9.2647 9.4703 9.2525 9.4415
(Pound
GBP sterling) 0.7795 0.6756 0.6873 0.7923 0.6740 0.7334
(Canadian
CAD dollar) 1.5497 1.4988 1.4663 1.5942 1.4245 1.4449
(Brazilian
BRL real) 2.6025 2.7201 2.6623 2.5112 2.5966 2.5949
BUSINESS AREA
INFORMATION
NET SALES
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 7/2007-6/2008 2007
Metso Paper 701 708 1,349 1,374 2,900 2,925
Metso Minerals 738 648 1,321 1,188 2,740 2,607
Metso Automation 194 174 352 320 730 698
Valmet Automotive 19 19 42 47 80 85
Corporate office and
other - - - - - -
Corporate office and
others total 19 19 42 47 80 85
Intra Metso net sales (19) (13) (31) (27) (69) (65)
Metso total 1,633 1,536 3,033 2,902 6,381 6,250
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 7/2007-6/2008 2007
Metso Paper 2.3 (3.3) 1.6 (1.4) (8.5) (11.5)
Metso Minerals (4.4) 0.2 1.7 1.4 8.0 7.7
Metso Automation (0.8) (0.4) 0.0 0.1 2.3 2.4
Valmet Automotive 0.0 0.0 0.0 0.0 0.0 0.0
Corporate office and
other 0.7 0.4 0.0 2.6 (0.1) 2.5
Corporate office and
others total 0.7 0.4 0.0 2.6 (0.1) 2.5
Metso total (2.2) (3.1) 3.3 2.7 1.7 1.1
SHARE IN PROFITS OF ASSOCIATED
COMPANIES
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 7/2007-6/2008 2007
Metso Paper 0.3 0.1 0.7 0.5 1.3 1.1
Metso Minerals 0.1 0.0 0.1 0.0 0.4 0.3
Metso Automation 0.3 1.0 0.5 1.0 0.9 1.4
Valmet Automotive - - - - - -
Corporate office and other - - - - - -
Corporate office and others
total - - - - - -
Metso total 0.7 1.1 1.3 1.5 2.6 2.8
OPERATING PROFIT
(LOSS)
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
EUR million 2008 2007 2008 2007 7/2007-6/2008 2007
Metso Paper 33.2 35.7 60.4 61.1 136.2 136.9
Metso Minerals 100.2 95.7 183.3 163.5 382.4 362.6
Metso Automation 25.6 23.3 43.0 38.8 103.0 98.8
Valmet Automotive 0.9 1.0 1.9 5.4 4.5 8.0
Corporate office and
other (4.7) (7.4) (13.8) (12.1) (28.2) (26.5)
Corporate office and
others total (3.8) (6.4) (11.9) (6.7) (23.7) (18.5)
Metso total 155.2 148.3 274.8 256.7 597.9 579.8
OPERATING PROFIT (LOSS), % OF NET SALES
4-6/ 4-6/ 1-6/ 1-6/ 7/2007- 1-12/
% 2008 2007 2008 2007 6/2008 2007
Metso Paper 4.7 5.0 4.5 4.4 4.7 4.7
Metso Minerals 13.6 14.8 13.9 13.8 14.0 13.9
Metso Automation 13.2 13.4 12.2 12.1 14.1 14.2
Valmet Automotive 4.7 5.3 4.5 11.5 5.6 9.4
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 9.5 9.7 9.1 8.8 9.4 9.3
EBITA
4-6/ 4-6/ 1-6/ 1-6/ 7/2007- 1-12/
EUR million 2008 2007 2008 2007 6/2008 2007
Metso Paper 41.7 47.7 80.7 84.8 180.4 184.5
Metso Minerals 101.6 96.9 186.0 165.6 387.5 367.1
Metso Automation 26.3 23.6 44.1 39.5 105.0 100.4
Valmet Automotive 0.9 1.0 1.9 5.4 4.6 8.1
Corporate office and other (4.0) (6.9) (12.5) (11.1) (26.1) (24.7)
Corporate office and others
total (3.1) (5.9) (10.6) (5.7) (21.5) (16.6)
Metso total 166.5 162.3 300.2 284.2 651.4 635.4
EBITA, % OF NET SALES
4-6/ 4-6/ 1-6/ 1-6/ 7/2007- 1-12
% 2008 2007 2008 2007 6/2008 /2007
Metso Paper 5.9 6.7 6.0 6.2 6.2 6.3
Metso Minerals 13.8 15.0 14.1 13.9 14.1 14.1
Metso Automation 13.6 13.6 12.5 12.3 14.4 14.4
