Metso Corporation Company Release on October 28, 2008 at 12.00 p.m.
Good profitability in third quarter, measures to adjust to changing
operating environment started
Highlights of the third quarter
* New orders worth EUR 2,246 million were received in
July-September (EUR 1,440 million in Q3/07). At the end of
September 2008, the order backlog was 21 percent higher than at
the end of December 2007, standing at EUR 5,244 million (EUR
4,341 million at December 31, 2007).
* Net sales grew 5 percent on the comparison period and totaled EUR
1,528 million (EUR 1,452 million in Q3/07).
* Earnings before interest, tax and amortization (EBITA) were EUR
180.7 million, i.e. 11.8 percent of net sales (EUR 157.3 million
and 10.8% in Q3/07).
* Operating profit (EBIT) was EUR 172.3 million, i.e. 11.3 percent
of net sales (EUR 143.4 million and 9.9% in Q3/07).
* Earnings per share were EUR 0.69 (EUR 0.66 in Q3/07).
* Free cash flow was EUR 91 million (EUR 144 million in Q3/07).
* Return on capital employed (ROCE) before taxes was 23.3 percent
(24.7% in Q3/07)."In the third quarter, we made good progress towards our guided 2008
performance. Actually, the operating profit for the quarter - EUR 172
million or 11.3 percent - was the best ever third-quarter in Metso's
history," says Jorma Eloranta, President and CEO of Metso
Corporation. "Steadily improving financial performance is a strong
evidence that we are developing Metso into the right direction, and
we believe that Metso is today more balanced, responsive and flexible
when it comes to weathering storms in the global economy.""In the current global economic environment, we are putting more
emphasis on profitability and cash flows than growth. This means,
that acquisition and investment plans are now reviewed very
carefully. We are convinced that the positive cash flow impact from
the ongoing programs to manage net working capital more efficiently
continue to pay off in the coming months. We are also implementing
tight cost control measures throughout Metso. What comes to capacity
adjustments, we are prepared to move quickly when needed. At the same
time, we are continuing to pursue growth especially in the emerging
markets and in our services business."
Metso's key figures
EUR million Q3/08 Q3/07 Change % Q1-Q3 Q1-Q3 Change % 2007
/08 /07
Net sales 1,528 1,452 5 4,561 4,354 5 6,250
Net sales of services 548 516 6 1,583 1,465 8 2,024
business
% of net sales 36 36 35 34 33
Earnings before
interest, tax and 180.7 157.3 15 480.9 441.5 9 635.4
amortization (EBITA)
% of net sales 11.8 10.8 10.5 10.1 10.2
Operating profit 172.3 143.4 20 447.1 400.1 12 579.8
% of net sales 11.3 9.9 9.8 9.2 9.3
Earnings per share, 0.69 0.66 5 1.96 1.84 7 2.69
EUR
Orders received 2,246 1,440 56 5,495 5,194 6 6,965
Order backlog at end 5,244 4,519 16 4,341
of period
Free cash flow 91 144 (37) 51 198 (74) 198
Return on capital
employed (ROCE) 23.3 24.7 26.1
before taxes,
annualized, %
Equity to assets
ratio at end of
period, % 31.5 36.0 37.7
Gearing at end of 72.2 34.3 33.4
period, %
Metso's third quarter 2008 review
Operating environment and demand for products in July-September
The market situation for Metso's products and services continued to
be favorable in the mining, construction and energy customer
industries and satisfactory in the pulp and paper industry in
July-August. However, uncertainty in the world economy and the
acceleration of the financial crisis in September clearly
deteriorated the market outlook for Metso's products and services
towards the end of quarter.
In the paper and board industry, demand weakened notably in the third
quarter. In the main market area, China, economic growth has slowed
down, and the board industry is experiencing overcapacity, partly due
to government actions seeking to limit export of certain products.
The markets for tissue machines and fiber lines continued to be
active but deteriorated towards the end of the quarter. The
increasingly difficult situation in the pulp and paper industry in
North America and Europe has weakened the demand for aftermarket
services. The demand for power plants utilizing renewable energy
sources weakened from good to satisfactory in the main market areas
of Europe and North America.
The mining industry's market situation continued to be favorable. The
rapid decline of the prices of metals and minerals in September and
general uncertainty in the world economy did not reflect on the
mining industry's third quarter demand. However, towards the end of
the quarter some mining companies publicly commented about cuts in
their capital expenditure plans. In construction, the operating
environment weakened in North America and Western Europe, but
remained good in emerging markets due to development projects
concerning road networks and other infrastructure. Demand for metal
recycling equipment continued to be good.
Demand for process automation and flow control systems was good in
the power, oil and gas industries and satisfactory in the pulp and
paper industry.
Orders received in July-September
The orders received by Metso in July-September totaled EUR 2,246
million, up by 56 percent from the comparison period. The value of
orders received was increased by two large pulp mill projects and two
board machine orders received by Metso Paper. Metso Minerals' orders
received increased, while Metso Automation's orders received remained
at the level of the comparison period.
The value of orders received by Metso Paper in July-September totaled
EUR 1,252 million, which was 143 percent higher than in the
comparison period. The major orders received in the third quarter
were a papermaking line for Propapier in Germany, pulp mill equipment
for Zhanjiang Chenming in China and Aracruz in Brazil, a
containerboard line to Amcor in Australia and a power boiler for
Dalkia France in France. In late October, Aracruz announced that
because of the deterioration in the global economic environment, it
will temporarily suspend the pulp mill project ordered in August. In
the pulp mill project for Zhanjiang Chenming the customer is still in
the process of finalizing the financial arrangements and thus Metso
has not fully commenced the project work.
The orders received by Metso Minerals in the third quarter were up by
10 percent on the corresponding quarter in 2007 and totaled EUR 819
million. Orders from the mining industry increased substantially,
while those from construction decreased slightly. Geographically, the
growth of Metso Minerals' new orders was strong in North and South
America and in Eastern Europe but dropped clearly in Western Europe.
The orders received in July-September included a number of smaller
orders and one more sizable order; a railcar unloader systems to
Pilbara Infrastructure Pty Ltd in Australia.
The orders received by Metso Automation in July-September were at the
level of the comparison period. Geographically the orders grew
clearly in North America and Europe but came down in the emerging
markets. Metso Automation's largest orders in the third quarter
included an automation and quality control system to Propapier's
papermaking line in Germany, automation systems to ZhanjiangChenming's new pulp mill in China and automation and safety solutions
to Neste Oil's production plants in Singapore and in Rotterdam, the
Netherlands.
Financial performance in July-September
Metso's net sales grew by 5 percent compared with July-September 2007
and were EUR 1,528 million. The net sales of the services business
grew 6 percent on the comparison period, and accounted for 36 percent
(36% in Q3/07) of Metso's third-quarter net sales.
Metso's third-quarter financial performance improved substantially on
the comparison period; earnings before interest, tax and amortization
(EBITA) were EUR 180.7 million or 11.8 percent of net sales (EUR
157.3 million and 10.8% in Q3/07). Measured in euros, EBITA improved
at Metso Minerals and Metso Automation and remained at the level of
the comparison period at Metso Paper. All of the business areas
improved their EBITA margins on the comparison period. Metso's
third-quarter operating profit was EUR 172.3 million, or 11.3 percent
of net sales (EUR 143.4 million and 9.9% in Q3/2007). The improvement
in the operating profit margin was facilitated by the strong growth
in net sales, stringent control of fixed costs and the successful
completion of large project deliveries. The profit attributable to
shareholders was EUR 97 million (EUR 94 million Q3/07) in
July-September, corresponding to earnings per share (EPS) of EUR 0.69
(EUR 0.66 in Q3/07).
Metso's January-September 2008 Interim Review
Orders received and order backlog
The orders received by Metso in January-September totaled EUR 5,495
million, up by 6 percent on the comparison period. Excluding the
impact of exchange rate changes, the value of orders received
increased by 10 percent. The orders received by Metso Minerals and
Metso Automation improved by 12 percent and 3 percent respectively,
on the comparison period, while orders in Metso Paper were on par
with January-September 2007. Relatively, the strongest growth was in
Metso Paper's Fiber business line and Metso Minerals' Mining business
line while the largest decreases in orders received from the
comparison period were in Metso Paper's Paper and Board and Power
business lines.
The three countries generating the largest total value of orders
received were Brazil, the United States and China. The growth in new
orders came from the North and South America and Asia-Pacific regions
but orders from Western Europe declined. The share of emerging
markets in orders received increased to 51 percent (45%). At the end
of September, Metso's order backlog was EUR 5,244 million, which is
21 percent higher than at the end of 2007.
