Profitable growth continued
HIGHLIGHTS OF THE FIRST QUARTER
- New orders worth EUR 1,664 million were received in January-
March, i.e. 16 percent more than in the corresponding period last
year (EUR 1,437 million in Q1/06).
- The order backlog grew by 7 percent from the end of 2006 and was
EUR 3,999 million at the end of March (EUR 3,737 million on Dec.
31, 2006).
- Net sales increased by 27 percent and totaled EUR 1,366 million
(EUR 1,078 million in Q1/06).
- Earnings before interest, tax and amortization (EBITA) were EUR
121.9 million, i.e. 8.9 percent of net sales (EUR 99.9 million and
9.3% in Q1/06).
- Operating profit (EBIT) was EUR 108.4 million, i.e. 7.9 percent
of net sales (EUR 95.4 million and 8.8% in Q1/06).
- Earnings per share were EUR 0.50 (EUR 0.47 in Q1/06).
- Free cash flow was EUR 97 million (EUR 152 million in Q1/06).
- Return on capital employed (ROCE) was 20.7 percent (20.2% in
Q1/06).
“Metso's January - March order intake was strong, and our order
backlog has further strengthened from the record-high year-end
figures. This, together with the continuing favorable market
outlook, gives us confidence about the rest of the year and
beyond,” says Jorma Eloranta, President and CEO, Metso
Corporation.
Eloranta notes that Metso's financial performance was solid
despite seasonal factors that are typical for the first quarter.
“Our net sales grew significantly over the same period in 2006.
Much of the growth is due to our expanded business scope, i.e. the
acquisition of the Pulping and Power businesses, but even
organically we delivered some 10 percent growth. Also our
operating profit improved on the first quarter of 2006.”
Eloranta says that Metso's outlook for 2007 continues to be
favorable. "The financial performance for the rest of the year is
expected to be stronger than in the first quarter of 2007.
Furthermore, we repeat our estimate that our net sales will grow
by more than 20 percent on 2006 and that the operating profit will
clearly improve."
Metso Corporation's key figures
EUR million Q1/07 Q1/06 Change % 2006
Net sales 1,366 1,078 27 4,955
Earnings before interest, tax
and amortization (EBITA) 121.9 99.9 22 481.1
% of net sales 8.9 9.3 9.7
Operating profit 108.4 95.4 14 457.2
% of net sales 7.9 8.8 9.2
Earnings per share, basic, EUR 0.50 0.47 6 2.89
Orders received 1,664 1,437 16 5,705
Order backlog at end of period 3,999 2,692 49 3,737
Free cash flow 97 152 (36) 327
Return on capital employed
(ROCE), annualized, % 20.7 20.2 22.2
Equity to assets ratio at end 37.5 38.9 36.1
of period, %
Gearing at end of period, % 22.9 10.5 30.8
Operating environment and demand for products
The market situation for Metso continued to be favorable during
the first quarter.
The demand for new paper and board machines remained good in
China, but there were only a few active projects in other market
areas. New fiber lines were under planning in South America and
Southeast Asia, but the project implementation schedules have been
partly open. The increase in the demand for new alternative energy
sources kept the demand for new power plants at a good level. The
demand for new tissue machines was satisfactory. The demand for
aftermarket services in the pulp and paper industry was
satisfactory during January-March.
The demand for mining and metal recycling equipment remained
excellent. The demand for construction industry equipment
continued to be excellent in Continental and Eastern Europe, and
was good in other markets. Thanks to the high capacity utilization
rates in customer industries, the demand for aftermarket services
remained at an excellent level.
The demand for automation systems for the pulp and paper industry
and power generation was good. The demand for flow control systems
continued to be good in the pulp and paper industry and excellent
in the power, oil and gas industry.
Orders received and order backlog
In January-March, the value of orders received by Metso grew by 16
percent on the comparison period and totaled EUR 1,664 million.
Growth came from all business areas. Most of the increase in Metso
Paper's orders was attributable to the acquisition of the Pulping
and Power businesses at the end of 2006. Metso's order backlog
increased by 7 percent on the end of 2006 and stood at EUR 3,999
million at the end of March.
Metso Paper's largest orders in the first quarter included a paper
machine to Oji Paper in Japan and a board machine to Shandong
International Paper & Sun Coated Paperboard in China. Metso
Minerals' largest orders included a grinding system for Boliden's
Aitik mine in Sweden and grinding equipment to Osisko Exploration
in Canada. Metso Automation received the biggest single valve
order in its history from the Chiyoda-Technip Joint Venture (CTJV)
to Qatar.
Orders received by business area
Q1/07 Q1/06
% of % of
EUR orders EUR orders
million received million received
Metso Paper 653 39 544 38
Metso Minerals 771 46 686 47
Metso Automation 228 13 191 13
Valmet Automotive 28 2 31 2
Intra-Metso orders
received and other (16) (15)
Total 1,664 100 1,437 100
Orders received by market area
Q1/07 Q1/06
% of % of
EUR orders EUR orders
million received million received
Europe 722 43 608 42
North America 297 18 308 21
South and Central 118 7 182 13
America
Asia-Pacific 406 25 241 17
Rest of the world 121 7 98 7
Total 1,664 100 1,437 100
Net sales
Metso's net sales for the first quarter grew by 27 percent on the
comparison period and totaled EUR 1,366 million. Excluding the
Pulping and Power businesses acquired at the end of 2006, the net
sales growth was about 10 percent. All business areas increased
their net sales. Excluding the effect of exchange rate
translation, the increase would have been 4 percentage points
higher. Aftermarket operations accounted for 33 percent (38% in
Q1/06) of Metso's net sales. Decrease in the share of aftermarket
operations was mainly due to the acquired Pulping and Power
businesses where the share of aftermarket business is low.
Measured in euros, the volume of the aftermarket operations
increased by 11 percent.
