Metso's Interim Review, January 1-June 30, 2009
(Thomson Reuters ONE) - Metso's Company Release on July 24, 2009 at 12.00 p.m. local timeProfitability satisfactory. Guidance for 2009 intact.Highlights of the second quarter of 2009 * New orders worth EUR 1,020 million were received in April-June, i.e. 41 percent less than in the previous year (EUR 1,740 million in Q2/08). * At the end of June, the order backlog was 14 percent lower than at the end of December 2008, amounting to EUR 3,512 million (EUR 4,088 million at December 31, 2008). * Net sales decreased by 24 percent, standing at EUR 1,247 million (EUR 1,633 million in Q2/08). * Earnings before interest, tax and amortization (EBITA) were EUR 74.7 million, i.e. 6.0 percent of net sales (EUR 166.5 million and 10.2% in Q2/08). * Operating profit (EBIT) was EUR 65.9 million, i.e. 5.3 percent of net sales (EUR 155.2 million and 9.5% in Q2/08). * Earnings before interest, tax and amortization (EBITA) and operating profit (EBIT) in April-June, include some EUR 4 million in non-recurring expenses relating to capacity adjustment measures. * Earnings per share were EUR 0.26 (EUR 0.72 in Q2/08). * Free cash flow was EUR 80 million (EUR 59 million in Q2/08). * Return on capital employed (ROCE) before taxes was 9.3 percent (23.4% in Q2/08)."The overall cautious market sentiment in our customer industries hascontinued - with the positive exception of the paper and boardindustry in Asia, where we have seen improvement in the past fewmonths. The recovery in China is partly due to the implementedstimulus measures. So far it has resulted in several sizable ordersfor us, one of which has been included in our second quarter ordersreceived and the rest are to be included later this year," says JormaEloranta, President and CEO of Metso Corporation."The order intake for our equipment and project business in the firsthalf of the year was low, while the services demand remainedreasonably stable and satisfactory. Our profitability also remainedsatisfactory. Our overall financial development for January-June aswell as our updated estimates for the second half of the year supportour earlier guidance for this year. Our financial position is alsosolid."Eloranta notes that the overall market visibility for 2010 is weak."We are prepared to take additional capacity adjustment measures whenneeded. Our Board has today decided not to pay any additionaldividend for 2008. This is mainly due to the continuing generaluncertainty on the markets. Our financial performance and financialposition are stable and have developed according to our expectations.The importance of strong balance sheet increases in an uncertaineconomic climate."Metso's key figuresEUR million Q2/ Q2/ Change % Q1-Q2/ Q1-Q2/ Change % 2008 2009 2008 2009 2008Net sales 1,247 1,633 -24 2,467 3,033 -19 6,400Net sales of 522 606 -14 1,029 1,107 -7 2,343services business % of net sales 42 38 42 37 37EBITA beforenon-recurring 79.0 166.5 -53 169.8 300.2 -43 680.9capacity adjustmentexpenses % of net sales 6.3 10.2 6.9 9.9 10.6Earnings beforeinterest, tax and 74.7 166.5 -55 143.5 300.2 -52 680.9amortization(EBITA) % of net sales 6.0 10.2 5.8 9.9 10.6Operating profit 65.9 155.2 -58 124.5 274.8 -55 637.2 % of net sales 5.3 9.5 5.0 9.1 10.0Earnings per share, 0.26 0.72 -64 0.44 1.27 -65 2.75EUROrders received 1,020 1,740 -41 1,962 3,249 -40 6,384Order backlog at 3,512 4,494 -22 4,088end of periodFree cash flow 80 59 36 200 -40 n/a 29Return on capitalemployed (ROCE) 9.3 23.4 23.2before taxes,annualized, %Equity to assetsratio at end of 31.7 28.9 30.9period, %Gearing at end of 70.2 79.5 75.7period, %Metso's second-quarter 2009 reviewOperating environment and demand for products in April-JuneDue to the decline of the global economy and the uncertainty in thefinancial markets, our operating environment continued to bedemanding. Our customers were still cautious in their investmentdecisions, which particularly affected our equipment and projectbusinesses.The majority of mining companies have significantly cut theirinvestment plans compared with the peak investment levels of previousyears and continued to limit their production during the secondquarter of the year. The positive development in mineral and metalprices over the first half of 2009 has so far failed to improve thedemand. Due to our strong product and services offering and thesignificant increase in our installed equipment base, demand for ourmining equipment and related services continued on a satisfactorylevel. In the construction industry, demand for equipment relating toaggregates production continued on a weak level. Many countries haveintroduced economic stimulus packages relating to infrastructuredevelopment. According to our estimates, these measures will improvethe demand for construction industry products only in the longer termas much of the new capacity installed during recent years iscurrently under-utilized. Demand for our construction industryservices business was satisfactory.Demand for power plants utilizing renewable energy sources wassatisfactory in Europe and North America. The demand for power plantsutilizing biomass and waste is expected to improve during the yeardue to measures to stimulate the use of renewable energy sources.However, limited availability of financing tends to delay thedecision making in these projects. Demand for automation and flowcontrol solutions decreased during the second quarter of the year.Demand for metals recycling equipment continued on a weak level dueto the low price of scrap metal, customers' focus on inventoryreduction and curtailments in steel production. The demand for theservices business in our Energy and Environmental Technology segmentwas satisfactory.Demand for paper and board lines picked up in China during the secondquarter of the year. The recovery in the Chinese market was supportedby the economic stimulus measures which have been implemented there.Fiber producers continue to postpone investment decisions due to lowcapacity utilization rates and uncertainty related to demanddevelopment. We have agreed to extend the schedules in a fewadditional smaller and medium size projects but in general thepressure to renegotiate the schedules has diminished. Demand for ourservices business in the pulp and paper industry continued to be weakparticularly in North America and Europe due to low capacityutilization rates and capital spending restrictions.Orders received in April-JuneWe received new orders worth EUR 1,020 million in April-June. Thevalue of the orders was down by 41 percent from the comparisonperiod. Orders received decreased in all of the reporting segmentsfrom the comparison period. Previously received orders equaling someEUR 228 million were cancelled from the order backlog, of which themajority is related to Zhanjiang Chenming pulp mill ordercancellation. The agreements reported under the section "Events afterthe review period", are not included in the orders received nor inthe order backlog at the end of June.Orders received by Mining and Construction Technology in April-Juneequaled EUR 398 million, which was 57 percent less than the yearbefore. The Mining business line's orders received decreased by over60 percent on the exceptionally high comparison period. New ordersconsisted mainly of replacement, refurbishing and services businessorders; no large orders for projects were received. Orders receivedby the Construction business line declined 50 percent from thecomparison period.Orders received by the Energy and Environmental Technology segmentduring the second quarter totaled EUR 278 million, down 24 percent onthe comparison period. Orders received more than doubled in our Powerbusiness line from the weak second quarter order intake the yearbefore. Orders received decreased by over one third in the Automationbusiness line. This was mainly due to the heavy investment budgetcuts in the paper and pulp and energy industries. Orders received bythe Recycling business line decreased by over 75 percent due tocustomers' low capacity utilization rates. During the second quarterof the year, we received orders for a biofuel power boiler includingan automation and information management system for PGE ZespólElektrowni Dolna Odra S.A.'s heat and electricity co-generation plantin Poland, a recovery boiler for Phoenix Pulp & Paper Public CompanyLtd's pulp and paper mill in Thailand, as well as automation systemsfor two energy-from-waste plants in England.Orders received by our Paper and Fiber Technology segment inApril-June fell by 24 percent from the comparison period and totaledEUR 335 million. Paper business line was awarded a large coated finepaper production line order to Shandong Huatai Paper Co. Ltd inChina. Fiber and Tissue business lines received very few new orders.Also orders for the services business remained at an exceptionallylow level.Financial performance in April-JuneIn April-June our net sales equaled EUR 1,247 million, which was 24percent less than during the comparison period one year earlier (EUR1,633 million in Q2/08). The services business net sales decreased by14 percent on the comparison period, and accounted for 42 percent(38% in Q2/08) of Metso's second quarter net sales.Earnings before interest, tax and amortization (EBITA) for the secondquarter of the year were EUR 74.7 million, i.e. 6.0 percent of netsales (EUR 166.5 million and 10.2% in Q2/08). Metso's operatingprofit decreased and was EUR 65.9 million, or 5.3 percent of netsales (EUR 155.2 million and 9.5% in Q2/08). The result for thesecond quarter includes some EUR 4 million in non-recurring expensesresulting from capacity adjustment measures. The cancellation of theZhanjiang Chenming pulp mill order resulted in one-time expenses ofabout EUR 10 million mainly deriving from the dissolving of thehedging arrangements we had entered into. The result also includesEUR 6 million in capital gains from reducing our holding inTalvivaara Mining Company Plc's shares. The weakening of theoperating result on the comparison period resulted mainly from thenotable 24 percent decrease in net sales and related underabsorptionof fixed costs in a number of manufacturing and engineering units.The profit attributable to shareholders was EUR 37 million (EUR 102million in Q2/08) in the second quarter, corresponding to earningsper share (EPS) of EUR 0.26 (EUR 0.72 in Q2/08).Free cash flow remained strong during the second quarter and was EUR80 million. The positive cash flow development was supported by acontinued strong EUR 108 million decrease of inventories in theMining and Construction Technology segment which was partly offset bya strong decrease in advances received as well as in accounts payabledue to lower procurement volumes.Metso's January-June 2009 Interim ReviewOrders received and order backlogOrders received in January-June totaled EUR 1,962 million, down 40percent from the comparison period. Previously received ordersequaling some EUR 260 million were cancelled in January-June. Theseorder cancellations were booked off directly from the end-June 2009order backlog and had no impact on reported new orders. Almost EUR200 million of the cancellations relate to the cancellation of theZhanjiang Chenming pulp mill order received in August 2008. Cancelledorders worth approximately EUR 34 million were related to ourConstruction business line and about EUR 20 million to our Recyclingbusiness line.The three countries generating the largest total value of ordersreceived were China, the United States, and Finland. The share ofemerging markets in orders received was 49 percent (45% in Q1-Q2/08).All of our business segments reported decrease in orders received asour customers hesitated to make new investment decisions in the faceof the continuing uncertainty in the global markets and pooravailability of financing.At the end of June, our order backlog was EUR 3,512 million, which is14 percent less than at the end of 2008. Close to 60 percent of ourJune order backlog deliveries are expected to be completed during2009. The order backlog includes around EUR 800 million in projectswith somewhat uncertain delivery schedules and which will bedelivered after 2009. These orders include, among others, the pulpmill project for Aracruz in Brazil.Agreements reported under the section "Events after the reviewperiod", are not included in the orders received nor in the orderbacklog at the end of June.Orders received by reporting segments Q1-Q2/2009 Q1-Q2/2008 EUR million % of orders EUR % of orders received million receivedMining and ConstructionTechnology 783 40 1,623 49Energy and EnvironmentalTechnology 543 27 749 23Paper and Fiber 614 31 874 27TechnologyValmet Automotive 35 2 42 1Intra-Metso orders -13 -39receivedTotal 1,962 100 3,249 100Orders received by market area+-------------------------------------------------------------------+| | Q1-Q2/2009 | Q1-Q2/2008 ||----------------------+-----------------------+--------------------|| | EUR | % of orders | EUR | % of || | million | received | million | orders || | | | | received ||----------------------+---------+-------------+---------+----------|| Europe | 746 | 39 | 1,159 | 36 ||----------------------+---------+-------------+---------+----------|| North America | 320 | 16 | 631 | 19 ||----------------------+---------+-------------+---------+----------|| South and Central | 237 | 12 | 426 | 13 || America | | | | ||----------------------+---------+-------------+---------+----------|| Asia-Pacific | 535 | 27 | 784 | 24 ||----------------------+---------+-------------+---------+----------|| Rest of the world | 124 | 6 | 249 | 8 ||----------------------+---------+-------------+---------+----------|| Total | 1,962 | 100 | 3,249 | 100 |+-------------------------------------------------------------------+Net