Orders received by business area
Q1-Q3/2008 Q1-Q3/2007
EUR million % of orders EUR % of orders
received million received
Metso Paper 2,291 41 2,271 44
Metso Minerals 2,589 47 2,314 44
Metso Automation 617 11 598 11
Valmet Automotive 52 1 64 1
Intra-Metso orders (54) (53)
received
Total 5,495 100 5,194 100
Orders received by market area
+-------------------------------------------------------------------+
| | Q1-Q3/2008 | Q1-Q3/2007 |
|----------------------+-----------------------+--------------------|
| | EUR | % of orders | EUR | % of |
| | million | received | million | orders |
| | | | | received |
|----------------------+---------+-------------+---------+----------|
| Europe | 1,908 | 35 | 2,321 | 45 |
|----------------------+---------+-------------+---------+----------|
| North America | 883 | 16 | 773 | 15 |
|----------------------+---------+-------------+---------+----------|
| South and Central | 1,028 | 19 | 611 | 12 |
| America | | | | |
|----------------------+---------+-------------+---------+----------|
| Asia-Pacific | 1,333 | 24 | 1,115 | 21 |
|----------------------+---------+-------------+---------+----------|
| Rest of the world | 343 | 6 | 374 | 7 |
|----------------------+---------+-------------+---------+----------|
| Total | 5,495 | 100 | 5,194 | 100 |
+-------------------------------------------------------------------+
Net sales
During January-September, Metso's net sales grew by 5 percent on the
comparison period and totaled EUR 4,561 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 18 percent and 17
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 8 percent (at comparable exchange rates, the growth
would have been about 13 percent), accounting for 35 percent of
Metso's net sales (34% in Q1-Q3/07). The growth of the services
business was strongest in Metso Minerals, where growth was 19 percent
at comparable exchange rates.
Measured by net sales, the three largest countries in
January-September were the United States, China and Finland, which
together accounted for about 29 percent of total net sales.
Net sales by business area
Q1-Q3/2008 Q1-Q3/2007
EUR million % of net EUR million % of net
sales sales
Metso Paper 1,947 42 2,016 46
Metso Minerals 2,065 45 1,837 42
Metso Automation 544 12 485 11
Valmet Automotive 52 1 64 1
Intra-Metso net sales (47) (48)
Total 4,561 100 4,354 100
Net sales by market area
Q1-Q3/2008 Q1-Q3/2007
EUR million % of net EUR million % of net
sales sales
Europe 1,913 42 1,736 40
North America 722 16 786 18
South and Central 557 12 618 14
America
Asia-Pacific 1,082 24 1,029 24
Rest of the world 287 6 185 4
Total 4,561 100 4,354 100
Financial result
Metso's earnings before interest, tax and amortization (EBITA) for
January-September 2008 improved by 9 percent and were EUR 480.9
million, or 10.5 percent of net sales (EUR 441.5 million and 10.1% in
Q1-Q3/07). The increase in EBITA was attributable to Metso Minerals
and Metso Automation. Metso Minerals' and Metso Automation's EBITA
margin rose and Metso Paper's EBITA margin remained at the level of
the comparison period.
Metso's operating profit in January-September was EUR 447.1 million,
or 9.8 percent of net sales (EUR 400.1 million and 9.2% in Q1-Q3/07).
Metso's net financial expenses for January-September were EUR 54
million (EUR 25 million in Q1-Q3/07). Interest-bearing liabilities
have increased substantially through the significant growth in net
working capital over the first half year, through investments and the
pay-out of an exceptionally large dividend. The increased debt
capital, the relatively large share of floating interest rate debt
and the general rise in interest rates have resulted in an increase
in interest expenses of almost EUR 17 million from the comparison
period. In the third quarter, net financial expenses comprise
foreign currency losses resulting from USD-denominated export credit
financing of a Brazilian subsidiary. On the other hand, gains arising
from firm customer orders are, once recognized, reported in operating
profit.
Metso's profit before taxes for January-September was EUR 393 million
(EUR 375 million in Q1-Q3/07). Metso's tax rate is estimated to be
approximately 29 percent in 2008 (29.8% in 2007). The profit
attributable to shareholders was EUR 277 million (EUR 261 million) in
January-September, corresponding to earnings per share (EPS) of EUR
1.96 (EUR 1.84 per share).
Metso's return on capital employed (ROCE) before taxes was 23.3
percent (24.7%) and return on equity (ROE) was 24.5 percent (24.0%).
Cash flow and financing
Metso's net cash generated by operating activities was EUR 129
million in January-September (EUR 260 million in Q1-Q3/07). Net cash
generated by operating activities is burdened by the net working
capital being tied up in all business areas. Strong organic growth
has made the supply chain management more challenging, resulting in
working capital being tied up in inventories both in Metso Minerals
and in Metso Automation. Net working capital has increased by EUR 297
million since the beginning of the year. The increase has slowed down
during the year as a result of special programs aimed at improving
net working capital management. In the first quarter, EUR 187 million
of net working capital was tied up, and subsequently this growth
slowed down to EUR 67 million in the second quarter and EUR 43
million in the third. Cumulatively, Metso's free cash flow turned
positive in the third quarter and was EUR 51 million (EUR 198
million). Metso's free cash flow for the third quarter was EUR 91
million (EUR 144 million in Q3/07).
Net interest-bearing liabilities totaled EUR 1,040 million at the end
of September (EUR 521 million on Sept 30, 2007). The total amount of
short-term debt maturing within the next 12 months decreased by EUR
172 million between June and September and was EUR 425 million at the
end of the period. About half of the short-term debt consists of
commercial papers issued in the domestic markets. EUR 84 million are
current portions of long-term loans and the remainder is accounted
for by local working capital financing of certain subsidiaries,
primarily in Brazil. In the existing long-term debts the next
substantial installments to mature, amounting to about EUR 150
million, are due in 2010.
Metso's liquidity position is satisfactory. The syndicated EUR 500
million revolving loan facility is available until late 2011, and
currently it is undrawn.
Gearing was 72.2 percent (34.3%) and the equity-to-assets ratio was
31.5 percent (36.0%). In April, following the Annual General Meeting,
Metso paid EUR 425 million in dividends for 2007, 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-September was EUR 201
million (EUR 110 million in Q1-Q3/07). Capital expenditures on fixed
assets include technology and capacity acquisitions, such as Lachine,
Lignoboost and the paper machinery technology of Mitsubishi Heavy
Industries (explained in more detail below). The value of these
technology and capacity acquisitions totaled approximately EUR 64
million. Other acquisitions are not included in above mentioned gross
capital expenditure.
Metso estimates that in 2008 gross capital expenditure, excluding the
technology, capacity and other acquisitions mentioned above, will
exceed EUR 200 million (EUR 159 million in 2007). In the changed
global economic environment, all new investments are considered very
carefully.
In August, Metso completed the acquisition of GE Energy's Lachine
main plant, a heavy fabrication and machining facility in Canada. The
acquired plant was integrated into Metso's Mining business line and
approximately 170 employees transferred to Metso. The acquisition
added significantly to Metso's mining equipment supply, and according
to a clearly faster schedule than could have been achieved through a
greenfield investment.
In May, Metso acquired from the Swedish STFI-Packforsk AB the shares
of Lignoboost AB, a research company. The transaction included all
the intellectual property rights as well as the LignoBoost brand and
its related know-how. The acquired company became part of Metso's
Power business line.
In May, Metso closed the deal with Mitsubishi Heavy Industries (MHI)
over the acquisition of MHI's paper machinery technology, making
Metso globally the sole owner of Beloit's paper machinery
intellectual property. The effect of MHI on net sales is estimated to
be about EUR 10 million during the first 12 month period.
In September, Metso decided to establish its third service center in
China. The new center in Shandong province will provide high-quality
machinery maintenance and process development services to the pulp
and paper making industry in northern China. Metso's investment in
the new center will amount to over EUR 10 million. The center will be
operational in 2009. In the beginning, the center will employ about
40 service professionals.
Metso has investment projects underway to expand production and
service capacity. In China, a paper industry service unit is being
built in Guangzhou, crushing unit production capacity in Tianjin is
expanded and a new valve manufacture plant in Shanghai is under
construction. In India, a large Metso Industrial Park will be
established in Rajasthan. In the United States, a new boiler service
center was completed in Lancaster, South Carolina likewise the
extension in Fairmont, West Virginia. In Finland, Metso is rebuilding
a pilot machine at its Paper Technology Center in Jyväskylä.
Investment projects are underway at Metso Minerals and Metso
Automation concerning enterprise resource planning (ERP) systems
which are aimed at improving the global supply chain management. The
systems are being introduced in stages during 2007-2011.
Metso's research and development expenses in January-September
totaled EUR 96 million, representing 2.1 percent of Metso's net sales
(EUR 79 million and 1.8% in Q1-Q3/07).
