Metso Corporation´s Interim Review, January 1 - September 30, 2010
(Thomson Reuters ONE) -
Metso Corporation's stock exchange release on October 28, 2010 at around 12:00
p.m. local time
Solid performance
Highlights of the third quarter of 2010
* New orders worth EUR 1,409 million were received in July-September, i.e. 37
percent more than in the comparison period (EUR 1,031 million in Q3/2009).
* At the end of September, the order backlog was up by 21 percent on the end
of December 2009, and totaled EUR 4,144 million (EUR 3,415 million at
December 31, 2009).
* Net sales increased by 11 percent on the comparison period, and were EUR
1,325 million (EUR 1,196 million in Q3/2009).
* Earnings before interest, tax and amortization (EBITA), before non-recurring
items, were EUR 128.6 million in July-September, i.e. 9.7 percent of net
sales (EUR 134.3 million and 11.2% in Q3/2009).
* Operating profit (EBIT) was EUR 103.5 million, i.e. 7.8 percent of net sales
(EUR 114.1 million and 9.5% in Q3/2009).
* The EBIT includes as a whole EUR 10.5 million in negative non-recurring
items (EUR 9.7 million in negative non-recurring items in Q3/2009).
* Earnings per share were EUR 0.45 (EUR 0.44 in Q3/2009).
* Free cash flow was EUR 122 million (EUR 249 million in Q3/2009).
* Return on capital employed (ROCE) before taxes was 13.0 percent (11.1% in
Q3/2009).
"I am pleased with our solid performance. Our underlying operational performance
has improved quarter on quarter this year, underlying EBITA margin was 7.5
percent in the first quarter, 9.1 percent in the second quarter and now 9.7
percent in this quarter. Another strong area is our services business which
continues to develop strongly: orders have grown this year about 38 percent. I
am also pleased with our good free cash flow for the quarter. Our strong balance
sheet gives us a solid base to develop Metso further", comments Metso's
President and CEO Jorma Eloranta.
"We anticipate that the gradual recovery will continue in most of our customer
industries, but the picture is mixed. Out of our new orders 56 percent came from
the emerging markets in the third quarter and the outlook remains strong. In
Europe and North America demand outlook is more uncertain. There are also
differences between customer industries: for example demand in the mining
industry continues strong while in the power market final decision-making in new
projects is taking quite a long time despite the favorable long-term demand
outlook for renewable energy.
Our guidance for 2010 is intact. We have also given our estimate of 2011
development. Our orders received for the first nine months of this year exceed
the net sales for the same period by 15 percent. Based on this and assuming that
the gradual recovery of the global economy will continue we estimate that in
2011 our net sales will grow about 10 percent compared to this year and EBITA
before non-recurring items will improve."
Metso's key figures
Q3/ Q3/ Chan- Chan-
EUR million Q1-Q3/ 2010 Q1-Q3/ 2009 2009
2010 2009 ge % ge %
Net sales 1,325 1,196 11 3,865 3,663 6 5,016
Net sales of services 615 511 20 1,738 1,565 11 2,102
business
% of net sales 47 43 46 43 42
Earnings before interest,
tax and amortization
(EBITA) and non-recurring
items
128.6 134.3 -4 341.2 311.0 10 399.0
% of net sales 9.7 11.2 8.8 8.5 8.0
Operating profit 103.5 114.1 -9 313.0 238.6 31 293.6
% of net sales 7.8 9.5 8.1 6.5 5.9
Earnings per share, EUR 0.45 0.44 2 1.21 0.88 38 1.06
Orders received 1,409 1,031 37 4,446 2,993 49 4,358
Orders received of
services business
672 456 47 2,000 1,450 38 1,937
Order backlog at end of 4,144 3,340 24 3,415
period
Free cash flow 122 249 -51 321 449 -29 717
Return on capital employed
(ROCE) before taxes,
annualized, %
13.0 11.1 10.0
Equity to assets ratio at
end of period, %
37.2 33.2 35.7
Gearing at end of period, 21.3 51.1 32.5
%
Metso's third quarter 2010 review
Operating environment and demand in July-September
The gradual recovery of demand continued in most of our customer industries in
the third quarter of 2010. The growing budget deficits of several European
countries and the United States coupled with strong fluctuations in exchange
rates have, however, led to uncertainty, which has slowed the recovery of the
markets particularly in Europe and North America. In the emerging markets market
outlook continues to be strong. Our customers' overall capacity utilization
rates have clearly improved, which has had a positive impact on our services
business.
Mining companies ran their production at high capacity utilization rates and
quotations for equipment and projects were at a strong level resulting in an
increase in new orders. Due to the strengthening demand and prices for minerals
and due to our large installed equipment base, demand for our services for
mining customers improved further.
In the construction industry, demand for equipment used in aggregates production
was weak in Europe and in North America. Infrastructure construction projects in
the Asia-Pacific region and in the Brazilian markets maintained healthy demand
thanks to continued economic growth. Demand for our services business for the
construction industry was satisfactory.
Demand for power plants that utilize renewable energy sources was good in Europe
and North America in July-September. Several European countries and the United
States have published targets to increase the use of renewable energy supporting
the long-term demand for our power plant solutions fuelled by biomass and waste.