Net sales by business area
Q1/07 Q1/06
% of % of
EUR net EUR net
million sales million sales
Metso Paper 666 48 417 39
Metso Minerals 540 39 503 46
Metso Automation 146 11 134 12
Valmet Automotive 28 2 31 3
Intra-Metso net sales
and other (14) (7)
Total 1,366 100 1,078 100
Net sales by market area
Q1/07 Q1/06
% of % of
EUR net EUR net
million sales million sales
Europe 544 40 456 42
North America 259 19 248 23
South and Central America 218 16 135 13
Asia-Pacific 285 21 185 17
Rest of the world 60 4 54 5
Total 1,366 100 1,078 100
Financial result
Metso's operating profit in the first quarter was EUR 108.4
million, or 7.9 percent of net sales (EUR 95.4 million or 8.8% in
Q1/06). Metso Paper's operating profit was affected by a EUR 9
million amortization of intangible assets related to the
acquisition of the Pulping and Power businesses and by a EUR 3
million provision for a credit loss related to a customer project.
Metso Paper's and Metso Automation's operating profit was
negatively affected by a steep increase in the price of stainless
steel, a key raw material for components.
Earnings before interest, tax and amortization (EBITA) were EUR
121.9 million or 8.9 percent of net sales in the first quarter
(EUR 99.9 million or 9.3% in Q1/06).
Metso's net financial expenses were EUR 8 million (EUR 7 million)
in January-March.
Metso's profit before taxes was EUR 100 million (EUR 88 million).
The Corporation's tax rate is estimated to be about 30 percent in
2007.
The profit attributable to shareholders was EUR 70 million,
corresponding to earnings per share of EUR 0.50 (EUR 0.47).
The return on capital employed (ROCE) was 20.7 percent (20.2%) and
the return on equity (ROE) was 20.0 percent (22.1%).
Cash flow and financing
Metso's net cash generated by operating activities was EUR 123
million (EUR 169 million). Net working capital remained at year-
end level. Metso's free cash flow was EUR 97 million (EUR 152
million).
Net interest-bearing liabilities totaled EUR 353 million at the
end of March. Gearing (i.e. the ratio of net interest-bearing
liabilities to shareholder's equity) was 22.9 percent, while the
equity to asset ratio was 37.5 percent. After the first quarter,
following the Annual General Meeting, Metso paid out EUR 212
million in dividends in April, which raised the gearing ratio by
approximately 20 percentage points and decreased the equity to
assets ratio by approximately 3 percentage points.
Capital expenditure
Metso's gross capital expenditure was EUR 32 million excluding
acquisitions (EUR 26 million). About one third of the expenditure
was related to capacity increasing investments.
Metso Paper continued the expansion of the Wuxi service center in
China. Metso Minerals had an ongoing capital expenditure project
to build a crusher pilot plant and test laboratory at the Tampere
unit, Finland. In the first quarter, Metso Automation made a
decision to increase the valve production capacity at its Shanghai
unit in China.
Metso's gross capital expenditure for 2007 excluding acquisitions
is estimated to increase by some 20 percent on 2006.
Metso's research and development expenditure totaled EUR 29
million (EUR 25 million) during January-March, i.e. 2.1 percent of
Metso's net sales.
Acquisitions and divestments
On March 30, 2007, Metso Minerals acquired the North American
metal recycling technology provider, Bulk Equipment Systems and
Technologies Inc. (B.E.S.T. Inc), located in Cleveland, Ohio. The
acquisition price, approximately EUR 9 million, was paid in April.
The company's net sales in 2006 were EUR 8 million and it employs
approximately 40 people.
On March 1, 2007, Metso Paper sold the majority of Metso Paper AG
in Delémont, Switzerland. Metso Paper remains as a minority
shareholder in the company. Metso Paper AG is a supplier of roll
logistic systems, solutions and services. The company has about 70
employees and annual net sales of approximately EUR 10 million.
Acquisition and integration of the Pulping and Power businesses
Metso closed the acquisition of Aker Kvaerner's Pulping and Power
businesses on December 29, 2006. The estimated acquisition price
is EUR 341 million, including EUR 6 million in expenses related to
the acquisition and EUR 52 million in net cash. The process to
define the final balance sheet values of the acquired businesses
continues in accordance with the agreement.
Metso estimates that the annual cost savings achievable through
synergies will amount to EUR 20-25 million after integration.
About one third of these are expected to be realized during 2007.
The non-recurring expenses resulting from integration of the
acquired businesses are estimated to be less than EUR 10 million,
of which EUR 1 million was recognized in the first quarter and the
rest are expected to be recorded in the remaining three quarters
in 2007.
Integration of the acquired businesses into Metso Paper has
proceeded according to plan. During the first quarter, the
customer interface organization was restructured and employee
negotiations were conducted regarding the pruning of overlapping
activities in Sweden and Finland.
The amortization of intangible assets resulting from the
transaction is estimated to be EUR 37 million in 2007, EUR 20
million in 2008 and after that EUR 13 million annually until the
intangible assets have been fully amortized. The rest of the
transaction price exceeding the balance sheet value will remain as
goodwill, which is not amortized. In the first quarter, the
amortization of intangible assets amounted to EUR 9 million.
Personnel
Metso had 25,616 employees at the end of March, which was 62 less
than at the end of 2006 (25,678 employees). In the first quarter,
Metso had an average of 25,647 employees.
Personnel by area
Mar 31, Dec 31, Change %
2007 2006
Finland 9,275 9,281 0
Other Nordic countries 3,555 3,580 (1)
Other Europe 2,993 3,067 (2)
North America 3,708 3,715 0
South and Central America 2,410 2,439 (1)
Asia-Pacific 2,341 2,262 4
Rest of the world 1,334 1,334 -
Total personnel 25,616 25,678 0
Subpoena from U.S. Department of Justice requiring Metso to
produce documents
In November 2006, Metso Minerals Industries, Inc., which is Metso
Minerals' U.S. subsidiary, received a subpoena from the Antitrust
Division of the United States Department of Justice calling for
Metso Minerals Industries, Inc. to produce certain documents. The
subpoena relates to an investigation of potential antitrust
violations in the rock crushing and screening equipment industry.
Metso is cooperating fully with the Department of Justice.
Share ownership plan
Metso has a share ownership plan for 2006-2008. The maximum number
of shares to be allocated to the 2006-2008 incentive plan is
360,000 Metso Corporation shares.