Acquisitions and divestments
In September, Metso and Wärtsilä agreed to combine Metso's Heat &
Power business (a business unit within Metso Power) and Wärtsilä's
Biopower business into a joint venture. The new joint venture will be
one of Europe's leading providers of medium- and small-scale power
and heating plants, focusing on renewable fuel solutions. Metso owns
60 percent and Wärtsilä 40 percent of the joint venture. The closing
of the transaction will require the relevant regulatory approvals. It
is estimated that at full year level in 2008 the consolidated annual
pro forma net sales of the joint venture will be approximately EUR
130 million and the number of employees approximately 200.
In September, Metso acquired PSP Slévárna, a producer of finished
machined manganese wear parts located in Prerov, the Czech Republic.
The company was transferred to Metso on October 1, 2008, and the
factory is integrated into Metso's Construction business line. With
this transaction, Metso improved its capacity to supply wear parts to
crushing and screening plants for the construction and mining
customers. The production plant is located close to Metso's installed
equipment base in Central and Eastern Europe. The acquired company
has a personnel of 385 and annual net sales of about EUR 20 million.
In September, Metso announced the acquisition of a paper quality
control business from Finnish Fastpap Oy. The business was
transferred to Metso on October 1, 2008. The business operations
based in Ylöjärvi, Finland including a staff of 11 are integrated
into Metso's Automation business.
In June, Metso strengthened its engineering capabilities in India by
entering into a joint venture with EPT Engineering Services Pvt. Ltd.
Metso owns 51 percent of the new company, Metso Power India Private
Limited, which started its operations in July 2008 in Chennai. During
the first year the company will employ about 50 people.
In June, Metso completed the acquisition of MAPAG Valves GmbH, a
company manufacturing butterfly valves, from the Linde Group, a
German company. The transaction price was EUR 36 million and the unit
is integrated into Metso's Automation business. The acquired company
employs about 100 people. The company's net sales in 2008 is
estimated at EUR 36 million.
In May, Metso acquired Kemotron A/S, a Danish manufacturer of
measurement systems. The company has a workforce of 13. The acquired
company was integrated into Metso's Automation business.
In September, Metso increased its ownership from 48.3 percent to 75
percent in the Valmet-Xi'an Paper Machinery Co. Ltd. associated
company in China. The value of the share transaction was
approximately EUR 5 million. In addition, Valmet Xi'an will acquire
certain land use rights and facilities for about EUR 8-9 million. The
company has been consolidated into Metso's balance sheet from
September and its annual net sales are approximately EUR 30 million.
Of this more than half has been sales to Metso. At the end of
September, Valmet-Xi'an had about 1,100 employees.
In September, Metso divested the shares in Sweden-based Metso
Foundries Karlstad AB to a group of financial investors represented
by Primaca Group Oy. Metso will continue as a minority owner with a
16.7 percent holding in Heavycast Oy, a new company to which the
Primaca Group will transfer the acquired shares. The value of the
transaction was approximately EUR 15 million, and Metso booked a
small tax-free capital gain from the sale in the third quarter.
In May, Metso sold its spreader roll manufacturing business and the
related assets to a group of Finnish investors. The business is based
in Finland and employs 20 people. The divested business was part of
Metso's Paper business.
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 September, Metso had 28,762 employees, which was 1,925
more than at the end of 2007 (26,837 employees at December 31, 2007).
The growth in personnel numbers was most substantial in South
America, particularly in Brazil, where the number of personnel
increased by 188. Substantial growth was also experienced in
Asia-Pacific, for example, in India the number of personnel has
increased by 215 from the end of 2007. As a result of the acquisition
of a majority holding in Valmet-Xi'an Paper Machinery Co. Ltd, the
number of employees in China increased by 1,100 in the third quarter.
In January-September, Metso had an average of 27,683 employees.
Personnel by area
Sep 30, % of total Sep 30, % of total Change Dec 31,
2008 personnel 2007 personnel % 2007
Finland 9,118 32 9,332 35 (2) 9,386
Other Nordic 3,364 12 3,588 14 (6) 3,602
countries
Other Europe 3,463 12 3,175 12 9 3,183
North America 4,041 14 3,811 14 6 3,865
South and
Central America 2,917 10 2,627 10 11 2,675
Asia-Pacific 4,386 15 2,624 10 67 2,705
Rest of the 1,473 5 1,446 5 2 1,421
world
Total 28,762 100 26,603 100 8 26,837
Strategic focus for 2008-2012
At the end of August, as a result of its annual strategy rounds,
Metso decided to continue its strategic focus on sustainable
profitable growth during the years 2008-2012. In the same context,
the company's financial targets were raised and a study was initiated
to assess further value-enhancing opportunities, including structural
options. Since mid-September, following the radical and rapid changes
of the global economic environment, Metso has been putting more
emphasis on profitability and cash flows than growth.
Metso's businesses will be reorganized into three reporting segments
as of December 1, 2008:
Mining and Construction Technology, consisting of the current Mining
and Construction business lines, will focus on fully exploiting
market demand. The segment will be headed by Matti Kähkönen,
currently President of Metso Minerals.
Energy and Environmental Technology, consisting of the current Metso
Automation business area and the Power and Recycling business lines,
will offer interesting new growth opportunities based on Metso's
current know-how and technologies in the power, recycling and
automation businesses, complemented by value-enhancing acquisitions.
The segment will be headed by Pasi Laine, the current President of
Metso Automation.
Paper and Fiber Technology, consisting of the current Paper and
Board, Tissue and Fiber business lines, will focus on enhancing
Metso's presence close to its growing customer base in emerging
markets and on strengthening the services business in developed
markets. The segment will be headed by Bertel Langenskiöld, currently
President of Metso Paper.
The reporting segments in accordance with Metso's new operating
structure will be introduced as of December 1, 2008. The segment
information according to the new structure is presented in the tables
of this Interim Review.
New financial targets
Metso updated its long-term financial targets for the period
2009-2012. The following new financial targets replace the previous
targets set in October 2006:
Growth: An average annual net sales growth of more than 10 percent.
The growth will be attained both organically and through
complementary add-on acquisitions. Should Metso make major
acquisitions with a significant impact on its business scope, these
will come on top of the 10 percent growth target.
Profitability: Metso's target is to improve EBITA annually and to
exceed a 12 percent EBITA margin during the period 2009-2012. Return
on capital employed (ROCE-%) before tax was introduced as a new
target that should exceed 25 percent during 2009-2012.
Cash flow: In order to secure a strong operating cash flow, Metso
will establish a new target for annual cash conversion. The target is
measured by Free Cash Flow/Net Income. The ratio should be on average
100 percent during 2009-2012.
Efficient use of capital continues to be an important long-term value
driver for Metso. Operating cash flows in 2009-2012 are expected to
be strong, thus enabling further growth through complementary
acquisitions while maintaining an active dividend policy.
Capital structure: Metso's target is that its key financial
indicators, capital structure and cash flows support a solid
investment grade in credit rating.
Dividend policy: Metso's target is to distribute at least 50% of
annual earnings per share as a dividend or in other forms of
repatriation of capital (share buybacks, redemptions etc).
Metso appoints new Executive Team members and establishes Metso
Executive Forum as of December 1, 2008
In September, Metso announced the appointment of two new members to
its Executive Team as of December 1, 2008. The new members are Kalle
Reponen, Metso's Senior Vice President, Strategy and M&A, and Perttu
Louhiluoto, who started at Metso on October 1, 2008 as Senior Vice
President, Operational Excellence. Metso will also establish the
Metso Executive Forum to enforce strategy execution globally as of
December 1, 2008. In addition to the Metso Executive Team members,
the members of the Metso Executive Forum are from Metso's main
business lines and geographical regions: Andrew Benko (Mining
business line), João Ney Colagrossi (Construction business line),
Per-Åke Färnstrand (Fiber business line), Heinz Gerdes (Recycling
business line), Ari Harmaala (China), Hannu Mälkiä (Paper and Board
business line), Lennart Ohlsson (Power business line) and Sudhir
Srivastava (India).
BUSINESS AREAS
Segment information according to Metso's new reporting structure is
presented in the tables of this Interim Review.
Metso Paper
EUR million Q3/08 Q3/07 Change Q1-Q3/08 Q1-Q3/07 Change 2007
% %
Net sales 598 642 (7) 1,947 2,016 (3) 2,925
Net sales of 206 213 (3) 608 598 2 834
services business
% of net sales 34 33 31 30 29
Earnings before
interest, tax and 48.4 48.2 0 129.1 133.0 (3) 184.5
amortization
(EBITA)
% of net sales 8.1 7.5 6.6 6.6 6.3
Operating profit 43.2 36.2 19 103.6 97.3 6 136.9
% of net sales 7.2 5.6 5.3 4.8 4.7
Orders received 1,252 515 143 2,291 2,271 1 3,109
Order backlog at 2,676 2,455 9 2,363
end of period
Personnel at end 12,410 11,774 5 11,694
of period
Metso Paper's net sales in January-September were at the level of the
comparison period, totaling EUR 1,947 million. Net sales increased on
the comparison period in the Power business line and decreased in the
Fiber, Paper and Board, and Tissue business lines. Metso Paper's
services business grew by 2 percent on the comparison period (at
comparable exchange rates the growth would have been 6%), and the
services business accounted for 31 percent of net sales (30% in
Q1-Q3/07).