Valmet Automotive 4.7 5.3 4.5 11.5 5.8 9.5
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 10.2 10.6 9.9 9.8 10.2 10.2
ORDERS RECEIVED
4-6/ 4-6/ 1-6/ 1-6/ 7/2007- 1-12/
EUR million 2008 2007 2008 2007 6/2008 2007
Metso Paper 498 1,103 1,039 1,756 2,392 3,109
Metso Minerals 1,030 798 1,770 1,569 3,276 3,075
Metso Automation 208 185 428 413 778 763
Valmet Automotive 19 19 42 47 80 85
Corporate office and other - - - - - -
Corporate office and others
total 19 19 42 47 80 85
Intra Metso orders received (15) (15) (30) (31) (66) (67)
Metso total 1,740 2,090 3,249 3,754 6,460 6,965
QUARTERLY INFORMATION
NET SALES
EUR million 4-6/2007 7-9/2007 10-12/2007 1-3/2008 4-6/2008
Metso Paper 708 642 909 648 701
Metso Minerals 648 649 770 583 738
Metso Automation 174 165 213 158 194
Valmet Automotive 19 17 21 23 19
Corporate office
and other - - - - -
Corporate office and
others total 19 17 21 23 19
Intra Metso net
sales (13) (21) (17) (12) (19)
Metso total 1,536 1,452 1,896 1,400 1,633
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 4-6/2007 7-9/2007 10-12/2007 1-3/2008 4-6/2008
Metso Paper (3.3) 4.2 (14.3) (0.7) 2.3
Metso Minerals 0.2 2.0 4.3 6.1 (4.4)
Metso Automation (0.4) 0.2 2.1 0.8 (0.8)
Valmet Automotive 0.0 0.0 0.0 0.0 0.0
Corporate office
and other 0.4 (0.1) 0.0 (0.7) 0.7
Corporate office and
others total 0.4 (0.1) 0.0 (0.7) 0.7
Metso total (3.1) 6.3 (7.9) 5.5 (2.2)
OPERATING PROFIT (LOSS)
EUR million 4-6/2007 7-9/2007 10-12/2007 1-3/2008 4-6/2008
Metso Paper 35.7 36.2 39.6 27.2 33.2
Metso Minerals 95.7 85.2 113.9 83.1 100.2
Metso Automation 23.3 25.8 34.2 17.4 25.6
Valmet Automotive 1.0 1.7 0.9 1.0 0.9
Corporate office
and other (7.4) (5.5) (8.9) (9.1) (4.7)
Corporate office and
others total (6.4) (3.8) (8.0) (8.1) (3.8)
Metso total 148.3 143.4 179.7 119.6 155.2
EBITA
EUR million 4-6/2007 7-9/2007 10-12/2007 1-3/2008 4-6/2008
Metso Paper 47.7 48.2 51.5 39.0 41.7
Metso Minerals 96.9 86.3 115.2 84.4 101.6
Metso Automation 23.6 26.2 34.7 17.8 26.3
Valmet Automotive 1.0 1.7 1.0 1.0 0.9
Corporate office
and other (6.9) (5.1) (8.5) (8.5) (4.0)
Corporate office and
others total (5.9) (3.4) (7.5) (7.5) (3.1)
Metso total 162.3 157.3 193.9 133.7 166.5
CAPITAL EMPLOYED
June 30, Sep 30, Dec 31, Mar 31, June 30,
EUR million 2007 2007 2007 2008 2008
Metso Paper 637 593 674 772 784
Metso Minerals 1,030 1,045 1,106 1,166 1,221
Metso Automation 189 201 214 210 268
Valmet Automotive 23 29 21 22 22
Corporate office
and other 419 444 419 533 496
Corporate office and
others total 442 473 440 555 518
Metso total 2,298 2,312 2,434 2,703 2,791
ORDERS RECEIVED
EUR million 4-6/2007 7-9/2007 10-12/2007 1-3/2008 4-6/2008
Metso Paper 1,103 515 838 541 498
Metso Minerals 798 745 761 740 1,030
Metso Automation 185 185 165 220 208
Valmet Automotive 19 17 21 23 19
Corporate office
and other - - - - -
Corporate office and
others total 19 17 21 23 19
Intra Metso orders
received (15) (22) (14) (15) (15)
Metso total 2,090 1,440 1,771 1,509 1,740
ORDER BACKLOG
June 30, Sep 30, Dec 31, Mar 31, June 30,