The share ownership plan for the year 2006 was directed to 60
Metso managers. Based on the 2006 earnings period, 99,961 shares
corresponding to 0.07 percent of Metso shares were distributed at
the end of March 2007. Members of Metso's Executive Team received
25,815 shares.
Metso's Board of Directors decided in February to direct the 2007
share ownership plan to a total of 84 Metso managers. The entire
Metso Executive Team is included in the sphere of the 2007
incentive plan. The potential reward from the plan will be based
on the achieved operating profit of Metso Corporation and its
business areas in 2007. The share ownership plan in 2007 will
cover a maximum of 125,500 Metso shares. The Metso Executive
Team's allocation of this total is a maximum of 26,500 shares. If
the value of Metso share, determined as the average trading price
during the first two full weeks of March 2008, exceeds EUR 48, the
number of grantable shares for the 2007 plan will be decreased by
a corresponding ratio. Payment of the potential rewards will be
decided during the first quarter of 2008.
The maximum number of shares to be allocated for the 2008 earnings
period as well as the share value limit will be decided by Metso's
Board of Directors in the beginning of 2008.
Shares, options and share capital
A total of 35,000 shares were subscribed with Metso Corporation's
2003A stock options during a period of February 8 - March 15,
2007. The resulting increase in share capital of EUR 59,500.00 was
entered into the Finnish Trade Register on March 29, 2007. The
shares were listed on the Helsinki Stock Exchange together with
the existing shares as of March 30, 2007. Dividend and other
shareholder rights of the new shares commenced from the
registration date.
Following this increase, the Company's share capital at the end of
March was EUR 240,982,843.80 and the total number of shares was
141,754,614. At the end of March, the Parent Company held 60,841
Metso shares. Additionally, a partnership included in Metso's
consolidated financial statements held 200,039 Metso shares.
Together these shares represent 0.18 percent of all the shares and
votes. During the first quarter of 2007, the average number of
outstanding shares excluding the own shares mentioned above was
141,364,382.
After cancellations and exercised options there remains a total of
100,000 year 2003A options, all of them being held by Metso's
subsidiary, Metso Capital Ltd.
Metso's market capitalization excluding the own shares was EUR
5,596 million on March 31, 2007.
BUSINESSES
Metso Paper
EUR million Q1/07 Q1/06 Change % 2006
Net sales 666 417 60 2,092
Earnings before interest, tax
and amortization (EBITA) 37.1 23.8 56 105.6
% of net sales 5.6 5.7 5.0
Operating profit 25.4 21.5 18 89.8
% of net sales 3.8 5.2 4.3
Orders received 653 544 20 2,276
Order backlog at end of period 2,190 1,459 50 2,225
Personnel at end of period 11,469 8,902 29 11,558
Aker Kvaerner's Pulping and Power businesses were acquired as of
December 29, 2006, and the acquired balance sheet was consolidated
to Metso on December 31, 2006. The acquired businesses had no
effect to Metso's income statement for 2006 and are therefore not
included in the comparative segment information except for order
backlog and personnel as at December 31, 2006.
Metso Paper's net sales increased in January-March by 60 percent
and were EUR 666 million. About two thirds of this growth was
attributable to the acquisition of the Pulping and Power
businesses at the end of 2006. The comparable net sales growth
originated mostly from the Paper and Board business line. The
aftermarket operations accounted for 26 percent of net sales (35%
in Q1/06). The decline in the share of aftermarket business was
due to the change in Metso Paper's structure. Measured in euros,
the volume of aftermarket business increased by 19 percent and the
growth came from the Pulping and Power businesses.
Metso Paper's EBITA was EUR 37.1 million, or 5.6 percent of net
sales and operating profit was EUR 25.4 million, or 3.8 percent of
net sales. The first quarter's operating profit includes a EUR 9
million amortization of intangible assets related to the
acquisition of the Pulping and Power businesses, and a EUR 3
million provision for a credit loss related to a customer project.
The rise in the price of stainless steel impacted component prices
and thus Metso Paper's profitability. The Panelboard business
recorded a small operating profit in the first quarter.
The value of orders received by Metso Paper increased by 20
percent on the comparison period and were EUR 653 million. The
growth was mostly due to the acquisition of the Pulping and Power
businesses. In the first quarter, the Paper and Board business
line received orders from Asia for four new machines. A long-term
maintenance agreement was signed in the review period with
Plattling Papier's mill in Germany. This is Metso Paper's first
extensive service agreement for a paper mill, which is still under
construction. The end-of-March order backlog, EUR 2,190 million,
was nearly the same as at year-end 2006.
Metso Minerals
EUR million Q1/07 Q1/06 Change % 2006
Net sales 540 503 7 2,199
Earnings before interest, tax
and amortization (EBITA) 68.7 61.5 12 302.1
% of net sales 12.7 12.2 13.7
Operating profit 67.8 60.2 13 297.7
% of net sales 12.6 12.0 13.5
Orders received 771 686 12 2,655
Order backlog at end of period 1,497 1,043 44 1,277
Personnel at end of period 9,545 8,914 7 9,433
Metso Minerals' first-quarter net sales increased by 7 percent and
were EUR 540 million. Deliveries of the Mining business line were
up on the comparison period, while those of the Construction
business line remained at the level of the comparison period.
Deliveries of the Recycling business line were down on the
comparison period due to the timing of projects. The aftermarket
operations accounted for 44 percent of net sales (44% in Q1/06).
The operating profit of Metso Minerals was EUR 67.8 million, or
12.6 percent of net sales. The Mining business line improved its
operating profit from the comparison period mainly due to volume
growth. The operating profit of the Construction business line was
at the level of the comparison period.
The value of orders received by Metso Minerals was up by 12
percent on the comparison period and totaled EUR 771 million.
Growth came evenly from all business lines. The trend in order
intake was most favorable in Continental and Eastern Europe. In
North America, orders received for mining equipment increased
significantly. The order backlog increased by 17 percent on the
end of 2006 and was EUR 1,497 million at the end of March.