Metso Paper's EBITA for January-September was EUR 129.1 million, i.e.
6.6 percent of net sales (EUR 133.0 million and 6.6%). Strong EBITA
margin of 8.1 percent in third quarter (7.5% in Q3/07) was due to
successful execution of a number of large projects.
Metso Paper's operating profit in January-September was EUR 103.6
million, i.e. 5.3 percent of net sales (EUR 97.3 million and 4.8%).
The operating profit includes EUR 16 million in amortization of
intangible assets related to the acquisition of the Pulping and Power
businesses. The amortization of intangible assets 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 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 are realized primarily in the latter half of
2008.
In September, Metso Paper initiated personnel negotiations concerning
temporary lay-off of personnel at its Järvenpää, Jyväskylä and
Tampere units in Finland. The temporary lay-offs will commence in
November at the earliest. These lay-offs result from a temporary
reduction in work volumes. The negotiations concern all personnel
groups and a total of about 2,720 employees. According to the Finnish
practice, temporary lay-offs do not result in any cost to the
employer.
The value of orders received by Metso Paper remained at the
comparison period's level and was EUR 2,291 million. Orders received
by the Fiber business line increased notably from the comparison
period. The largest orders in January-September were a papermaking
line for Propapier in Germany, pulp mill equipment for Zhanjiang
Chenming in China, a pulp technology order to Aracruz in Brazil and
boardmaking lines to Shandong Bohui in China and Amcor in Australia.
The order backlog at the end of September, EUR 2,676 million, was 13
percent higher than at the end of 2007. Some customers have initiated
discussions about extension of delivery times of projects in the
order backlog and Metso's management estimates that the
implementation schedules of some paper, board and fiber line projects
in the order backlog may be prolonged if the global economy remains
uncertain for an extended period of time.
Metso Minerals
EUR million Q3/08 Q3/07 Change Q1-Q3/08 Q1-Q3/07 Change 2007
% %
Net sales 744 649 15 2,065 1,837 12 2,607
Net sales of 305 270 13 867 771 12 1,050
services business
% of net sales 41 42 42 42 40
Earnings before
interest, tax and 109.2 86.3 27 295.2 251.9 17 367.1
amortization
(EBITA)
% of net sales 14.7 13.3 14.3 13.7 14.1
Operating profit 107.9 85.2 27 291.2 248.7 17 362.6
% of net sales 14.5 13.1 14.1 13.5 13.9
Orders received 819 745 10 2,589 2,314 12 3,075
Order backlog at 2,185 1,728 26 1,690
end of period
Personnel at end 11,560 10,194 13 10,446
of period
Metso Minerals' net sales for January-September grew by 12 percent on
the comparison period and were EUR 2,065 million (18% at comparable
exchange rates). Net sales increased across all business lines and in
both Mining and Construction business lines with over 10 percent.
Metso Minerals' services business developed favorably and grew by 12
percent (19% at comparable exchange rates). The services business
accounted for 42 percent of net sales (42% in Q1-Q3/07).
The operating profit of Metso Minerals increased to EUR 291.2
million, which was 14.1 percent of net sales (EUR 248.7 million and
13.5%). Contributing to the increase in third quarter profitability
over the comparison period were strong volume growth and successful
execution of major project deliveries.
The value of orders received by Metso Minerals in January-September
increased by 12 percent on the comparison period and totaled EUR
2,589 million. At comparable exchange rates, the value of orders
received increased approximately 18 percent. The value of orders
received increased on the comparison period in the Mining and
Construction business lines, and remained at the comparison period's
level in the Recycling business line. Regionally the growth was
strongest in South America and Asia-Pacific. The value of orders
received from the emerging markets grew by 19 percent and their
contribution to Metso Minerals' order intake rose to 50 percent
(47%). Orders grew also in North America but declined in Western
Europe. Among the largest orders received in January-September were
orders received for minerals processing equipment to China
Metallurgical Group in Australia, grinding equipment to Minera
Petaquilla S.A.'s copper mine in Panama, and minerals processing
equipment to Terrane Metals Corp. for its Mt. Milligan Copper-Gold
Project in Canada. The order backlog was up by 29 percent on the end
of 2007 and totaled EUR 2,185 million at the end of September.
Metso Automation
EUR million Q3/08 Q3/07 Change % Q1-Q3/08 Q1-Q3/07 Change 2007
%
Net sales 192 165 16 544 485 12 698
Net sales of 37 33 12 108 97 12 140
services
business
% of net 21 22 21 22 22
sales
Earnings
before 33.5 26.2 28 77.6 65.7 18 100.4
interest, tax
and
amortization
(EBITA)
% of net 17.4 15.9 14.3 13.5 14.4
sales
Operating 32.3 25.8 25 75.3 64.6 17 98.8
profit
% of net 16.8 15.6 13.8 13.3 14.2
sales
Orders 189 185 2 617 598 3 763
received
Order backlog 433 382 13 332
at end of
period
Personnel at 3,837 3,523 9 3,564
end of period
Metso Automation's net sales for January-September increased by 12
percent on the comparison period (17% at comparable exchange rates)
and were EUR 544 million. Growth came evenly from flow control and
process automation deliveries. The services business grew by 12
percent (excluding the impact of exchange rate changes, the growth
would have been around 16 percent). The services business accounted
for 21 percent of net sales (22% in Q1-Q3/07).
Metso Automation's operating profit in January-September increased to
EUR 75.3 million, or 13.8 percent of net sales (EUR 64.6 million and
13.3% in Q1-Q3/07). Contributing to the increase in third quarter
profitability were strong volume growth, successful execution of
major project deliveries and tight control of fixed costs.
The value of orders received by Metso Automation increased by 3
percent on the comparison period and totaled EUR 617 million. Major
orders were received particularly from the power, oil and gas
industry, whose contribution to Metso Automation's new orders rose to
60 percent (56%). Regionally the growth came from Europe and North
America. Major orders during January-September were valves for the
oil and gas industry in Asia and the Middle East, of which the most
significant was valve delivery for the Qatar Petroleum and Shell GTL
(gas-to-liquids) project in Qatar. Major orders for automation
systems were large automation packages for Propapier in Germany and
Zhanjiang Chenming in China. Metso Automation's order backlog was 30
percent higher than at the end of 2007 and totaled EUR 433 million.
Valmet Automotive
Valmet Automotive's net sales in January-September totaled EUR 52
million. The operating loss was EUR 1.0 million, or 1.9 percent of
net sales. During January-September, Valmet Automotive manufactured
an average of 95 vehicles per day. At the end of September, Valmet
Automotive employed 579 people (789 employees at December 31, 2007).
Decline in the number of personnel was a result of the temporary
lay-offs.
Valmet Automotive's current assembly contract with Porsche will
continue until 2012. In July, Valmet Automotive signed a letter of
intent with an American car company Fisker Automotive Inc. to
manufacture Fisker Karma cars in Finland.
Short-term risks of business operations
Continuing uncertainty about the development of the global economy
and the prolongation of the financial crisis may reduce the demand
for Metso's products and services. In particular, uncertainty may
affect the timing and implementation of Metso'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 in
particular. During 2008, the decision schedules of paper and board
machine projects in China have been prolonged due to increased
caution of customers in light of economic uncertainty and due to the
stricter investment policies set by the country's authorities. The
situation has become more difficult during the past months, and
customers have discontinued or postponed some new potential projects
at the planning stage.
Global economic uncertainties and financial crisis may have material
adverse effects on projects in Metso's order backlog. Some projects
may be prolonged or even discontinued or cancelled. Metso applies the
percentage of completion method to long-standing delivery agreements,
and the customer advance is typically 10-30 percent with additional
progress payments during the execution of the project. Metso
continually evaluates its customers' creditworthiness and ability to
fulfill their obligations. If a customer faces liquidity problems,
Metso will discuss the possibility of changing project delivery
schedules and the resulting cost escalation effects or any other
measures needed with the customer. As a rule, Metso does not finance
customer projects.
The financial crisis may also have material adverse effects on the
availability and costs of Metso's funding. Metso's management
estimates that the company's financial assets and available credit
facilities are sufficient to secure short-term liquidity. At the end
of September, cash and cash equivalents totaled EUR 256 million, and
committed credit facilities available for withdrawal totaled EUR 500
million. Most of Metso's long-term loans totaling EUR 894 million
will mature in 2011 or later, and they do not have covenants
initiating premature repayment on the basis of credit ratings.
Currently Metso fully meets the covenants and other terms related to
its financing agreements.