EUR million 2007 2007 2007 2008 2008
Metso Paper 2,584 2,455 2,363 2,241 2,040
Metso Minerals 1,673 1,728 1,690 1,758 2,067
Metso Automation 365 382 332 387 428
Valmet Automotive - - - - -
Corporate office
and other - - - - -
Corporate office and
others total - - - - -
Intra Metso order
backlog (48) (46) (44) (46) (41)
Metso total 4,574 4,519 4,341 4,340 4,494
June 30, Sep 30, Dec 31, Mar 31, June 30,
PERSONNEL 2007 2007 2007 2008 2008
Metso Paper 11,954 11,774 11,694 11,522 11,818
Metso Minerals 9,967 10,194 10,446 10,762 11,215
Metso Automation 3,564 3,523 3,564 3,628 3,870
Valmet Automotive 782 777 789 789 779
Corporate office
and other 342 335 344 361 387
Corporate office and
others total 1,124 1,112 1,133 1,150 1,166
Metso total 26,609 26,603 26,837 27,062 28,069
NOTES TO THE INTERIM REVIEW
This Interim Review has been prepared in accordance with IAS 34
'Interim Financial Reporting'. The same accounting policies have been
applied as in the annual financial statements.
New accounting standards
IFRS 8
In November 2006, IASB issued IFRS 8 'Operating Segments', which
requires the company to adopt the 'management approach' to reporting
on the financial performance of its operating segments. Thus, the
information to be reported would be what management uses internally
for evaluating segment performance. Metso is currently evaluating the
effects on its financial statements. However, it does not expect the
standard to affect its current segment structure.
IFRS 8 is effective for annual financial statements for periods
beginning on or after January 1, 2009. Earlier adoption is permitted.
Metso will apply the standard for the financial year beginning on
January 1, 2009.
IAS 1 (Revised)
IASB has published IAS 1 (Revised) 'Presentation of Financial
Statements'. The revised standard is aimed at improving users'
ability to analyze and compare the information given in financial
statements by separating changes in the equity of an entity arising
from transactions with owners from other changes in equity.
IAS 1 (Revised) is effective for annual financial statements for
periods beginning on or after January 1, 2009. The standard is still
subject to endorsement by the European Union.
Provided the standard is endorsed by the European Union before the
end of 2008, Metso will apply the standard for the financial year
beginning on January 1, 2009.
IFRS 3 (Revised)
IASB has published IFRS 3 (Revised), 'Business combinations'. The
revised standard continues to apply the acquisition method to
business combinations, with some significant changes such as
expensing of transaction costs. In addition, all payments to purchase
a business are to be recorded at fair value at the acquisition date,
with some contingent payments subsequently remeasured at fair value
through income. Goodwill may be calculated based on the parent's
share of net assets or it may include goodwill related to the
minority interest. Metso is currently evaluating the effects on its
financial statements.