salesOur net sales for January-June decreased by 19 percent on thecomparison period and equaled EUR 2,467 million (EUR 3,033 million inQ1-Q2/08). Net sales decreased in all reporting segments: in Miningand Construction Technology by 12 percent, in Energy andEnvironmental Technology by 11 percent and in Paper and FiberTechnology by 34 percent. The net sales of our services businessdecreased by 7 percent and its share of total net sales was 42percent (37% in Q1-Q2/08).Measured by net sales, the largest countries were the United States,China and Germany, which together accounted for about 29 percent ofour total net sales.Net sales by reporting segments Q1-Q2/2009 Q1-Q2/2008 EUR million % of net EUR million % of net sales salesMining and ConstructionTechnology 1,059 43 1,199 39Energy and EnvironmentalTechnology 754 30 849 28Paper and Fiber Technology 646 26 976 32Valmet Automotive 35 1 42 1Intra-Metso net sales -27 -33Total 2,467 100 3,033 100Net sales by market area Q1-Q2/2009 Q1-Q2/2008 EUR million % of net EUR million % of net sales salesEurope 1,064 43 1,312 43North America 404 16 460 15South and Central 315 13 363 12AmericaAsia-Pacific 481 20 729 24Rest of the world 203 8 169 6Total 2,467 100 3,033 100Financial resultOur earnings before interest, tax and amortization (EBITA) forJanuary-June weakened significantly from the comparison period andequaled EUR 143.5 million, or 5.8 percent of net sales (EUR 300.2million and 9.9% in Q1-Q2/08). Our result includes non-recurringexpenses of EUR 26 million due to capacity adjustment measures, ofwhich EUR 18 million are related to Paper and Fiber Technology, EUR 5million to Mining and Construction Technology and EUR 3 million toEnergy and Environmental Technology.The EBITA of the Paper and Fiber Technology weakened markedly and wasEUR 12.6 million negative. The main causes for the weakenedprofitability were the high non-recurring expenses related to thecapacity adjustment measures, the low utilization rates in severalunits and the cancellation costs of the Zhanjiang Chenming pulp millorder, which resulted in one-time expenses of about EUR 10 millionmainly deriving from dissolving the hedging arrangements we hadentered into.The result for Mining and Construction Technology weakened clearlyfrom the previous year as a result of the lower delivery volumes inthe Construction business line and low capacity utilization rates inall manufacturing units. On the other hand the result includes EUR 6million in capital gains from reducing our holding in TalvivaaraMining Company Plc.The result of the Energy and Environmental Technology segment alsodecreased from the previous year mainly due to significantly reducedvolumes in the Recycling business line and timing of projectdeliveries in the Power business line.During the first half of the year our operating profit was EUR 124.5million, or 5.0 percent of net sales (EUR 274.8 million and 9.1% inQ1-Q2/08). Operating profit before non-recurring expenses related tocapacity adjustment actions was EUR 150.8 million or 6.1% of netsales.Our net financing expenses in January-June were EUR 36 million (EUR19 million). Due to the higher debt level compared to last year, ourinterest expenses increased by EUR 5 million and were EUR 36 million(EUR 31 million in Q1-Q2/08). Other financial expenses include a EUR4 million reversal of translation adjustments resulting from twosubsidiaries liquidated in the first quarter.Our profit before tax was EUR 89 million (EUR 256 million) and ourtax rate for 2009 is estimated to be about 30 percent (30% in 2008).The profit attributable to shareholders was EUR 63 million (EUR 180million) in January-June, corresponding to earnings per share (EPS)of EUR 0.44 (EUR 1.27 per share).In January-June, the annualized return on capital employed (ROCE)before taxes was 9.3 percent (23.4%) and return on equity (ROE) was8.7 percent (23.9%).Cash flow and financingNet cash generated by operating activities for January-June was EUR228 million (EUR 17 million in Q1-Q2/08).During January-June, EUR 135 million of net working capital wasreleased. EUR 192 million of the release came from inventories andEUR 55 million from trade receivables. Simultaneously, trade payablesdecreased by EUR 197 million. Inventories in Mining and ConstructionTechnology continued to decrease during the second quarter by EUR 108million and the cumulative decrease from the beginning of the year isnow EUR 180 million as a result of the ongoing special inventoryreduction initiative.Free cash flow was EUR 200 million positive in January-June (EUR 40million negative in Q1-Q2/08).Our net interest-bearing liabilities totaled EUR 1,042 million at theend of June (EUR 1,099 million on December 31, 2008).The total amount of short-term debt maturing over the next 12 monthsequaled EUR 357 million at the end of June. EUR 118 million of theshort-term debt consists of commercial papers issued in the Finnishmarkets, EUR 156 million is current portions of long-term debt andthe remainder is local working capital financing of subsidiaries,primarily in Brazil. About EUR 48 million of existing long-term debtwill mature during the two final quarters of 2010.The amount of commercial paper financing in use during January-Junefluctuated between EUR 110-160 million. During January-June, weobtained EUR 365 million in new long-term debt maturing in 4-5 years.The largest single transaction was a EUR 200 million five-yearfunding arrangement under the Euro medium term note (EMTN) program.New loans are primarily meant for the refinancing of our existingdebt and for the extension of the maturity structure. The amount ofthis new long term debt exceeds the repayments of earlier loans fromthe beginning of 2009 to halfway through 2011. Metso's liquidityposition is good. At the end of June, cash and cash equivalentstotalled EUR 605 million. The syndicated EUR 500 million revolvingcredit facility is available until late 2011, and it is currentlyundrawn.At the end of June, our gearing was 70.2 percent (79.5%) and theequity-to-assets ratio was 31.7 percent (28.9%). In April, followingthe Annual General Meeting, we paid EUR 99 million in dividends for2008.Capital expenditureOur gross capital expenditure for January-June decreased by 51percent on the comparison period and was EUR 55 million (EUR 112million in Q1-Q2/08).We expect our capital expenditure excluding business acquisitions toremain below EUR 150 million this year. Due to the changed globaleconomic situation, we are significantly restricting the amount ofnew investments and extending the implementation schedules of ongoinginvestment projects when feasible.We are constructing new plant and office premises for the Automationbusiness line in Shanghai, China. The Metso Park industrial facility,designed especially to serve the mining and construction industry, isunder construction in Rajasthan, India. In Finland, we are upgradinga