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. These risks have reduced to some extent over the past few
months due to decreased material costs and improved availability of
subcontractor resources.
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.
Events after the review period
Metso extends its belt services with an acquisition in Australia
In October, Metso acquired the Australian company G & F Beltline
Services Pty Ltd (Beltline), a provider of conveyor belt
installations and maintenance services to the mining industry. The
value of the deal is approximately EUR 7 million. The company was
integrated into Metso's Mining business line on October 15, 2008.
Approximately 90 employees are transferring to Metso. Beltline's
annual net sales are approximately EUR 11 million.
Metso negotiates with Aracruz about the new implementation schedule
of the Guaíba pulp project
In October, Metso's customer Aracruz announced that they will
temporarily suspend the expansion of its plant in Guaíba in Brazil.
In late August Metso won an order for the main technology for
Aracruz's new pulp line, to be built at their Guaíba mill in Rio
Grande do Sul, Brazil. The new pulp line was scheduled to start up
during the second half of 2010. The order is valued at close to EUR
400 million. Metso is negotiating with Aracruz about the new
implementation schedule of the Guaíba project. Metso is continuing
work, within the cost frame covered by the down payment received from
Aracruz, in order to allow an easy restart of the project.
The Finnish government proposes the transfer of state-owned Metso
Corporation shares to Solidium Oy
In October, the Finnish State and the entirely state-owned Solidium
Oy announced an arrangement that would result in the Finnish State's
holdings in Metso Corporation to fall below and Solidium Oy's
holdings to exceed the thresholds set out in the Finnish Securities
Markets Act, section 9 of chapter 2. The shares to be transferred to
Solidium Oy include 15,695,287 Metso Corporation shares, which
corresponds to 11.07 percent of the share capital and votes in Metso
Corporation. This arrangement is subject to parliamentary approval.
Short-term outlook
Metso's profit estimate for 2008 remains unchanged on the basis of
the order backlog and profit development during January-September.
At comparable exchange rates, Metso's net sales in 2008 are expected
to grow by 5-10 percent compared with 2007, and the operating profit
margin is estimated to be about 10 percent.
The uncertainty regarding the financial markets and the development
of the global economy is expected to affect the demand for Metso's
products and services during the coming months.
Mining companies are expected to continue with capacity expansion
projects despite the growing concern about the global economy, but
demand is expected to level off. In the construction industry, the
demand for equipment relating to aggregates production is estimated
to be good in the emerging markets but to slow down in the developed
markets. In the mining and construction industry, the demand for the
services business is expected to remain good owing to the rapid
growth of the equipment base installed over the past few years.
The demand for paper and board lines is expected to be weak in 2009.
The demand for fiber lines is also expected to slow down. The
delivery schedules of large paper and board machine and fiber line
projects in the order backlog may be prolonged. In the pulp and paper
industry, lower capacity utilization rates are expected to weaken the
demand for Metso's services business in North America and Europe.
The demand for power plants using renewable energy sources is
expected to be satisfactory in Europe and North America. The demand
for Metso's automation products is expected to be satisfactory in the
pulp and paper industry and good in the power, oil and gas industry.
The demand for metals recycling equipment is expected to be good.
Metso's customers operate in different industrial sectors. Metso's
operations have a wide geographical spread, and Metso has a strong
market position in many products. The services business,
subcontracting and emerging markets have rapidly become more
important for Metso over the past few years. Metso's management
estimates that the measures carried out in recent years have placed
Metso in a better position to weather storms in the global economy.
In the past few weeks Metso has launched new measures to adapt to its
rapidly-changing operating environment. Metso's priorities are to
secure new orders, continue strict cost control and to secure healthy
cash flows. All potential investments and M&A activities will be
critically evaluated. The company is quickly adjusting its capacity
to meet demand.
As there is a lot of uncertainty associated with the development of
the global economy and Metso's operating environment, Metso will,
before publishing 2008 financial statements, refrain from
establishing a guidance for its net sales and profitability in 2009.
Helsinki, October 28, 2008
Metso Corporation's Board of Directors
The Interim Review is unaudited
CONSOLIDATED STATEMENTS
OF INCOME
EUR million 7-9/2008 7-9/2007 1-9/2008 1-9/2007 1-12/2007
Net sales 1,528 1,452 4,561 4,354 6,250
Cost of goods sold (1,114) (1,085) (3,362) (3,249) (4,702)
Gross profit 414 367 1,199 1,105 1,548
Selling, general and
administrative expenses (246) (230) (761) (716) (972)
Other operating income
and expenses, net 4 6 8 9 1
Share in profits of
associated companies 0 1 1 2 3
Operating profit 172 144 447 400 580
% of net sales 11.3% 9.9% 9.8% 9.2% 9.3%
Financial income and
expenses, net (35) (7) (54) (25) (33)
Profit before taxes 137 137 393 375 547
Income taxes (39) (43) (115) (114) (163)
Profit 98 94 278 261 384
Profit attributable to
minority interests 1 0 1 0 3
Profit attributable to
equity shareholders 97 94 277 261 381
Profit 98 94 278 261 384
Earnings per share, EUR 0.69 0.66 1.96 1.84 2.69
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE
EUR million 7-9/2008 7-9/2007 1-9/2008 1-9/2007 1-12/2007
Cash flow hedges, net
of tax (18) 2 (9) 1 (2)
Available-for-sale
equity investments,
net of tax (10) 5 (10) 25 22
Currency translation on
subsidiary net
investments 38 (29) (12) (13) (29)
Net investment hedge
gains (losses),
net of tax (11) 6 (3) 0 (2)
Defined benefit plan
actuarial
gains (losses), net of
tax - - - 0 (1)
Other 0 1 0 1 2
Net income (expense)
recognized
directly in equity (1) (15) (34) 14 (10)
Profit 98 94 278 261 384
Total recognized income
(expense) for the
period 97 79 244 275 374
Total recognized income
(expense)
attributable to
minority interests 1 0 1 0 3
Total recognized income
(expense)
attributable to equity
shareholders 96 79 243 275 371
Total recognized income
(expense)
for the period 97 79 244 275 374
CONSOLIDATED BALANCE SHEET
ASSETS
Sep 30, Dec 31,
EUR million Sep 30, 2008 2007 2007
Non-current assets
Intangible assets
Goodwill 780 770 772
Other intangible assets 262 256 251
1,042 1,026 1,023
Property, plant and equipment
Land and water areas 56 54 54
Buildings and structures 232 215 216
Machinery and equipment 357 312 315
Assets under construction 79 47 49
724 628 634
Financial and other assets
Investments in associated companies 13 19 19
Available-for-sale equity investments 32 50 45
Loan and other interest bearing
receivables 16 6 5
Available-for-sale financial investments 5 5 5
Deferred tax asset 121 223 144
Other non-current assets 18 26 22
205 329 240
Total non-current assets 1,971 1,983 1,897
Current assets
Inventories 1,745 1,479 1,410
Receivables
Trade and other receivables 1,201 1,277 1,274
Cost and earnings of projects under
construction
in excess of advance billings 365 284 374