Metso Automation
EUR million Q1/07 Q1/06 Change % 2006
Net sales 146 134 9 613
Earnings before interest, tax
and amortization (EBITA) 15.9 15.7 1 88.3
% of net sales 10.9 11.7 14.4
Operating profit 15.5 15.3 1 86.7
% of net sales 10.6 11.4 14.1
Orders received 228 191 19 717
Order backlog at end of period 356 234 52 276
Personnel at end of period 3,379 3,170 7 3,352
Metso Automation's net sales increased in January-March by 9
percent and were EUR 146 million. Deliveries of the Flow Control
business line, which manufactures field equipment, increased,
while those of the Process Automation Systems business line
remained at the level of the comparison period. The aftermarket
operations accounted for 22 percent of net sales (24% in Q1/06).
Measured in euros, the volume of the aftermarket operations
remained at the level of the comparison period.
Metso Automation's operating profit amounted to EUR 15.5 million
or 10.6 percent of net sales. Operating profit was negatively
affected by a steep increase in the price of raw materials used in
valve casting.
The value of orders received by Metso Automation increased by 19
percent on the comparison period and rose to EUR 228 million. The
growth originated mainly from field equipment orders from the
power, oil and gas industry. The order backlog increased by 29
percent on the end of 2006 and was EUR 356 million at the end of
March.
Valmet Automotive
Valmet Automotive's net sales in January-March were EUR 28
million. Operating profit was EUR 4.4 million, or 15.7 percent of
net sales. In the first quarter, Valmet Automotive manufactured an
average of 127 cars per day, but in early April the manufacturing
volumes dropped according to plan to 102 cars per day. The
decrease was due to general uncertainty in the automotive markets.
Valmet Automotive's number of personnel was adjusted in the first
quarter to correspond with the current production level.
Events after the review period
Decisions of the Annual General Meeting
The Annual General Meeting of Metso Corporation approved on April
3, 2007 the accounts for 2006 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 2006. In addition, the Annual
General Meeting approved the proposals of the Board of Directors
to amend the Articles of Association and to authorize the Board of
Directors to resolve of a repurchase of the Corporation's own
shares and of a share issue.
The Annual General Meeting decided to establish a Nomination
Committee of the Annual General Meeting to prepare proposals for
the following Annual General Meeting in respect of the composition
of the Board of Directors along with the director remuneration.
The Nomination Committee consists of representatives appointed by
the four biggest shareholders along with the Chairman of the Board
of Directors as an expert member.
Matti Kavetvuo was re-elected the Chairman of the Board and Jaakko
Rauramo was re-elected the Vice Chairman of the Board. Eva
Liljeblom, Professor at the Swedish School of Economics and
Business Administration, Helsinki, Finland, was elected as a new
member of the Board. The Board members re-elected were Svante
Adde, Maija-Liisa Friman, Christer Gardell and Yrjö Neuvo. The
term of office of Board members lasts until the end of the
following Annual General Meeting.
The Annual General Meeting decided that the annual remuneration
for Board members would be EUR 80,000 for the Chairman, EUR 50,000
for the Vice Chairman and the Chairman of the Audit Committee and
EUR 40,000 for the members, and that the meeting fee including
committee meetings would be EUR 500 per meeting.
The auditing company, Authorized Public Accountants
PricewaterhouseCoopers was re-elected to act as Auditor of the
Corporation until the end of the next Annual General Meeting.
The Annual General Meeting decided that a dividend of EUR 1.50 per
share would be paid for the financial year which ended on December
31, 2006. The dividend was paid on April 17, 2007.
Board committees
The Board of Directors elected members among the Board for the
Audit Committee and Compensation Committee at its assembly
meeting.
The Board's Audit Committee consists of Maija-Liisa Friman
(Chairman), Svante Adde and Eva Liljeblom. The Board of Directors
assigned Svante Adde as the financial expert of the Audit
Committee.
The Board's Compensation Committee consists of Matti Kavetvuo
(Chairman), Jaakko Rauramo, Christer Gardell and Yrjö Neuvo.
Metso evaluates possible delisting from the New York Stock
Exchange
In the beginning of April, Metso Corporation's Board of Directors
decided to evaluate the possible deregistration and delisting of
Metso Corporation's shares from the New York Stock Exchange in
view of the revisions to the U.S. Securities Exchange Act of 1934
published by the U.S. Securities and Exchange Commission on March
27, 2007, which will take effect in early June 2007. Metso
Corporation's Board of Directors will decide on the matter later
this year after having completed the evaluation.
New service center in Guangzhou
In the beginning of the second quarter, Metso Paper made a
decision to build a service center in Guangzhou, China. The value
of the investment is approximately EUR 10 million. The new service
center will start its operations in 2008.
Short-term risks of business operations
The significance of China as the primary market for new paper and
board machines has increased even further, and thus any
substantial changes in demand on the Chinese market may have a
material adverse effect on Metso Paper's profitability. Metso
seeks to mitigate these risks by developing its global aftermarket
operations and increasing the flexibility of its delivery chain.
The delivery times for Metso products have been lengthened because
of strong growth in order intake and backlog. Therefore, there is
a risk that material and other costs may rise significantly during
the delivery time and have a greater impact on Metso's
profitability than currently anticipated. In the current strong
demand situation, the scarcity of certain components and
subcontractor resources, particularly at Metso Minerals and Metso
Automation, may also lengthen delivery times.
Metso strives to manage and limit the potential adverse effects of
these and other risks. However, if the risks materialize, they
could have a significant adverse effect on Metso's business,
financial position and results of operations or on the price of
Metso share.
Short-term outlook
The favorable market outlook for Metso's products and services is
expected to continue for the rest of 2007.
Metso Paper's market situation is estimated to continue much the
same as in the year's first quarter. The demand for paper, board
and tissue machines and for fiber lines is expected to be
satisfactory. The demand for power plants is estimated to be good.
Also the demand for Metso Paper's aftermarket services is expected
to remain satisfactory.
Metso Minerals' favorable market outlook is expected to continue.
The demand is anticipated to remain at the first quarter's
excellent level in the mining and metals recycling industries, and
at a good level in the construction industry. The demand for
aftermarket services is expected to remain excellent.
Metso Automation's market outlook in the pulp and paper customer
segment is estimated to be good. In the power, oil and gas
industries, the demand is expected to be good in process
automation systems and excellent in flow control systems.