pilot machine at the Paper Technology Center in Jyväskylä. We areestablishing a third service center for the pulp and paper industryin China, in Zibo, Shandong province. Due to the changed marketconditions, we have extended the implementation schedules for theMetso Park and Zibo service center investments. Investment projectsin enterprise resource planning systems are underway in Mining andConstruction Technology and in the Automation business line.Metso's research and development expenses in January-June totaled EUR61 million, representing 2.5 percent of Metso's net sales (EUR 66million and 2.2% in Q1-Q2/08).Acquisitions, divestments and joint venturesIn May, we sold the entire stock of Metso Paper Turku Works Oy toStairon Oy. Metso Paper Turku Works Oy manufactured air systems forthe pulp and paper industry. The sale had no significant impact onMetso's financial performance. The air system technology and therelated business will remain in Metso's ownership. Metso Paper TurkuWorks Oy employed 91 people. In conjunction with the sale, Metso andStairon have agreed on a long-term supply contract for themanufacture of certain key products.In January, we sold our composites manufacturing business and relatedassets in Oulu, Finland, to xperion Oy. Annual net sales of thedivested business have been less than EUR 5 million. The entirepersonnel of the business, 21 people, were transferred to xperion Oy.The divested business was part of our Paper business line.MW Power Oy, a joint venture of Metso's heat and power business andWärtsilä's biopower business, started its operations on January 1,2009. We own 60 percent and Wärtsilä owns 40 percent of the jointventure. An order backlog of approximately EUR 116 million wastransferred with Wärtsilä Biopower Oy to the joint venture. In 2008,the consolidated annual pro forma net sales of the company wereapproximately EUR 130 million and the number of employees about 200.Adjusting capacity to demandWe began adjusting our capacity and cost structure to lower demandimmediately when the market situation started to weaken in September2008 and have continued these measures in 2009. The aim is to ensurethe competitiveness of our operations.Our first steps were to reduce the number of temporary personnel andthe use of subcontractors. In addition we have initiated temporarylay-offs and permanent reductions at several of our units. In mostcases, the temporary lay-offs concern all employee groups, and theirduration varies, depending on the work load, from a few weeks tolonger periods. The temporary lay-offs are mainly in use in Finlandwhere local agreements allow for this type of flexibility. In othercountries we have applied alternative options made possible by laborlegislation, such as a shortened work week. Through theimplementation of temporary lay-offs in Finland, we estimate that wewill achieve some EUR 25-30 million savings in personnel costs overthe course of this year. Furthermore, during the first half-year wehave concluded employee negotiations to permanently reduce close to1,900 employees. In January-June we recorded EUR 26 million innon-recurring expenses resulting from these personnel reductions andthe closures of units connected with them. With these measures weestimate that we will achieve annual savings of about EUR 90 million,of which about EUR 40 million is estimated to be realized in 2009.As a result of the above actions, our actual comparable personnelreduction from the end of June 2008 to the end of June 2009 has beenabout 2,650 employees. In addition, with the decisions already madeduring the first half of the year, our personnel is estimated tocontinue to go down during the second half of 2009 and first quarterof 2010 by another about 1,250 employees taking the total personnelreductions already decided to almost 4,000 employees. Whencalculating the comparable personnel reduction from the end of June2008 to the end of June 2009 one has to take into considerations thatsome 1,800 employees have been added through acquisitions and some300 employees have left the company through divestitures. Inaddition, we estimate the impact of temporary lay-offs in Finland in2009 to equal to about 600 man-years in 2009.The table below details the most significant capacity-adjustmentmeasure decisions.Segment Business line Measures Implementati-on startingMining and Mining business Reduction of about December 2008Construction line 320 people, temporaryTechnology lay-offs according to work load, unit closures.Mining and Construction Reduction of about December 2008Construction business line 360 people, temporaryTechnology lay-offs, unit closures.Energy and Power business Reduction of 15 March 2009Environmental line people, temporaryTechnology lay-offs. Q2/2009: Reduction of 81 people including temporary work force reduction and internal transfers etc.Energy and Automation Reduction of 87 March 2009Environmental business line people includingTechnology closure of a unit and temporary lay-offs.Energy and Recycling Reduction of 24 September 2008Environmental business line people, temporaryTechnology revoking of contracts, shortened working hours.Paper and Fiber Paper business Reduction of about December 2008Technology line 750 people, temporary lay-offs, unit closures, transfers of personnel to other units.Paper and Fiber Fiber business Reduction of about December 2008Technology line 250 people, temporary lay-offs, reduction of temporary personnel.Paper and Fiber Tissue business Reduction of about 45 January 2009Technology line people.PersonnelAt the end of June, we had 27,608 employees, which was 1,714 lessthan at the end of 2008 (29,322 people at December 31, 2008). Around300 employees of these were seasonal workers. The number of employeesfell especially in Finland and Sweden, as a result of capacityadjustment measures in our Paper and Fiber Technology segment. DuringJanuary-June, we had an average of 28,414 employees.Personnel by area June 30, % of total June % of total Change Dec 31, 2009 personnel 30, personnel % 2008 2008Finland 8,813 32 9,837 35 -10 9,252Other Nordic 3,073 11 3,566 13 -14 3,332countriesOther Europe 3,588 13 3,391 12 6 3,842North America 3,606 13 3,890 14 -7 3,964South andCentral America 2,743 10 2,863 10 -4 2,991Asia-Pacific 4,332 16 3,077 11 41 4,469Rest of the 1,453 5 1,445 5 1 1,472worldTotal 27,608 100 28,069 100 -2 29,322Changes in top managementIn June, Perttu Louhiluoto was appointed Mining and ConstructionTechnology's Senior Vice President, EMEA market area, as of July 1,2009. He is responsible for sales and services delivery and miningand construction customer contacts in Europe, Middle East and Africa.Louhiluoto has worked as SVP, Operational Excellence at Group HeadOffice, Finland, since October 2008. Due to his new positionLouhiluoto has renounced his membership of Metso Executive Team andMetso Executive Forum.REPORTING SEGMENTSMining