Loan and other interest bearing
receivables 2 2 2
Available-for-sale financial assets - - 0
Tax receivables 21 35 30
1,589 1,598 1,680
Cash and cash equivalents 256 261 267
Total current assets 3,590 3,338 3,357
Assets held for sale - - -
TOTAL ASSETS 5,561 5,321 5,254
SHAREHOLDERS' EQUITY AND
LIABILITIES
EUR million Sep 30, 2008 Sep 30, 2007 Dec 31, 2007
Equity
Share capital 241 241 241
Share premium reserve - 77 77
Cumulative translation
differences (91) (58) (76)
Fair value and other reserves 520 462 456
Retained earnings 761 790 910
Equity attributable to
shareholders 1,431 1,512 1,608
Minority interests 9 5 7
Total equity 1,440 1,517 1,615
Liabilities
Non-current liabilities
Long-term debt 894 586 700
Post employment benefit
obligations 172 185 177
Deferred tax liability 33 61 41
Provisions 35 37 37
Other long-term liabilities 4 2 2
Total non-current liabilities 1,138 871 957
Current liabilities
Current portion of long-term
debt 89 101 22
Short-term debt 336 108 97
Trade and other payables 1,297 1,308 1,307
Provisions 217 211 222
Advances received 631 728 637
Billings in excess of cost and
earnings
of projects under construction 366 375 331
Tax liabilities 47 102 66
Total current liabilities 2,983 2,933 2,682
Liabilities held for sale - - -
Total liabilities 4,121 3,804 3,639
TOTAL SHAREHOLDERS' EQUITY AND
LIABILITIES 5,561 5,321 5,254
NET INTEREST BEARING
LIABILITIES
Long-term interest bearing
debt 894 586 700
Short-term interest bearing
debt 425 209 119
Cash and cash equivalents (256) (261) (267)
Other interest bearing assets (23) (13) (12)
Total 1,040 521 540
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
EUR million 2008 2007 2008 2007 2007
Cash flows from operating activities:
Profit 98 94 278 261 384
Adjustments to reconcile profit to net cash
provided by operating activities
Depreciation and amortization 31 38 102 110 148
Interests and dividend income 18 10 42 26 32
Income taxes 39 43 115 114 163
Other 14 (6) 18 4 (4)
Change in net working capital (43) 12 (297) (163) (286)
Cash flows from operations 157 191 258 352 437
Interest paid and dividends received (14) (5) (24) (12) (29)
Income taxes paid (31) (21) (105) (80) (114)
Net cash provided by (used in) operating
activities 112 165 129 260 294
Cash flows from investing activities:
Capital expenditures on fixed assets (88) (36) (200) (110) (159)
Proceeds from sale of fixed assets 5 4 8 13 16
Business acquisitions, net of cash
acquired 8 (37) (31) (47) (55)
Proceeds from sale of businesses, net of
cash sold 9 7 12 9 9
(Investments in) proceeds from sale
of financial assets (1) 10 6 13 13
Other - - (7) - -
Net cash provided by (used in) investing
activities (67) (52) (212) (122) (176)
Cash flows from financing activities:
Share options exercised - - - 0 0
Dividends paid - - (425) (212) (212)
Net funding (148) (62) 489 (34) (5)
Other - - 15 15 15
Net cash provided by (used in) financing
activities (148) (62) 79 (231) (202)
Net increase (decrease) in cash
and cash equivalents (103) 51 (4) (93) (84)
Effect from changes in exchange rates (2) (3) (7) 1 (2)
Cash and cash equivalents
at beginning of period 361 213 267 353 353
Cash and cash equivalents at end of
period 256 261 256 261 267
Free cash flow
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
EUR million 2008 2007 2008 2007 2007
Net cash provided by operating activities 112 165 129 260 294
Capital expenditures on maintenance
investments (26) (25) (86) (75) (112)
Proceeds from sale of fixed assets 5 4 8 13 16
Free cash flow 91 144 51 198 198
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
Cu- Eq-
mu- uity
la- at-
tive tri-
Share trans- Fair but- Mi-
pre- la- value Re- able nor-
mi- tion and tain- to ity To-
Share um ad- other ed share- in- tal
capi- re- just- re- earn- hold- ter- eq-
EUR million tal serve ments serves ings ers ests uity
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 - - - 25 - 25 - 25
Currency
translation on
subsidiary net
investments - - (13) - - (13) - (13)
Net investment
hedge gains
(losses),
net of tax - - - - - - - -
Defined benefit
plan actuarial
gains
(losses), net of
tax - - - - - - - -
Other - - - - 1 1 - 1
Net income
(expense)
recognized
directly in equity - - (13) 26 1 14 - 14
Net profit for the
period - - - - 261 261 0 261
Total recognized
income (expense)
for the period - - (13) 26 262 275 0 275
Dividends - - - - (212) (212) - (212)
Share options
exercised 0 0 - - - 0 - 0
Redemption of own
shares - - - - - - - -
Share-based
payments,
net of tax - - - 1 - 1 - 1
Other - - - 3 1 4 (1) 3
Balance at Sep 30,
2007 241 77 (58) 462 790 1,512 5 1,517
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 - - - (10) - (10) - (10)
Currency
translation on
subsidiary
net investments - - (12) - - (12) - (12)
Net investment
hedge gains
(losses),
net of tax - - (3) - - (3) - (3)
Defined benefit
plan actuarial
gains
(losses), net of
tax - - - - - - - -
Other - - - - - - - -
Net income
(expense)
recognized
directly in equity - - (15) (19) - (34) - (34)
Net profit for the
period - - - - 277 277 1 278
Total recognized
income (expense)
for the period - - (15) (19) 277 243 1 244
Dividends - - - - (425) (425) - (425)
Share options
exercised - - - - - - - -
Redemption of own
shares - - - - - - - -
Share-based
payments,
net of tax - - - 4 - 4 - 4
Decrease and
transfer of
share premium
reserve - (77) - 77 - - - -
Other - - - 2 (1) 1 1 2
Balance at Sep 30,
2008 241 - (91) 520 761 1,431 9 1,440
ACQUISITIONS
Acquisitions in 2008
In September Metso increased its ownership in the associated company
Valmet-Xi'an Paper Machinery Co. Ltd in China. Metso's holding
increased from 48.3% to 75% and the company was consolidated into
Metso's balance sheet in September. The cash paid for the incremental
portion was EUR 5 million and the value of the previously held
investment in Associated companies was EUR 6 million. The company
held a cash balance of EUR 13 million at acquisition. Goodwill of EUR
1 million was recognized on the transaction.
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 10 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 10 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 31 million and EUR 2
million, respectively.
Summary information on acquisitions made in January-September 2008 is
as follows:
Fair
Carrying value
EUR million amount allocations Fair value
Intangible assets 0 10 10
Property, plant and equipment 7 - 7
Inventories 19 - 19
Trade and other receivables 12 - 12
Deferred tax liabilities 0 (3) (3)
Minority interests (3) - (3)
Other liabilities assumed (19) - (19)
Non-interest bearing net assets 16 7 23
Cash and cash equivalents acquired 13
Pre-acquisition investment in
associated companies (Valmet-Xi'an) (6)
Debt assumed (10)
Purchase price (34)
Goodwill 14
Purchase price settled in cash (34)
Settlement of acquired debt (10)
Cash and cash equivalents acquired 13
Net cash outflow on acquisitions (31)
ASSETS PLEDGED AND CONTINGENT
LIABILITIES
Sep 30, Dec 31,
EUR million Sep 30, 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 9 9 11
Repurchase and other commitments 7 8 8
Lease commitments 144 155 142
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR million Sep 30, 2008 Sep 30, 2007 Dec 31, 2007
Forward exchange rate
contracts 1,594 1,204 1,387
Interest rate and currency
swaps - 1 0
Currency swaps - 1 -
Interest rate swaps 143 143 143
Option agreements
Bought 24 3 -
Sold 24 3 -
The notional amount of electricity forwards was 542 GWh as of Sep 30,
2008 and 454 GWh as of
Sep 30, 2007.
The notional amount of nickel forwards to hedge stainless steel
prices was 324 tons as of Sep 30, 2008 and 378 tons as of Sep 30,
2007.
The notional amounts indicate the volumes in the use of derivatives,
but do not indicate the
exposure to risk.