It is estimated that Metso's financial performance for the rest of
the year will be stronger than in the first quarter. Metso's net
sales in 2007 are estimated to grow by more than 20 percent on
2006, thanks to the strong order backlog, continuing favorable
market situation and the expanded business scope. The operating
profit in 2007 is estimated to clearly improve. It is estimated
that the operating profit margin in 2007 will be slightly below
Metso's target, which is over 10 percent. This is primarily due to
the high first-year amortization of intangible assets, integration
costs and only partially materializing synergy benefits related to
the acquisition of the Pulping and Power businesses.
The estimates concerning financial performance are based on
Metso's current structure, order backlog and market outlook.
Helsinki, April 27, 2007
Metso Corporation's Board of Directors
The interim review is unaudited
CONSOLIDATED STATEMENTS OF INCOME
EUR million 1-3/ 1-3/ 1-12/
2007 2006 2006
Net sales 1,366 1,078 4,955
Cost of goods sold (1,026) (778) (3,659)
Gross profit 340 300 1,296
Selling, general and (238) (206) (846)
administrative expenses
Other operating income and 6 1 6
expenses, net
Share in profits of associated 0 0 1
companies
Operating profit 108 95 457
% of net sales 7.9% 8.8% 9.2%
Financial income and expenses, (8) (7) (36)
net
Profit on continuing operations 100 88 421
before tax
Income taxes on continuing (30) (21) (11)
operations
Profit on continuing operations 70 67 410
Profit (loss) on discontinued - - -
operations
Profit (loss) 70 67 410
Profit (loss) attributable to 0 0 1
minority interests
Profit (loss) attributable to 70 67 409
equity shareholders
Profit (loss) 70 67 410
Earnings per share from
continuing operations, EUR
Basic 0.50 0.47 2.89
Diluted 0.50 0.47 2.89
Earnings per share from
discontinued operations, EUR
Basic - - -
Diluted - - -
Earnings per share from continuing and
discontinued operations, EUR
Basic 0.50 0.47 2.89
Diluted 0.50 0.47 2.89
CONSOLIDATED BALANCE SHEETS
ASSETS
EUR million Mar 31, Mar 31, Dec 31,
2007 2006 2006
Non-current assets
Intangible assets
Goodwill 772 496 768
Other intangible assets 265 100 274
1,037 596 1,042
Property, plant and equipment
Land and water areas 54 58 57
Buildings and structures 217 213 221
Machinery and equipment 312 280 318
Assets under construction 29 19 19
612 570 615
Financial and other assets
Investments in associated 19 19 19
companies
Available-for-sale equity 15 13 15
investments
Loan and other interest bearing 6 5 6
receivables
Available-for-sale financial 5 34 5
assets
Deferred tax asset 218 156 228
Other non-current assets 29 47 33
292 274 306
Total non-current assets 1,941 1,440 1,963
Current assets
Inventories 1,276 963 1,112
Receivables
Trade and other receivables 1,074 840 1,218
Cost and earnings of projects 302 206 284
under construction in excess
of advance billings
Loan and other interest bearing 2 2 2
receivables
Available-for-sale 10 100 10
financial assets
Tax receivables 20 15 16
1,408 1,163 1,530
Cash and cash equivalents 371 494 353
Total current assets 3,055 2,620 2,995
Assets held for sale - - -
TOTAL ASSETS 4,996 4,060 4,958
SHAREHOLDERS' EQUITY AND LIABILITIES
EUR million Mar 31, Mar 31, Dec 31,
2007 2006 2006
Equity
Share capital 241 241 241
Share premium reserve 77 76 77
Cumulative translation (45) (16) (45)
differences
Fair value and other reserves 436 434 432
Retained earnings 827 618 763
Equity attributable to 1,536 1,353 1,468
shareholders
Minority interests 6 6 6
Total equity 1,542 1,359 1,474
Liabilities
Non-current liabilities
Long-term debt 590 589 605
Post employment benefit 159 153 157
obligations
Deferred tax liability 54 21 57
Provisions 50 32 53
Other long-term liabilities 2 4 2
Total non-current liabilities 855 799 874
Current liabilities
Current portion of long-term 107 160 93
debt
Short-term debt 50 29 132
Trade and other payables 1,302 936 1,238
Provisions 203 181 213
Advances received 653 399 655
Billings in excess of cost and 230 164 222
earnings of projects under
construction
Tax liabilities 54 33 57
Total current liabilities 2,599 1,902 2,610
Liabilities held for sale - - -
Total liabilities 3,454 2,701 3,484
TOTAL SHAREHOLDERS' EQUITY AND 4,996 4,060 4,958
LIABILITIES
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt 590 589 605
Short-term interest bearing debt 157 189 225
Cash and cash equivalents (371) (494) (353)
Other interest bearing assets (23) (141) (23)
Total 353 143 454
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR million 1-3/ 1-3/ 1-12/
2007 2006 2006
Cash flows from operating
activities:
Profit (loss) 70 67 410
Adjustments to reconcile profit
(loss) to net cash provided by
operating activities
Depreciation 36 26 105
Provisions / Efficiency 0 (2) (7)
improvement programs
Interests and dividend income 6 8 26
Income taxes 30 21 11
Other 4 1 7
Change in net working capital 1 62 (18)
Cash flows from operations 147 183 534
Interest paid and dividends 0 1 (24)
received
Income taxes paid (24) (15) (68)
Net cash provided by (used in) 123 169 442
operating activities
Cash flows from investing
activities:
Capital expenditures on fixed (32) (26) (129)
assets
Proceeds from sale of fixed 6 9 14
assets
Business acquisitions, net of - - (277)
cash acquired
Proceeds from sale of businesses, 2 - 13
net of cash sold
(Investments in) proceeds from 3 33 154
sale of financial assets
Other 0 1 (2)
Net cash provided by (used in) (21) 17 (227)
investing activities
Cash flows from financing
activities:
Share options exercised 0 - 1