and Construction TechnologyEUR million Q2/09 Q2/08 Change Q1- Q1- Change 2008 % Q2/09 Q2/08 %Net sales 531 665 -20 1,059 1,199 -12 2,586Net sales of servicesbusiness 250 270 -7 492 508 -3 1,078 % of net sales 47 41 47 43 42Earnings beforeinterest, tax andamortization (EBITA) 46.9 91.8 -49 102.5 170.7 -40 361.2 % of net sales 8.8 13.8 9.7 14.2 14.0Operating profit 46.0 91.0 -49 100.9 169.2 -40 358.4 % of net sales 8.7 13.7 9.5 14.1 13.9Orders received 398 936 -57 783 1,623 -52 2,709Order backlog at endof period 1,196 1,850 -35 1,492Personnel at end ofperiod 10,344 10,503 -2 11,259Net sales of Mining and Construction Technology decreased by 12percent on the comparison period, equaling EUR 1,059 million. TheMining business line's net sales decreased by about 5 percent, whilethe net sales of the Construction business line decreased over 20percent. Net sales of the services business declined by 3 percent onthe comparison period and accounted for 47 percent of the segment'snet sales (43% in Q1-Q2/08).Mining and Construction Technology's operating profit for the firsthalf-year was EUR 100.9 million, i.e. 9.5 percent of net sales (EUR169.2 million and 14.1% in Q1-Q2/08). The segment's operating profitwas burdened by EUR 5 million in non-recurring expenses relating tothe capacity adjustment measures. The operating profit includes EUR 6million in capital gains relating to the reduction of our holding inTalvivaara Mining Company Plc. The profitability of the Miningbusiness line weakened but continued to be good. Profitability of theConstruction business line weakened clearly from the comparisonperiod due to lower delivery volumes, low capacity utilization ratesin the factories and one-time capacity adjustment measures.The value of orders received declined 52 percent from the comparisonperiod and was EUR 783 million in January-June (EUR 1,623 million inQ1-Q2/08). The amount of new orders decreased in both of thesegment's business lines in all geographical areas. The relativeshare of orders received from emerging markets remained on par withthe previous year, equaling 49 percent (50%). During January-June,around EUR 50 million in earlier received orders were cancelled.The order backlog declined by 20 percent from the end of 2008 andtotaled EUR 1,196 million at the end of June (EUR 1,492 million onDecember 31, 2008). Around EUR 200 million of the mining equipmentorders in the order backlog have somewhat uncertain deliveryschedules.A decision was made in June 2009 to renew the Mining and ConstructionTechnology segment's operating model. The aims of the new way tooperate include developing the services business, enhancing operatingefficiency and further strengthening of our position as a leadingprovider of mining and construction equipment and systems. As of July1, 2009 the segment will be organized into two new business lines:All services-related business activities, including the spare andwear parts business, will be concentrated into the Services businessline and all systems- and equipment-related business activities willbe consolidated into the Equipment and Systems business line.Energy and Environmental TechnologyEUR million Q2/09 Q2/08 Change Q1- Q1- Change 2008 % Q2/09 Q2/08 %Net sales 357 476 -25 754 849 -11 1,775Net sales of servicesbusiness 130 143 -9 262 254 3 549 % of net sales 37 31 35 31 32Earnings before interest,tax and amortization(EBITA) 34.1 49.7 -31 66.4 82.1 -19 198.3 % of net sales 9.6 10.4 8.8 9.7 11.2Operating profit 29.7 44.2 -33 57.4 68.8 -17 176.0 % of net sales 8.3 9.3 7.6 8.1 9.9Orders received 278 367 -24 543 749 -28 1,658Order backlog at end ofperiod 1,035 1,253 -17 1,204Personnel at end ofperiod 6,349 6,311 1 6,357The net sales of Energy and Environmental Technology declined by 11percent on the comparison period, equaling EUR 754 million. TheAutomation business line's net sales were on last year's level whilethe Power and Recycling business line's net sales declined clearlyfrom the comparison period. The main reason for decline in the Powerbusiness line's net sales was the timing of the projects in the orderbacklog. The services business grew by 3 percent, and its share ofthe segment's net sales went up to 35 percent (31% in Q1-Q2/08).The Energy and Environmental Technology segment's earnings beforeinterest, tax and amortization (EBITA) weakened from the previousyear and equaled EUR 66.4 million, or 8.8 percent of net sales (EUR82.1 million and 9.7% in Q1-Q2/08). The EBITA margin improvedslightly from the previous year's level in the Automation businessline, weakened somewhat in the Power business line due to timing ofdeliveries and declined significantly in the Recycling business linedue to low volumes and capacity utilization rates. The operatingprofit includes almost EUR 3 million in non-recurring expensesresulting from capacity adjustment measures.The value of orders received fell by 28 percent from the comparisonperiod and totaled EUR 543 million. The decrease came from theAutomation and Recycling business lines. Approximately EUR 80 millionof orders previously received by the Energy and EnvironmentalTechnology segment were cancelled, of which about EUR 60 millionresulted from the cancelled Zhanjiang Chenming recovery boiler order.Larger orders came in particularly from the power productionindustry, for example a recovery boiler for Phoenix Pulp & PaperPublic Company Limited's pulp and paper mill in Thailand, a powerboiler including an automation and information management system forPGE Zespól Elektrowni Dolna Odra S.A.'s heat and electricityco-generation plant in Poland and automation systems for twoenergy-from-waste plants in the United Kingdom.The order backlog at the end of June, EUR 1,035 million, was 14percent lower than at the end of 2008. Projects accounting forslightly less than EUR 110 million of the order backlog's total valueare subject to uncertainties relating to delivery schedules. Theseuncertain orders include, among others, the delivery of power boilerand automation technology for the pulp mill project of Aracruz inBrazil.Paper and Fiber TechnologyEUR million Q2/09 Q2/08 Change Q1- Q1- Change 2008 % Q2/09 Q2/08 %Net sales 359 493 -27 646 976 -34 2,044Net sales of servicesbusiness 143 193 -26 275 345 -20 716 % of net sales 40 39 43 35 35Earnings beforeinterest, tax andamortization (EBITA) 1.4 28.1 -95 -12.6 58.0 n/a 146.1 % of net sales 0.4 5.7 -2.0 5.9 7.1Operating profit -1.6 23.8 n/a -19.8 48.7 n/a 130.1 % of net sales -0.4 4.8 -3.1 5.0 6.4Orders received 335 441 -24 614 874 -30 2,021Order backlog at end ofperiod 1,304 1,441 -10 1,434Personnel at end ofperiod 9,858 10,089 -2 10,544The net sales of Paper and Fiber Technology decreased by 34 percentin January-June, equaling EUR 646 million. The decrease was due tothe overall slowdown of the markets and the timing of the deliveriesin the order backlog. Net sales decreased clearly across all of