KEY RATIOS
1-9/2008 1-9/2007 1-12/2007
Earnings per share, EUR 1.96 1.84 2.69
Equity/share at end of period, EUR 10.10 10.69 11.36
Return on equity (ROE), % (annualized) 24.5 24.0 25.4
Return on capital employed (ROCE) before
tax, % (annualized) 23.3 24.7 26.1
Return on capital employed (ROCE) after
tax, % (annualized) 17.3 18.0 19.0
Equity to assets ratio at end of period,
% 31.5 36.0 37.7
Gearing at end of period, % 72.2 34.3 33.4
Free cash flow 51 198 198
Free cash flow/share 0.36 1.40 1.40
Gross capital expenditure (excl. business
acquisitions) 201 110 159
Business acquisitions, net of cash
acquired 31 47 55
Depreciation and amortization 102 110 148
Number of outstanding shares at end of
period (thousands) 141,625 141,489 141,487
Average number of shares (thousands) 141,585 141,450 141,460
EXCHANGE RATES
USED
1-9/ 1-9/ 1-12/ Sep 30, Sep 30, Dec 31,
2008 2007 2007 2008 2007 2007
USD (US dollar) 1.5257 1.3515 1.3797 1.4303 1.4179 1.4721
(Swedish
SEK krona) 9.4575 9.2383 9.2647 9.7943 9.2147 9.4415
(Pound
GBP sterling) 0.7846 0.6780 0.6873 0.7903 0.6968 0.7334
(Canadian
CAD dollar) 1.5491 1.4782 1.4663 1.4961 1.4122 1.4449
(Brazilian
BRL real) 2.5819 2.6877 2.6623 2.7525 2.6037 2.5949
BUSINESS AREA INFORMATION
NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 598 642 1,947 2,016 2,856 2,925
Metso Minerals 744 649 2,065 1,837 2,835 2,607
Metso Automation 192 165 544 485 757 698
Valmet Automotive 10 17 52 64 73 85
Corporate office and other - - - - - -
Corporate office and others
total 10 17 52 64 73 85
Intra Metso net sales (16) (21) (47) (48) (64) (65)
Metso total 1,528 1,452 4,561 4,354 6,457 6,250
OTHER OPERATING INCOME (+) AND EXPENSES (-),
NET
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 1.7 4.2 3.3 2.8 (11.0) (11.5)
Metso Minerals 2.4 2.0 4.1 3.4 8.4 7.7
Metso Automation (0.2) 0.2 (0.2) 0.3 1.9 2.4
Valmet Automotive 0.0 0.0 0.0 0.0 0.0 0.0
Corporate office and other 0.4 (0.1) 0.4 2.5 0.4 2.5
Corporate office and others
total 0.4 (0.1) 0.4 2.5 0.4 2.5
Metso total 4.3 6.3 7.6 9.0 (0.3) 1.1
SHARE IN PROFITS OF ASSOCIATED COMPANIES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 0.0 0.0 0.7 0.5 1.3 1.1
Metso Minerals 0.0 0.0 0.1 0.0 0.4 0.3
Metso Automation 0.4 0.3 0.9 1.3 1.0 1.4
Valmet Automotive - - - - - -
Corporate office and other - - - - - -
Corporate office and others total - - - - - -
Metso total 0.4 0.3 1.7 1.8 2.7 2.8
OPERATING PROFIT (LOSS)
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 43.2 36.2 103.6 97.3 143.2 136.9
Metso Minerals 107.9 85.2 291.2 248.7 405.1 362.6
Metso Automation 32.3 25.8 75.3 64.6 109.5 98.8
Valmet Automotive (2.9) 1.7 (1.0) 7.1 (0.1) 8.0
Corporate office and other (8.2) (5.5) (22.0) (17.6) (30.9) (26.5)
Corporate office and
others total (11.1) (3.8) (23.0) (10.5) (31.0) (18.5)
Metso total 172.3 143.4 447.1 400.1 626.8 579.8
OPERATING PROFIT (LOSS), % OF
NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
% 2008 2007 2008 2007 9/2008 2007
Metso Paper 7.2 5.6 5.3 4.8 5.0 4.7
Metso Minerals 14.5 13.1 14.1 13.5 14.3 13.9
Metso Automation 16.8 15.6 13.8 13.3 14.5 14.2
Valmet Automotive (29.0) 10.0 (1.9) 11.1 (0.1) 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 11.3 9.9 9.8 9.2 9.7 9.3
EBITA
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 48.4 48.2 129.1 133.0 180.6 184.5
Metso Minerals 109.2 86.3 295.2 251.9 410.4 367.1
Metso Automation 33.5 26.2 77.6 65.7 112.3 100.4
Valmet Automotive (2.8) 1.7 (0.9) 7.1 0.1 8.1
Corporate office and other (7.6) (5.1) (20.1) (16.2) (28.6) (24.7)
Corporate office and
others total (10.4) (3.4) (21.0) (9.1) (28.5) (16.6)
Metso total 180.7 157.3 480.9 441.5 674.8 635.4
EBITA, % OF NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
% 2008 2007 2008 2007 9/2008 2007
Metso Paper 8.1 7.5 6.6 6.6 6.3 6.3
Metso Minerals 14.7 13.3 14.3 13.7 14.5 14.1
Metso Automation 17.4 15.9 14.3 13.5 14.8 14.4
Valmet Automotive (28.0) 10.0 (1.7) 11.1 0.1 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 11.8 10.8 10.5 10.1 10.5 10.2
ORDERS RECEIVED
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Metso Paper 1,252 515 2,291 2,271 3,129 3,109
Metso Minerals 819 745 2,589 2,314 3,350 3,075
Metso Automation 189 185 617 598 782 763
Valmet Automotive 10 17 52 64 73 85
Corporate office and other - - - - - -
Corporate office and others
total 10 17 52 64 73 85
Intra Metso orders received (24) (22) (54) (53) (68) (67)
Metso total 2,246 1,440 5,495 5,194 7,266 6,965
QUARTERLY INFORMATION
NET SALES
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Metso Paper 642 909 648 701 598
Metso Minerals 649 770 583 738 744
Metso Automation 165 213 158 194 192
Valmet Automotive 17 21 23 19 10
Corporate office and other - - - - -
Corporate office and others total 17 21 23 19 10
Intra Metso net sales (21) (17) (12) (19) (16)
Metso total 1,452 1,896 1,400 1,633 1,528
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Metso Paper 4.2 (14.3) (0.7) 2.3 1.7
Metso Minerals 2.0 4.3 6.1 (4.4) 2.4
Metso Automation 0.2 2.1 0.8 (0.8) (0.2)
Valmet Automotive 0.0 0.0 0.0 0.0 0.0
Corporate office and other (0.1) 0.0 (0.7) 0.7 0.4
Corporate office and others total (0.1) 0.0 (0.7) 0.7 0.4
Metso total 6.3 (7.9) 5.5 (2.2) 4.3
OPERATING PROFIT (LOSS)
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Metso Paper 36.2 39.6 27.2 33.2 43.2
Metso Minerals 85.2 113.9 83.1 100.2 107.9
Metso Automation 25.8 34.2 17.4 25.6 32.3
Valmet Automotive 1.7 0.9 1.0 0.9 (2.9)
Corporate office and other (5.5) (8.9) (9.1) (4.7) (8.2)
Corporate office and others total (3.8) (8.0) (8.1) (3.8) (11.1)
Metso total 143.4 179.7 119.6 155.2 172.3
EBITA
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Metso Paper 48.2 51.5 39.0 41.7 48.4
Metso Minerals 86.3 115.2 84.4 101.6 109.2
Metso Automation 26.2 34.7 17.8 26.3 33.5
Valmet Automotive 1.7 1.0 1.0 0.9 (2.8)
Corporate office and other (5.1) (8.5) (8.5) (4.0) (7.6)
Corporate office and others total (3.4) (7.5) (7.5) (3.1) (10.4)
Metso total 157.3 193.9 133.7 166.5 180.7
CAPITAL EMPLOYED
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
EUR million 2007 2007 2008 2008 2008
Metso Paper 593 674 772 784 774
Metso Minerals 1,045 1,106 1,166 1,221 1,319
Metso Automation 201 214 210 268 271
Valmet Automotive 29 21 22 22 23
Corporate office and other 444 419 533 496 372
Corporate office and others
total 473 440 555 518 395
Metso total 2,312 2,434 2,703 2,791 2,759
ORDERS RECEIVED
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Metso Paper 515 838 541 498 1,252
Metso Minerals 745 761 740 1,030 819
Metso Automation 185 165 220 208 189
Valmet Automotive 17 21 23 19 10
Corporate office and other - - - - -
Corporate office and others total 17 21 23 19 10
Intra Metso orders received (22) (14) (15) (15) (24)
Metso total 1,440 1,771 1,509 1,740 2,246
ORDER BACKLOG
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
EUR million 2007 2007 2008 2008 2008
Metso Paper 2,455 2,363 2,241 2,040 2,676
Metso Minerals 1,728 1,690 1,758 2,067 2,185
Metso Automation 382 332 387 428 433
Valmet Automotive - - - - -
Corporate office and other - - - - -
Corporate office and others
total - - - - -
Intra Metso order backlog (46) (44) (46) (41) (50)
Metso total 4,519 4,341 4,340 4,494 5,244
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
PERSONNEL 2007 2007 2008 2008 2008
Metso Paper 11,774 11,694 11,522 11,818 12,410
Metso Minerals 10,194 10,446 10,762 11,215 11,560
Metso Automation 3,523 3,564 3,628 3,870 3,837
Valmet Automotive 777 789 789 779 579
Corporate office and other 335 344 361 387 376
Corporate office and others
total 1,112 1,133 1,150 1,166 955
Metso total 26,603 26,837 27,062 28,069 28,762
BUSINESS AREA INFORMATION BY NEW OPERATING STRUCTURE
NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 670 570 1,869 1,647 2,552 2,330
Energy and Environment
Technology 423 372 1,272 1,069 1,746 1,543
Paper and Fiber Technology 441 515 1,417 1,626 2,155 2,364
Valmet Automotive 10 17 52 64 73 85
Corporate office and other - - - - - -
Corporate office and others
total 10 17 52 64 73 85
Intra Metso net sales (16) (22) (49) (52) (69) (72)
Metso total 1,528 1,452 4,561 4,354 6,457 6,250
OPERATING PROFIT (LOSS)
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 97.8 72.5 267.0 221.3 365.5 319.8
Energy and Environment
Technology 50.0 40.7 120.0 95.7 174.6 150.3
Paper and Fiber Technology 35.6 34.0 83.1 93.6 117.7 128.2
Valmet Automotive (2.9) 1.7 (1.0) 7.1 (0.1) 8.0
Corporate office and other (8.2) (5.5) (22.0) (17.6) (30.9) (26.5)
Corporate office and
others total (11.1) (3.8) (23.0) (10.5) (31.0) (18.5)
Metso total 172.3 143.4 447.1 400.1 626.8 579.8
OPERATING PROFIT (LOSS), % OF
NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
% 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 14.6 12.7 14.3 13.4 14.3 13.7