Redemption of own shares - - (11)
Dividends paid - - (198)
Net funding (85) (8) 35
Other - (5) (6)
Net cash provided by (used in) (85) (13) (179)
financing activities
Net increase (decrease) in cash and 17 173 36
cash equivalents
Effect from changes in exchange 1 (2) (6)
rates
Cash and cash equivalents at 353 323 323
beginning
of period
Cash and cash equivalents at end of 371 494 353
period
Free cash flow
EUR million 1-3/ 1-3/ 1-12/
2007 2006 2006
Net cash provided by operating 123 169 442
activities
Capital expenditures on fixed (32) (26) (129)
assets
Proceeds from sale of fixed assets 6 9 14
Free cash flow 97 152 327
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Sha- Sha- Cumu- Fair Retai- Equi- Mino- To-
re re lative value ned ty rity tal
capi- pre- trans- and ear- attri- inte- equi-
tal mium lation other nings bu- rest ty
re- ad- re- table
ser- just- ser- to
ve ments ves share-
hol-
ders
EUR million
Balance at 241 76 (9) 424 553 1,285 7 1,29
Jan 1, 2006 2
Dividends - - - - - - - -
Share options - - - - - - - -
exercised
Translation - - (13) - - (13) - (13)
differences
Net investment - - 4 - - 4 - 4
hedge gains
(losses)
Cash flow - - - 10 - 10 - 10
hedges, net of
tax
Available-for- - - - - - - - -
sale equity
investments,
net of tax
Other - - 2 - (2) - (1) (1)
Net profit for - - - - 67 67 0 67
the period
Balance at 241 76 (16) 434 618 1,353 6 1,35
Mar 31, 2006 9
Balance at 241 77 (45) 432 763 1,468 6 1,47
Dec 31, 2006 4
Dividends - - - - - - - -
Share options 0 0 - - - 0 - 0
exercised
Translation - - 8 - - 8 - 8
differences
Net investment - - (8) - - (8) - (8)
hedge gains
(losses)
Cash flow - - - (2) - (2) - (2)
hedges, net of
tax
Available-for- - - - - - - - -
sale equity
investments,
net of tax
Redemption of - - - - - - - -
own shares
Other - - - 6 (6) - - 0
Net profit for - - - - 70 70 0 70
the period
Balance at 241 77 (45) 436 827 1,536 6 1,54
Mar 31, 2007 2
ACQUISITIONS
Metso Minerals acquired North American metal recycling provider, Bulk
Equipment Systems and Technologies Inc (B.E.S.T. Inc), on March 30, 2007.
The acquisition price, which was paid in April, was approximately EUR 9
million.
The company's net sales were about EUR 2 million and net income
approximately
EUR 0.2 million in January-March 2007. Part of the excess purchase price,
EUR 2
million, was allocated to intangible assets, representing the calculated
preliminary fair values of acquired customer base, brands, new technology
and
order backlog. The remaining excess arising from the acquisition, EUR 7
million, represents goodwill related to Metso's improved position in
the North American metal recycling market.
Information on acquisitions for January-March 2007 is as follows
(there were no acquisitions in the comparison period January-March
2006):
Carrying Fair value Fair value
amount allocations
EUR million
Intangible assets - 2 2
Property, plant and equipment 0 - 0
Inventories 1 0 1
Trade and other receivables 1 - 1
Deferred tax liabilities - (1) (1)
Other liabilities assumed (1) - (1)
Non-interest bearing net assets 1 1 2
Cash and cash equivalents 0 - 0
acquired
Debt assumed 0 - 0
Purchase price (9) - (9)
Goodwill 8 (1) 7
Purchase price payable (9)
ASSETS PLEDGED AND CONTINGENT LIABILITIES
EUR million Mar 31, Mar 31, Dec 31,
2007 2006 2006
Mortgages on corporate debt 14 3 14
Other pledges and
contingencies
Mortgages 2 2 2
Pledged assets 0 0 0
Guarantees on behalf of - - -
associated company
obligations
Other guarantees 9 4 6
Repurchase and other 9 12 10
commitments
Lease commitments 155 123 166
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR million Mar 31, Mar 31, Dec 31,
2007 2006 2006
Forward exchange rate 1,459 1,142 1,357
contracts
Interest rate and currency 1 2 1
swaps
Currency swaps 1 1 1
Interest rate swaps 143 183 143
Interest rate futures - - -
contracts
Option agreements
Bought 11 5 7
Sold 12 11 6
The notional amount of electricity forwards was 463 GWh as of March 31,
2007 and 382 GWh as of March 31, 2006.
The notional amounts indicate the volumes in the use of derivatives,
but do not indicate the exposure to risk.
KEY RATIOS
1-3/ 1-3/ 1-12/
2007 2006 2006
Earnings per share from continuing 0.50 0.47 2.89
operations, EUR
Earnings per share from - - -
discontinued operations, EUR
Earnings per share from continuing 0.50 0.47 2.89
and discontinued operations, EUR
Equity/share at end of period, EUR 10.86 9.56 10.38
Return on equity (ROE), 20.0 22.1 30.3
% (annualized)
Return on capital employed (ROCE), 20.7 20.2 22.2
% (annualized)
Equity to assets ratio at end 37.5 38.9 36.1
of period, %
Gearing at end of period, % 22.9 10.5 30.8
Free cash flow 97 152 327
Free cash flow/share 0.68 1.07 2.31
Gross capital expenditure of 32 26 131
continuing operations (excl.
business acquisitions)
Business acquisitions, net of cash - - 277
acquired
Depreciation and amortization of 36 26 105
continuing operations
Number of outstanding shares at end 141,494 141,594 141,359
of period (thousands)
Average number of shares 141,364 141,594 141,581
(thousands)
Average number of diluted shares 141,364 141,628 141,600
(thousands)
EXCHANGE RATES USED
1-3/ 1-3/ 1-12/ Mar 31, Mar 31, Dec 31,
2007 2006 2006 2007 2006 2006
USD (US dollar) 1.3161 1.2032 1.2630 1.3318 1.2104 1.3170
SEK (Swedish krona) 9.2248 9.3769 9.2533 9.3462 9.4315 9.0404
GBP (Pound sterling) 0.6722 0.6868 0.6819 0.6798 0.6964 0.6715
CAD (Canadian 1.5370 1.3829 1.4267 1.5366 1.4084 1.5281
dollar)
BRL (Brazilian real) 2.7699 2.6216 2.7375 2.7195 2.6484 2.8105
BUSINESS AREA INFORMATION
Metso Ventures Business Area was dismantled as of January 1, 2007.