thebusiness lines. The services business net sales for January-Junedecreased by 20 percent but equaled 43 percent of segment's net salesdue to low new equipment sales (35% in Q1-Q2/08).Paper and Fiber Technology's EBITA for the first half-year was EUR12.6 million negative (EUR 58.0 million positive in Q1-Q2/08). Theresult includes around EUR 18 million in non-recurring costsresulting from capacity adjustment measures. The cancellation of theZhanjiang Chenming pulp mill order resulted in about EUR 10 millionof one-time expenses mainly deriving from the dissolving of thehedging arrangements we had entered into. The underlying operationalEBITA before the above mentioned non-recurring capacity adjustmentand cancellation costs was EUR 15.0 million. The profitability of thefirst half of the year was also weakened by the low capacityutilization rate of our manufacturing and engineering units, capacityadjustment expenses and low volume.The weak demand for the pulp industry's machinery and equipmentcontinued. Demand for paper and board lines picked up in China in thesecond quarter partly due to the stimulus measures which have beenimplemented there. The value of orders received decreased 30 percentfrom the comparison period and was EUR 614 million.The largest orderreceived was a coated fine paper production line to Shandong HuataiPaper Co. Ltd, in China. The order backlog at the end of June was EUR1,304 million. Close to 40 percent of the projects in the orderbacklog are subject to uncertainties relating to delivery schedules.These include, for example, the Aracruz pulp equipment order.Agreements reported under the section "Events after the reviewperiod", are not included in orders received nor order backlog at theend of June.Two of our North American customers, Smurfit-Stone ContainerCorporation and AbitibiBowater Inc., announced in the beginning ofthe year that they have filed a voluntary petition for reorganizationunder Chapter 11. For the first half of the year, we have recognizeda EUR 4 million credit loss reserve to cover the risks related tothese reorganizations.Valmet AutomotiveValmet Automotive's net sales in January-June totaled EUR 35 million(EUR 42 million in Q1-Q2/08). Operating loss was EUR 2.9 million(operating profit EUR 1.9 million in Q1-Q2/08). In January-June,Valmet Automotive produced an average of 71 vehicles (108 vehicles inQ1-Q2/08) per day. At the end of June, Valmet Automotive employed 636people (783 people at December 31, 2008).In January, Valmet Automotive signed an agreement with the Danishcompany Garia A/S for the engineering and manufacturing of anelectric golf car. The production of this vehicle is planned to beginduring the third quarter. The agreement spans several years andinvolves the production of a few thousand Garia golf cars annually.At the end of 2008, Valmet Automotive and the U.S. company FiskerAutomotive Inc. signed a cooperation agreement on the engineering andmanufacturing of Fisker Karma hybrid cars in Finland. The first carsare planned to be manufactured during the fourth quarter of thisyear. The agreement spans several years and annual production isprojected to be 15,000 cars. Valmet Automotive's current assemblycontract with Porsche will continue until 2012.Events after the review periodFine paper line to Zhanjiang Chenming in China, earlier received pulpmill order cancelledIn July, we signed a contract with the Chinese Zhanjiang ChenmingPulp & Paper Co., Ltd., for the supply of the world's largest finepaper production line to the company's greenfield pulp and paper millin Zhanjiang, China. The total value of the order is approximatelyEUR 130 million. The new paper line order is included in Paper andFiber Technology's third quarter orders received. Metso agreed withthe customer that the pulp mill order which we were awarded in thethird quarter of 2008 was cancelled and the cancelled order has beenremoved from June 2009 order backlog.A letter of order for a paper making line with MCC Meili of ChinaIn July, Metso and the Chinese MCC Meili Paper Industry Co. Ltd.signed a letter of order for the delivery of a lightweight-coatedpapermaking line to the customer's mill in Zhongwei city, Ningxiaautonomous region in China. The start-up of the production line isscheduled for the first quarter of 2011. The total value of the orderis approximately EUR 90 million. The deal is still subject to theparties coming to the final agreement of the project within a fewmonths.Metso decides not to distribute the additional dividend from 2008On July 24, 2009, Metso's Board of Directors decided that Metso willnot pay any additional dividend for 2008 in addition to the ordinarydividend of 0.70 euro per share that was distributed in April 2009.Metso's financial performance and financial position are stable andhave developed according to management expectations, but the marketvisibility for 2010 continues to be weak. The importance of strongbalance sheet increases in an uncertain economic climate.The Annual General Meeting of March 30, 2009 authorized the Board todecide by the end of 2009, at its discretion and when the economicsituation of Metso favors it, on the payment of an additionaldividend for 2008 in the amount of no more than EUR 0.68 per share.With this Board decision no additional dividend will be distributed.Short-term risks of business operationsBased on the uncertainty in the global economy and financial markets,our business environment for 2009 is continuing to be demanding.The global economic recession and the financial crisis may haveadverse effects on projects in our order backlog. Some projects maybe postponed or they may be suspended or canceled. We estimate thatover 20 percent of the projects currently in our order backlog aresubject to uncertainties relating to delivery schedules. We apply thepercentage of completion method to long-term delivery agreements, sowe recognize long-term delivery agreements according the progress ofthe delivery. The customer advance payment is typically 10-30percent, in addition to which the customer makes progress paymentsbased on the milestones during the project execution, whichsignificantly decreases risk related to projects. We assesscontinually our customers' creditworthiness and ability to fulfilltheir obligations. If a customer faces liquidity problems, we willdiscuss the possibility of changing project delivery schedules andterms of payment and any other measures needed. As a rule, we do notfinance customer projects.We have launched many measures to adjust to the rapidly changingoperating environment. We are adjusting our capacity as well as costand operational structure to correspond with the demand, in order tomaintain our competitiveness. As a result of the global recession,the markets for our products are decreasing, leading to tighteningcost competition.Securing the continuity of our operations requires that