Energy and Environment
Technology 11.8 10.9 9.4 9.0 10.0 9.7
Paper and Fiber Technology 8.1 6.6 5.9 5.8 5.5 5.4
Valmet Automotive (29.0) 10.0 (1.9) 11.1 (0.1) 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 11.3 9.9 9.8 9.2 9.7 9.3
EBITA
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 98.6 73.4 269.3 224.1 369.1 323.9
Energy and Environment
Technology 54.5 41.5 137.8 98.0 193.2 153.4
Paper and Fiber Technology 38.0 45.8 94.8 128.5 141.0 174.7
Valmet Automotive (2.8) 1.7 (0.9) 7.1 0.1 8.1
Corporate office and other (7.6) (5.1) (20.1) (16.2) (28.6) (24.7)
Corporate office and
others total (10.4) (3.4) (21.0) (9.1) (28.5) (16.6)
Metso total 180.7 157.3 480.9 441.5 674.8 635.4
EBITA, % OF NET SALES
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
% 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 14.7 12.9 14.4 13.6 14.5 13.9
Energy and Environment
Technology 12.9 11.2 10.8 9.2 11.1 9.9
Paper and Fiber Technology 8.6 8.9 6.7 7.9 6.5 7.4
Valmet Automotive (28.0) 10.0 (1.7) 11.1 0.1 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 11.8 10.8 10.5 10.1 10.5 10.2
ORDERS RECEIVED
7-9/ 7-9/ 1-9/ 1-9/ 10/2007- 1-12/
EUR million 2008 2007 2008 2007 9/2008 2007
Mining and Construction
Technology 747 662 2,370 2,071 3,075 2,776
Energy and Environment
Technology 609 395 1,358 1,517 1,725 1,884
Paper and Fiber Technology 940 387 1,814 1,595 2,512 2,293
Valmet Automotive 10 17 52 64 73 85
Corporate office and other - - - - - -
Corporate office and others
total 10 17 52 64 73 85
Intra Metso orders received (60) (21) (99) (53) (119) (73)
Metso total 2,246 1,440 5,495 5,194 7,266 6,965
QUARTERLY INFORMATION BY NEW OPERATING STRUCTURE
NET SALES
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Mining and Construction Technology 570 683 534 665 670
Energy and Environment Technology 372 474 373 476 423
Paper and Fiber Technology 515 738 483 493 441
Valmet Automotive 17 21 23 19 10
Corporate office and other - - - - -
Corporate office and others total 17 21 23 19 10
Intra Metso net sales (22) (20) (13) (20) (16)
Metso total 1,452 1,896 1,400 1,633 1,528
OPERATING PROFIT (LOSS)
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Mining and Construction Technology 72.5 98.5 78.2 91.0 97.8
Energy and Environment Technology 40.7 54.6 25.1 44.9 50.0
Paper and Fiber Technology 34.0 34.6 24.4 23.1 35.6
Valmet Automotive 1.7 0.9 1.0 0.9 (2.9)
Corporate office and other (5.5) (8.9) (9.1) (4.7) (8.2)
Corporate office and others total (3.8) (8.0) (8.1) (3.8) (11.1)
Metso total 143.4 179.7 119.6 155.2 172.3
EBITA
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Mining and Construction Technology 73.4 99.8 78.9 91.8 98.6
Energy and Environment Technology 41.5 55.4 32.9 50.4 54.5
Paper and Fiber Technology 45.8 46.2 29.4 27.4 38.0
Valmet Automotive 1.7 1.0 1.0 0.9 (2.8)
Corporate office and other (5.1) (8.5) (8.5) (4.0) (7.6)
Corporate office and others total (3.4) (7.5) (7.5) (3.1) (10.4)
Metso total 157.3 193.9 133.7 166.5 180.7
CAPITAL EMPLOYED
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
EUR million 2007 2007 2008 2008 2008
Mining and Construction
Technology 962 1,004 1,067 1,120 1,226
Energy and Environment
Technology 498 532 524 621 641
Paper and Fiber Technology 379 458 557 532 497
Valmet Automotive 29 21 22 22 23
Corporate office and other 444 419 533 496 372
Corporate office and others
total 473 440 555 518 395
Metso total 2,312 2,434 2,703 2,791 2,759
ORDERS RECEIVED
7-9/ 10-12/ 1-3/ 4-6/ 7-9/
EUR million 2007 2007 2008 2008 2008
Mining and Construction Technology 662 705 687 936 747
Energy and Environment Technology 395 367 382 367 609
Paper and Fiber Technology 387 698 433 441 940
Valmet Automotive 17 21 23 19 10
Corporate office and other - - - - -
Corporate office and others total 17 21 23 19 10
Intra Metso orders received (21) (20) (16) (23) (60)
Metso total 1,440 1,771 1,509 1,740 2,246
ORDER BACKLOG
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
EUR million 2007 2007 2008 2008 2008
Mining and Construction
Technology 1,500 1,496 1,562 1,850 1,964
Energy and Environment
Technology 1,456 1,337 1,331 1,253 1,443
Paper and Fiber Technology 1,607 1,553 1,494 1,441 1,931
Valmet Automotive - - - - -
Corporate office and other - - - - -
Corporate office and others
total - - - - -
Intra Metso order backlog (44) (45) (47) (50) (94)
Metso total 4,519 4,341 4,340 4,494 5,244
Sep 30, Dec 31, Mar 31, June 30, Sep 30,
PERSONNEL 2007 2007 2008 2008 2008
Mining and Construction
Technology 9,535 9,754 10,063 10,503 10,829
Energy and Environment
Technology 5,772 5,857 5,957 6,311 6,317
Paper and Fiber Technology 10,184 10,093 9,892 10,089 10,661
Valmet Automotive 777 789 789 779 579
Corporate office and other 335 344 361 387 376
Corporate office and others
total 1,112 1,133 1,150 1,166 955
Metso total 26,603 26,837 27,062 28,069 28,762
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 'Sharebased
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 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 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 January-September, excluding Metso shares held by the
company, was 141,585,385.
Metso's Annual General meeting on April 2, 2008 decided to decrease
the share premium reserve and the legal reserve. The decreased
amounts have been transferred to the invested non-restricted equity
as of August 7, 2008.
In August, Metso's Board of Directors decided to cancel the remaining
100,000 year 2003A stock options. Following this and earlier
cancellations and share subscriptions there are no options
outstanding or available from any of Metso's option programs for
subscription of shares in Metso Corporation.
Metso's market capitalization, excluding Metso shares held by the
company, was EUR 2,418 million on September 30, 2008.
Trading of Metso shares
The number of Metso Corporation shares traded on the NASDAQ OMX in
Helsinki Exchange in January-September was 254,194,469 shares,
equivalent to a turnover of EUR 7,377 million. The share price on
September 30, 2008 was EUR 17.07 and the average trading price for
the period was EUR 29.02. The highest quotation during the review
period was EUR 38.56 and the lowest EUR 15.85.
Metso's ADSs (American Depositary Shares) are traded in the United
States on the OTC market. On September 30, 2008, the closing price of
an ADS was USD 24.44. 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.
No disclosures of changes in holdings were received during the third
quarter of 2008.
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 2009Metso's Financial Statements for 2008 will be published on February
4, 2009. The 2009 Interim Review for January - March 2009 will be
published on April 28, Interim Review for January - June 2009 on July
24 and Interim Review for January - September 2009 on October 29
respectively.
Further information, please contact:
Jorma Eloranta, President and CEO, Metso Corporation, tel. +358 204
84 3000
Olli Vaartimo, Executive Vice President and CFO, Metso Corporation,
tel. +358 204 84 3010
Johanna Sintonen, Vice President, Investor Relations, Metso
Corporation, tel. +358 20 484 3253
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
It should be noted that certain statements herein which are not
historical facts, including, without limitation, those regarding
expectations for general economic development and the market
situation, expectations for customer industry profitability and
investment willingness, expectations for company growth, development
and profitability and the realization of synergy benefits and cost
savings, and statements preceded by "expects", "estimates","forecasts" or similar expressions, are forward-looking statements.
These statements are based on current decisions and plans and
currently known factors. They involve risks and uncertainties which
may cause the actual results to materially differ from the results
currently expected by the company.
Such factors include, but are not limited to:
(1) general economic conditions, including fluctuations in exchange
rates and interest levels which influence the operating environment
and profitability of customers and thereby the orders received by the
company and their margins
(2) the competitive situation, especially significant technological
solutions developed by competitors
(3) the company's own operating conditions, such as the success of
production, product development and project management and their
continuous development and improvement
(4) the success of pending and future acquisitions and restructuring.
Metso Corporation
Olli Vaartimo
Executive Vice President and CFO
Kati Renvall
Vice President, Corporate Communications
Distribution:
NASDAQ OMX Helsinki Ltd
Media
www.metso.com