Two of Metso's three foundries were transferred to Metso Paper and
one to Metso Minerals. Metso Panelboard became part of Metso
Paper. Valmet Automotive is reported as part of Corporate Office
and others group. Comparative segment information for 2006 is
presented according to the new organization structure.
Aker Kvaerner's Pulping and Power businesses were acquired as of
December 29, 2006 and the acquired balance sheet was consolidated
to Metso as of December 31, 2006. The acquired businesses had no
effect to Metso's income statement for 2006 and are therefore not
included in the comparative segment information except for capital
employed, order backlog and personnel as at December 31, 2006.
NET SALES
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 666 417 2,341 2,092
Metso Minerals 540 503 2,236 2,199
Metso Automation 146 134 625 613
Valmet Automotive 28 31 106 109
Corporate office and other - 3 7 10
Corporate office and others 28 34 113 119
total
Intra Metso net sales (14) (10) (72) (68)
Metso total 1,366 1,078 5,243 4,955
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 1.9 0.9 (10.0) (11.0)
Metso Minerals 1.2 2.3 15.0 16.1
Metso Automation 0.5 0.2 0.6 0.3
Valmet Automotive 0.0 0.0 0.0 0.0
Corporate office and other 2.2 (1.8) 4.4 0.4
Corporate office and others 2.2 (1.8) 4.4 0.4
total
Metso total 5.8 1.6 10.0 5.8
SHARE IN PROFITS OF ASSOCIATED COMPANIES
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 0.4 0.3 1.8 1.7
Metso Minerals 0.0 0.0 0.1 0.1
Metso Automation 0.0 0.2 0.6 0.8
Valmet Automotive - - - -
Corporate office and other 0.0 (0.6) (1.1) (1.7)
Corporate office and others 0.0 (0.6) (1.1) (1.7)
total
Metso total 0.4 (0.1) 1.4 0.9
OPERATING PROFIT (LOSS)
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 25.4 21.5 93.7 89.8
Metso Minerals 67.8 60.2 305.3 297.7
Metso Automation 15.5 15.3 86.9 86.7
Valmet Automotive 4.4 5.0 11.1 11.7
Corporate office and other (4.7) (6.6) (26.8) (28.7)
Corporate office and others (0.3) (1.6) (15.7) (17.0)
total
Metso total 108.4 95.4 470.2 457.2
OPERATING PROFIT (LOSS), % OF NET SALES
% 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 3.8 5.2 4.0 4.3
Metso Minerals 12.6 12.0 13.7 13.5
Metso Automation 10.6 11.4 13.9 14.1
Valmet Automotive 15.7 16.1 10.5 10.7
Corporate office and other n/a n/a n/a n/a
Corporate office and others n/a n/a n/a n/a
total
Metso total 7.9 8.8 9.0 9.2
EBITA
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 37.1 23.8 118.9 105.6
Metso Minerals 68.7 61.5 309.3 302.1
Metso Automation 15.9 15.7 88.5 88.3
Valmet Automotive 4.4 5.0 11.1 11.7
Corporate office and other (4.2) (6.1) (24.7) (26.6)
Corporate office and others 0.2 (1.1) (13.6) (14.9)
total
Metso total 121.9 99.9 503.1 481.1
EBITA, % OF NET SALES
% 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 5.6 5.7 5.1 5.0
Metso Minerals 12.7 12.2 13.8 13.7
Metso Automation 10.9 11.7 14.2 14.4
Valmet Automotive 15.7 16.1 10.5 10.7
Corporate office and other n/a n/a n/a n/a
Corporate office and others n/a n/a n/a n/a
total
Metso total 8.9 9.3 9.6 9.7
ORDERS RECEIVED
EUR million 1-3/ 1-3/ 4/2006- 1-12/
2007 2006 3/2007 2006
Metso Paper 653 544 2,385 2,276
Metso Minerals 771 686 2,740 2,655
Metso Automation 228 191 754 717
Valmet Automotive 28 31 106 109
Corporate office and other 0 2 13 15
Corporate office and others 28 33 119 124
total
Intra Metso orders received (16) (17) (66) (67)
Metso total 1,664 1,437 5,932 5,705
QUARTERLY INFORMATION
NET SALES
EUR million 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2006 2006 2006 2006 2007
Metso Paper 417 469 489 717 666
Metso Minerals 503 541 525 630 540
Metso Automation 134 140 146 193 146
Valmet Automotive 31 28 22 28 28
Corporate office and 3 2 2 3 -
other
Corporate office and others 34 30 24 31 28
total
Intra Metso net sales (10) (10) (15) (33) (14)
Metso total 1,078 1,170 1,169 1,538 1,366
OTHER OPERATING INCOME (+) AND EXPENSES (-), NET
EUR million 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2006 2006 2006 2006 2007
Metso Paper 0.9 1.7 (3.2) (10.4) 1.9
Metso Minerals 2.3 3.2 (0.1) 10.7 1.2
Metso Automation 0.2 0.1 (0.4) 0.4 0.5
Valmet Automotive 0.0 0.0 0.0 0.0 0.0
Corporate office and (1.8) 2.9 0.4 (1.1) 2.2
other
Corporate office and others (1.8) 2.9 0.4 (1.1) 2.2
total
Metso total 1.6 7.9 (3.3) (0.4) 5.8
OPERATING PROFIT (LOSS)
EUR million 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2006 2006 2006 2006 2007
Metso Paper 21.5 25.1 30.0 13.2 25.4
Metso Minerals 60.2 71.6 75.9 90.0 67.8
Metso Automation 15.3 19.6 20.0 31.8 15.5
Valmet Automotive 5.0 4.0 1.7 1.0 4.4
Corporate office and (6.6) (3.9) (7.2) (11.0) (4.7)
other
Corporate office and others (1.6) 0.1 (5.5) (10.0) (0.3)
total
Metso total 95.4 116.4 120.4 125.0 108.4
EBITA
EUR million 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2006 2006 2006 2006 2007
Metso Paper 23.8 27.4 32.3 22.1 37.1
Metso Minerals 61.5 72.8 76.7 91.1 68.7
Metso Automation 15.7 19.9 20.5 32.2 15.9
Valmet Automotive 5.0 4.0 1.7 1.0 4.4
Corporate office and (6.1) (3.4) (6.8) (10.3) (4.2)
other
Corporate office and others (1.1) 0.6 (5.1) (9.3) 0.2
total
Metso total 99.9 120.7 124.4 136.1 121.9
CAPITAL EMPLOYED
EUR million Mar 31, June Sep 30, Dec 31, Mar 31,
2006 30, 2006 2006 2007
2006
Metso Paper 266 300 292 631 572
Metso Minerals 934 939 955 967 983
Metso Automation 123 132 130 149 156
Valmet Automotive 32 28 31 23 23
Corporate office and 783 656 745 534 555
other
Corporate office and others 815 684 776 557 578
total
Metso total 2,138 2,055 2,153 2,304 2,289
ORDERS RECEIVED
EUR million 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2006 2006 2006 2006 2007