IFRS 3 (Revised) is effective for annual financial statements for
periods beginning on or after July 1, 2009. The standard is still
subject to endorsement by the European Union.
Provided the revision receives endorsement by the European Union,
Metso will apply the standard for the financial year beginning on
January 1, 2010.
IAS 23 (Amended)
IASB has published Amendment to IAS 23 'Borrowing Costs', which
requires an entity to capitalize borrowing costs directly
attributable to the acquisition, construction or production of a
qualifying asset as part of the cost of that asset. A qualifying
asset can be intended for its own use (self-constructed asset) or for
sale. The option of immediately expensing these borrowing costs will
be removed. The amendment does not change the accounting policy
applied by the group to self-constructed assets and, therefore,
should not have any material impact on the group's financial
statements. However, the implementation of the amendment to
qualifying assets for sale is under review and its effects are being
evaluated by Metso.
The amendment is effective for annual periods beginning on or after
January 1, 2009. The standard is still subject to endorsement by the
European Union.
Provided the amendment receives endorsement by the European Union,
Metso will apply the standard for the financial year beginning on
January 1, 2009.
IAS 27 (Revised)
IASB has published IAS 27 (Revised), 'Consolidated and separate
financial statements'. The revised standard requires the effects of
all transactions with non-controlling interests to be recorded in
equity if there is no change in control. They will no longer result
in goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in the entity
is remeasured to fair value and a gain or loss is expensed. Metso is
currently evaluating the effects on its financial statements.
IAS 27 (Revised) is effective for annual financial statements for
periods beginning on or after July 1, 2009. The standard is still
subject to endorsement by the European Union.
Provided the revision receives endorsement by the European Union,
Metso will apply the standard for the financial year beginning on
January 1, 2010.
IFRS 2 (Amended)
IASB published in January 2008 an amendment to IFRS 2 'Share-based
payments' clarifying the accounting of vesting conditions and
cancellations. Vesting conditions are limited to service and
performance conditions, other features are not vesting conditions and
only impact the grant date fair value. Cancellations, whether by the
Company or by other parties, receive similar accounting treatment.
Metso is currently evaluating the effects of the amendment to its
financial statements.
The amendment is effective for annual financial statements for
periods beginning on or after January 1, 2009. The standard is still
subject to endorsement by the European Union.
Pending on the endorsement by the European Union, Metso will apply
the standard for the financial year beginning on January 1, 2009.
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.
Decisions of the Annual General Meeting
The Annual General Meeting of Metso Corporation on April 2, 2008
approved the accounts for 2007 as presented by the Board of Directors
and decided to discharge the members of the Board of Directors and
the President and CEO of Metso Corporation from liability for the
financial year 2007. In addition, the Annual General Meeting approved
the proposals of the Board of Directors to authorize the Board to
decide upon repurchasing the Corporation's own shares, arranging a
share issue, granting special rights and decreasing the share premium
reserve and the legal reserve.
The Annual General Meeting decided to establish a Nomination
Committee of the Annual General Meeting to prepare proposals for the
next Annual General Meeting in respect of the composition of the
Board of Directors and director remuneration. The Nomination
Committee consists of the representatives appointed by the four
biggest shareholders and the Chairman of Metso's Board 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. Jukka Viinanen and Arto
Honkaniemi were elected as new members of the Board. Board members
re-elected were Maija-Liisa Friman, Christer Gardell and Yrjö Neuvo.
The term of office of Board members lasts until the end of the next
Annual General Meeting.
The Annual General Meeting decided that the annual remunerations for
Board members be EUR 92,000 for the Chairman, EUR 56,000 for the Vice
Chairman and EUR 45,000 for the members and that the meeting fee
including committee meetings be EUR 600 per meeting.