sufficientfunding is available under all circumstances. The financial crisismay have adverse effects on the availability of our debt financingand increase the costs relating to it. We estimate that our financialassets and available credit facilities are sufficient to secureshort-term liquidity. At the end of June, cash and cash equivalentstotaled EUR 605 million and credit facilities available forwithdrawal amounted to EUR 500 million. The average repayment periodfor our long-term loan capital is 3.9 years. More than half of ourlong-term debt will mature after 2011. There are no prepaymentcovenants in our debt facilities that would be triggered by changesin credit ratings. Some of our debt facilities include financialcovenants related to capital structure. Currently we fully meet thecovenants and other terms related to our financing agreements. Weconsider our flexibility in relation to the covenants to be adequate.The levels of net working capital and the level of capitalexpenditure have a fundamental effect on the adequacy of financing.Our aim is to decrease the level of our net working capital, and thiscould be difficult to achieve if the economic downturn is prolonged.We do not have any particularly large-scale investment projectsunderway, and we estimate that we are well positioned to keep ourcapital expenditure at a moderate level in the coming years.We have EUR 787 million of goodwill on our balance sheet related tocorporate acquisitions made over the last 10 years. We monitor ourgoodwill quarterly and carry out comprehensive impairment testingannually in September. Following the significant changes in ourbusiness environment, we have conducted additional impairment testingreviews at the end of every quarter since September 2008, and havenot found any impairment necessary. The quarterly testing reviewshave been conducted with the same principles as the annual tests andthe discount rates have been adjusted when appropriate. Theprinciples of the impairment testing are represented in the annualreport.Changes in the prices of raw materials and components could affectour profitability. On the one hand, the risk of increases inprocurement costs typically diminishes during economic downturn. Onthe other hand, some of our customers are raw-material producers,whose ability to operate and invest may be hampered by declining rawmaterial prices. Changes in raw material and component prices alsoaffect the value of our inventories. Over the past few months, wehave sold finished construction equipment from the inventory with alower contribution margin than during the past few years.Of the financial risks that affect our profitability, currencyexchange rate risks are among the most substantial. Exchange ratechanges can affect our business, although the geographical scope ofour operations decreases the significance of any individual currency.The prevailing uncertainty in the financing markets is likely toincrease exchange rate fluctuations.Short-term outlookBased on the global economic recession and uncertain financialmarkets, we estimate that our business environment will continue tobe demanding during the rest of the year. Our customers are beingcautious in their investment decisions, which particularly affectsour equipment sales and project business. Our customers' capacityutilization rates have decreased which has had some negative impacton our services net sales, too.Several mining companies are making substantial cuts in theirinvestment plans compared with the recent years and are limitingtheir production. Due to our strong product and services offering, aswell as our large installed equipment base, which has further grownsignificantly over the last few years, the demand for our miningequipment and services is expected to be satisfactory in 2009. In theconstruction industry, we estimate that the demand for equipmentrelating to aggregates production will be weak. Many countries haveintroduced stimulus measures relating to infrastructure development,which we expect to have a positive effect on the demand for ourconstruction industry products in the long term. We estimate that thedemand for our services offering in the construction industry will besatisfactory.We estimate that the demand for power plants utilizing renewableenergy sources will be satisfactory in Europe and North America in2009. Many countries have initiated plans to increase the use ofrenewable energy sources. This is expected to support the demand forpower plants utilizing biomass and waste. However, limitedavailability of financing may delay decision making in theseprojects. We estimate that the demand for our automation and flowcontrol products will be satisfactory in 2009. The demand for metalsrecycling equipment is expected to be weak, owing to the low price ofscrap metal and decline in steel production. We expect that thedemand for the services offering of Energy and EnvironmentalTechnology will be satisfactory.We estimate that the demand for fiber lines will be weak and forpaper and board lines satisfactory in 2009. In the short-term, anumber of paper and board machine projects in China are expected tomaterialize, partly thanks to the local stimulus measures. Thedelivery schedules of some of the major paper and board machine andfiber line projects in our order backlog have been prolonged. Weestimate that the low capacity utilization rates in the pulp andpaper industry will have a negative impact on the demand for ourservices business, particularly in North America and Europe.We estimate that our net sales will exceed EUR 5 billion in 2009. Ourorder backlog stands at EUR 3.5 billion, of which EUR 2.0 billionconsists of deliveries for 2009. We expect our services business toremain satisfactory in 2009.We expect our profitability level to be satisfactory in 2009. We alsoexpect our free cash flow to improve considerably on 2008 owingmainly to the measures aimed at releasing net working capital.The net sales and profitability estimates are based on our currentmarket outlook and business scope.Helsinki, July 24, 2009Metso Corporation's Board of DirectorsIt should be noted that certain statements herein which are nothistorical facts, including, without limitation, those regardingexpectations for general economic development and the marketsituation, expectations for customer industry profitability andinvestment willingness, expectations for company growth, developmentand profitability and the realization of synergy benefits and costsavings, and statements preceded by "expects", "estimates","forecasts" or similar expressions, are forward-looking statements.These statements are based on current decisions and plans andcurrently known factors. They involve risks and uncertainties whichmay cause the actual results to materially differ from the resultscurrently expected by the company.Such factors include, but are not limited to:1) general