Metso Paper 544 564 491 677 653
Metso Minerals 686 628 636 705 771
Metso Automation 191 181 183 162 228
Valmet Automotive 31 28 22 28 28
Corporate office and 2 3 6 4 0
other
Corporate office and others 33 31 28 32 28
total
Intra Metso orders received (17) (14) (17) (19) (16)
Metso total 1,437 1,390 1,321 1,557 1,664
ORDER BACKLOG
EUR million Mar 31, June Sep 30, Dec 31, Mar 31,
2006 30, 2006 2006 2007
2006
Metso Paper 1,459 1,540 1,547 2,225 2,190
Metso Minerals 1,043 1,101 1,213 1,277 1,497
Metso Automation 234 272 309 276 356
Valmet Automotive - - - - -
Corporate office and 3 3 7 0 0
other
Corporate office and others 3 3 7 0 0
total
Intra Metso order backlog (47) (52) (54) (41) (44)
Metso total 2,692 2,864 3,022 3,737 3,999
PERSONNEL
Mar 31, June Sep 30, Dec 31, Mar 31,
2006 30, 2006 2006 2007
2006
Metso Paper 8,902 9,328 9,445 11,558 11,469
Metso Minerals 8,914 9,124 9,158 9,433 9,545
Metso Automation 3,170 3,341 3,315 3,352 3,379
Valmet Automotive 1,088 1,077 1,082 1,013 899
Corporate office and 329 351 342 322 324
other
Corporate office and others 1,417 1,428 1,424 1,335 1,223
total
Metso total 22,403 23,221 23,342 25,678 25,616
NOTES TO THE INTERIM REVIEW
This interim review has been prepared in accordance with IAS 34
'Interim Financial Reporting.' The same accounting principles have
been applied as in the annual financial statements.
New accounting standards
IFRS 7
In August 2005, IASB issued IFRS 7 ‘Financial Instruments:
Disclosures' which requires the company to disclose information
enabling users of its financial statements to evaluate the
significance of financial instruments to its financial position
and performance. Metso adopted the standard and the related
amendments to IAS 1 'Presentation of Financial Statements' from
January 1, 2007.
IFRS 8
In November 2006, the IASB issued IFRS 8 'Operating segments'
which requires the application of the 'management approach' in
segment reporting. This would result in uniformity between the
disclosed information and the principles for evaluating the
financial performance of segments followed internally by the
management. Metso will evaluate the effects of IFRS 8 on the
consolidated financial statements. The standard will come into
force in the financial years beginning after January 1, 2009, but
may already be applied in earlier financial years.
Shares traded on the Helsinki and New York Stock Exchanges
The number of Metso Corporation shares traded on the Helsinki
Stock Exchange in January-March was 98 million, equivalent to a
turnover of EUR 3,821 million. The share price on March 31, 2007
was EUR 39.55. The highest quotation was EUR 42.20 and the lowest
EUR 34.79.
The number of Metso ADRs (American Depository Receipts) traded on
the New York Stock Exchange was 1.3 million, equivalent to a
turnover of USD 66 million. The price of an ADR on March 31, 2007
was USD 52.81. The highest quotation was USD 54.27 and the lowest
USD 44.37.
Disclosures of changes in holdings
J.P. Morgan Chase & Co. announced that the funds they managed held
6,996,732 Metso shares/ADRs on February 12, 2007 corresponding to
4.94 percent of the paid up share capital of Metso Corporation.
Publication dates for Metso's Interim Reviews in 2007
Metso's Interim Review for January - June will be published on
July 26, 2007,
Interim Review for January - September on October 25, 2007.
Metso is a global engineering and technology corporation with 2006
net sales of approximately EUR 5 billion. Its 25,500 employees in
more than 50 countries serve customers in the pulp and paper
industry, rock and minerals processing, the energy industry and
selected other industries.
www.metso.com
For further information, please contact:
Jorma Eloranta, President and CEO, Metso Corporation, tel. +358
204 84 3000
Olli Vaartimo, Executive Vice President and CFO, Metso
Corporation, tel. +358 204 84 3010
Johanna Sintonen, Vice President, Investor Relations, Metso
Corporation, tel. +358 204 84 3253
It should be noted that certain statements herein which are not
historical facts, including, without limitation, those regarding
expectations for general economic development and the market
situation, expectations for customer industry profitability and
investment willingness, expectations for company growth,
development and profitability and the realization of synergy
benefits and cost savings, and statements preceded by ”expects”,
”estimates”, ”forecasts” or similar expressions, are forward-
looking statements. These statements are based on current
decisions and plans and currently known factors. They involve
risks and uncertainties which may cause the actual results to
materially differ from the results currently expected by the
company.
Such factors include, but are not limited to:
(1) general economic conditions, including fluctuations in
exchange rates and interest levels which influence the operating
environment and profitability of customers and thereby the orders
received by the company and their margins
(2) the competitive situation, especially significant
technological solutions developed by competitors
(3) the company's own operating conditions, such as the success of
production, product development and project management and their
continuous development and improvement
(4) the success of pending and future acquisitions and
restructuring.
Metso Corporation
Olli Vaartimo Kati Renvall
Executive Vice President and CFO Vice President,
Corporate Communications
Distribution:
Helsinki Stock Exchange
New York Stock Exchange
The media
www.metso.com