The auditing company PricewaterhouseCoopers Oy, Authorized Public
Accountants, was re-elected as the Corporation's Auditor until the
end of the next Annual General Meeting.
The Annual General Meeting decided that a dividend of EUR 3.00 per
share be paid for the financial year which ended on December 31,
2007. The dividend comprises an ordinary dividend of EUR 1.65 per
share and an extra dividend of EUR 1.35 per share. The dividend was
paid on April 15, 2008.
Members of Metso's Board Committees
Metso Corporation's Board of Directors elected from its midst the
members of the Audit Committee and Compensation Committee at its
assembly meeting. The Board's Audit Committee consists of Maija-Liisa
Friman (Chairman), Arto Honkaniemi and Jukka Viinanen. The Board's
Compensation Committee consists of Matti Kavetvuo (Chairman),
Christer Gardell, Yrjö Neuvo and Jaakko Rauramo.
Share ownership plan
Metso has a share ownership plan for 2006-2008. The maximum number of
shares to be allocated in the incentive plan is 360,000 Metso
Corporation shares.
The 2007 share ownership plan comprised 90 Metso executives,
including the entire Executive Team. At the end of March 2008, 70,949
shares were distributed as rewards, corresponding to approximately
0.05 percent of all Metso shares. Members of the Executive Team
received 14,966 shares.
Metso's Board of Directors decided in February on the number of
shares to be allocated for 2008 plan 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 in 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 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. The payment of rewards will be decided during the first
quarter of 2009.
Shares, options and share capital
At the end of June, 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 69,141 Metso
shares held by a limited partnership consolidated in Metso's
consolidated financial statements. Together these represent 0.09
percent of all the shares and votes. The average number of shares
outstanding in the first half of 2008, excluding Metso shares held by
the company, was 141,565,546.
After cancellations and exercised options there remains a total of
100,000 year 2003A options under Metso's stock options program, all
of which are held by Metso's subsidiary, Metso Capital Ltd.
Metso's market capitalization, excluding Metso shares held by the
company, was EUR 4,103 million on June 30, 2008.
Trading of Metso shares
The number of Metso Corporation shares traded on the OMX Nordic
Exchange, Helsinki in January-June was 168,048,835 shares, equivalent
to a turnover of EUR 5,301 million. The share price on June 30, 2008
was EUR 28.97, and the average trading price for the period was EUR
31.55. The highest quotation during the review period was EUR 38.56
and the lowest EUR 25.45.
Metso's ADSs (American Depositary Shares) are traded in the United
States on the OTC market. On June 30, 2008, the closing price of an
ADS was USD 45.70. Each ADS represents one share.
Disclosures of changes in holdings
On April 15, 2008 UBS AG announced that the funds they managed held
7,274,140 Metso shares corresponding to 5.13 percent of the paid up
share capital and votes in Metso Corporation.
UBS AG announced that on April 18, 2008 the group holding in Metso
shares fell below the 5 percent threshold. The holding amounted to
7,072,425 shares, which corresponds to 4.99 percent of the paid up
share capital and votes in Metso Corporation.
Credit ratings
In April, Standard & Poor's affirmed the BBB long-term credit ratings
for Metso and changed the outlook from stable to positive. At the
same time, the senior unsecured debt ratings were raised from BBB- to
BBB. The short-term A-2 ratings were affirmed.
In October 2007, Moody's Investor Service maintained its long-term
rating for Metso at Baa2 and estimated the rating outlook to be
stable.
Metso's financial reporting in 2008
Metso's interim reports for January-September will be published on
October 28, 2008.
Metso is a global engineering and technology corporation with 2007
net sales of over EUR 6 billion. Its over 27,000 employees in
approximately 50 countries serve customers in the pulp and paper
industry, rock and minerals processing, the energy industry and
selected other industries.
www.metso.com
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 Kati Renvall
Executive Vice President and Vice President, Corporate Communications
CFO