economic conditions, including fluctuations in exchangerates and interest levels, which influence the operating environmentand profitability of customers and thereby the orders received by thecompany and their margins(2) the competitive situation, especially significant technologicalsolutions developed by competitors(3) the company's own operating conditions, such as the success ofproduction, product development and project management and theircontinuous development and improvement(4) the success of pending and future acquisitions and restructuring. The Interim Review is unauditedCONSOLIDATED STATEMENT OF INCOMEEUR million 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Net sales 1,247 1,633 2,467 3,033 6,400Cost of goods sold -942 -1,210 -1,867 -2,248 -4,733Gross profit 305 423 600 785 1,667Selling, general andadministrative expenses -239 -266 -478 -515 -1,043Other operating incomeand expenses, net -1 -2 2 4 11Share in profits ofassociated companies 1 0 1 1 2Operating profit 66 155 125 275 637% of net sales 5.3% 9.5% 5.1% 9.1% 10.0%Financial income andexpenses, net -14 -10 -36 -19 -89Profit before taxes 52 145 89 256 548Income taxes -15 -43 -26 -76 -158Profit 37 102 63 180 390Attributable to:Shareholders of thecompany 37 102 63 180 389Minority interests 0 0 0 0 1Profit 37 102 63 180 390Earnings per share, EUR 0.26 0.72 0.44 1.27 2.75CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOMEEUR million 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Profit 37 102 63 180 390Cash flow hedges, netof tax 15 5 10 9 -33Available-for-saleequity investments, netof tax 4 0 10 0 -19Currency translation onsubsidiary netinvestments 10 15 48 -50 -49Net investment hedgegains (losses), net oftax 11 -5 2 8 -11Defined benefit planactuarial gains(losses), net of tax - - - - -22Other comprehensiveincome (expense) 40 15 70 -33 -134Total comprehensiveincome (expense) 77 117 133 147 256Attributable to:Shareholders of thecompany 77 117 133 147 255Minority interests 0 0 0 0 1Total comprehensiveincome (expense) 77 117 133 147 256CONSOLIDATED BALANCE SHEETASSETS June 30, June 30, Dec 31,EUR million 2009 2008 2008Non-current assetsIntangible assetsGoodwill 787 774 778Other intangible assets 250 269 254 1,037 1,043 1,032Property, plant and equipmentLand and water areas 59 54 58Buildings and structures 239 212 239Machinery and equipment 370 312 366Assets under construction 55 85 63 723 663 726Financial and other assetsInvestments in associated companies 14 19 14Available-for-sale equity investments 31 44 18Loan and other interest bearing receivables 9 12 8Available-for-sale financial investments 5 5 5Derivative financial instruments 0 8 0Deferred tax asset 178 119 174Other non-current assets 29 14 26 266 221 245Total non-current assets 2,026 1,927 2,003Current assetsInventories 1,466 1,616 1,606ReceivablesTrade and other receivables 1,088 1,199 1,146Cost and earnings of projects underconstruction in excess of advance billings 246 400 362Loan and other interest bearing receivables 8 2 9Available-for-sale financial assets 10 - -Derivative financial instruments 30 22 48Income tax receivables 29 33 23 1,411 1,656 1,588Cash and cash equivalents 605 361 314Total current assets 3,482 3,633 3,508TOTAL ASSETS 5,508 5,560 5,511SHAREHOLDERS' EQUITY AND LIABILITIES June 30, June 30,EUR million 2009 2008 Dec 31, 2008EquityShare capital 241 241 241Share premium reserve - 77 -Cumulative translation adjustments -86 -118 -136Fair value and other reserves 508 471 490Retained earnings 811 666 849Equity attributable to shareholders 1,474 1,337 1,444Minority interests 9 7 9Total equity 1,483 1,344 1,453LiabilitiesNon-current liabilitiesLong-term debt 1,322 850 1,089Post employment benefit obligations 191 169 191Provisions 43 44 36Derivative financial instruments 8 - 8Deferred tax liability 47 42 45Other long-term liabilities 3 4 4Total non-current liabilities 1,614 1,109 1,373Current liabilitiesCurrent portion of long-term debt 156 92 101Short-term debt 201 505 245Trade and other payables 952 1 310 1 189Provisions 233 212 218Advances received 489 632 479Billings in excess of cost andearnings of projectsunder construction 339 279 323Derivative financial instruments 35 21 82Income tax liabilities 6 56 48Total current liabilities 2,411 3,107 2,685Total liabilities 4,025 4,216 4,058TOTAL SHAREHOLDERS' EQUITY ANDLIABILITIES 5,508 5,560 5,511NET INTEREST BEARING LIABILITIESLong-term interest bearing debt 1,322 850 1,089Short-term interest bearing debt 357 597 346Cash and cash equivalents -605 -361 -314Other interest bearing assets -32 -19 -22Total 1,042 1,067 1,099CONDENSED CONSOLIDATED CASH FLOW STATEMENTEUR million 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Cash flows fromoperating activities:Profit 37 102 63 180 390Adjustments to reconcile profitto net cash provided byoperating activitiesDepreciation andamortization 34 34 70 71 138Interests and dividendincome 14 15 30 24 57Income taxes 15 43 26 76 158Other 1 4 10 4 34Change in net workingcapital 41 -67 135 -254 -437Cash flows fromoperations 142 131 334 101 340Interest paid anddividends received -14 -6 -25 -10 -49Income taxes paid -36 -39 -81 -74 -154Net cash provided by(used in) operatingactivities 92 86 228 17 137Cash flows frominvesting activities:Capital expenditures onfixed assets -25 -70 -55 -112 -255Proceeds from sale offixed assets 1 2 3 3 10Business acquisitions,net of cash acquired - -39 -3 -39 -44Proceeds from sale ofbusinesses, net of cash sold 0 1 2 3 12(Investments in)proceeds from sale offinancial assets -3 - -3 7 7Other 1 -1 1 -7 -7Net cash provided by(used in) investingactivities -26 -107 -55 -145 -277Cash flows fromfinancing activities:Redemption of ownshares - - -2 - -Dividends paid -99 -425 -99 -425 -425Net funding 201 397 214 637 621Other -6 13 -6 15 15Net cash provided by(used in) financingactivities 96 -15 107 227 211Net increase (decrease)in cash and cashequivalents 162 -36 280 99 71Effect from changes inexchange rates 7 8 11 -5 -24Cash and cashequivalents atbeginning of period 436 389 314 267 267Cash and cashequivalents at end ofperiod 605 361 605 361 314Free cash flowEUR million 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Net cash provided byoperating activities 92 86 228 17 137Capital expenditures onmaintenance investments -13 -29 -31 -60 -118Proceeds from sale offixed assets 1 2 3 3 10Free cash flow 80 59 200 -40 29CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' 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 uityBala
Datum: 24.07.2009 - 11:01 Uhr
Sprache: Deutsch
News-ID 3950
Anzahl Zeichen: 0
contact information:
Town:
London
Kategorie:
Business News
Diese Pressemitteilung wurde bisher 405 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Metso's Interim Review, January 1-June 30, 2009"
steht unter der journalistisch-redaktionellen Verantwortung von
Metso Corporation (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