However, in the short-term, uncertainty in the financial markets and pending
policies on support mechanisms for renewable energy are delaying decision-making
in several projects. Demand for the power plant services business was good.
Demand for our automation products continued to be good as the oil, gas and
petrochemical industries increased their investments due to the favourable long-
term outlook in the global energy segment. Demand for our automation solutions
by the pulp and paper customer industry developed favorably, too. Demand for our
services business for automation was good.
The demand for metal and solid waste recycling equipment was satisfactory.
Demand for recycling equipment services has clearly improved in 2010 alongside
the increasing capacity utilization rates of our customers' plants and
equipment.
The demand for new fiber lines, pulp mill rebuilds and mill services was
satisfactory during the quarter as the price and demand of pulp have
strengthened. A few large chemical pulp industry projects are in the preparatory
phase in South America. Demand for new paper and board lines focused on China
and was satisfactory. The use of tissue is quickly growing worldwide,
particularly in emerging markets, and the demand for new tissue lines was good.
The paper and board industry's improved capacity utilization rates resulted in
increased demand for paper machine clothing and our other services products.
Orders received in July-September
In July-September, we received new orders worth EUR 1,409 million, i.e. 37
percent more than in the comparison period (EUR 1,031 million in Q3/2009). The
share of emerging markets in our orders received was 56 percent. Orders received
increased on the weak comparison period in all of our reporting segments and in
all geographical areas except in Western Europe. Services orders increased 47
percent on the comparison period and accounted for 48 percent of the total
orders. Services orders grew in all segments.
Orders received by Mining and Construction Technology in July-September amounted
to EUR 643 million, which was 53 percent more than in the comparison period (EUR
420 million in Q3/2009). This was the seventh consecutive growth quarter since
the lowest point in the last quarter of 2008. Orders received from mining
customers increased 92 percent whereas orders from construction customers
decreased 4 percent. Services business orders were up 30 percent, and the growth
came mostly from mining customers. Among the largest, was an order received for
mining and minerals processing equipment and services for Nordic Mines' new gold
ore processing plant in Finland.
Orders received by Energy and Environmental Technology increased by 36 percent
on the comparison period and totaled EUR 341 million (EUR 250 million in
Q3/2009). Orders received by the Power business increased 32 percent and those
of the Automation business by 35 percent. In the Recycling business, orders
received grew by nearly 50 percent on the exceptionally weak comparison period.
Orders received included a service and rebuild project for one of Celulosa
Arauco y Constitucíon's recovery boilers that was damaged in an earthquake in
Arauco, Chile, a conversion of a pulverized coal boiler to a biomass-fired
boiler for Dalkia in Poland and a new biomass-fired power plant to Bomhus Energi
in Sweden.
Orders received by Paper and Fiber Technology grew 13 percent on the comparison
period and totaled EUR 417 million in July-September (EUR 369 million in
Q3/2009). Growth in orders received came from the Fiber business, where new
orders grew by 126 percent. The orders received included a coated board line for
Lee & Man Paper Manufacturing in Guangdong province and two board machines for
Liansheng Paper Industry (Longhai) in Longhai City, China.
Financial performance in July-September
Our net sales in July-September totaled EUR 1,325 million, which is 11 percent
more than a year earlier (EUR 1,196 million in Q3/2009). The services business
net sales increased 20 percent on the comparison period, and accounted for 47
percent of total net sales (43% in Q3/2009).
In the third quarter, our earnings before interest, tax and amortization and
non-recurring items (EBITA before non-recurring items), were EUR 128.6 million,
i.e. 9.7 percent of net sales (EUR 134.3 million and 11.2% in Q3/2009).
Profitability (i.e. EBITA margin before non-recurring items) continued to show
an improving trend after being 7.5 percent in the first quarter and 9.1 percent
in the second quarter. Decline in profitability compared with the third quarter
in 2009 was primarily due to clear increase in selling, general and
administrative expenses (SG&As), from 17.6 percent of net sales to 18.9 percent.
SG&As were at an exceptionally low level in the third quarter of 2009 due to
strict savings measures. This quarter SG&As have grown as a result of rapidly
increased market activity evidenced by 37 percent increase in new orders. Third
quarter gross profit margin improved to 26.9 percent from 26.0 percent in the
same period last year.
Metso's operating profit (EBIT) was EUR 103.5 million, or 7.8 percent of net
sales (EUR 114.1 million and 9.5% in Q3/2009). Our EBIT for July-September
included the following non-recurring items (see table), which had a total
negative impact of EUR 10.5 million on our third-quarter financial performance.
Non-recurring items in July-September
Q3/2010
Mining and Energy and Paper and Fiber Metso
Construction Environmental Technology
Technology Technology Group
EUR million
EBITA before non- 74.9 31.7 31.8 128.6
recurring items
% of net sales 13.3 10.2 7.2 9.7
Capacity
adjustment -1.2 -2.9 -2.7 -6.8
expenses
Adjustments
related to
intellectual
property -2.0 - - -2.0
settlements in the
United States and
in Australia
Adjustments
related to -1.6 - - -1.6
business disposal
Provision for
prior years' ICMS -0.1 - - -0.1
(VAT) tax credit
in Brazil
Amortization of
intangible assets -1.8 -5.0 -7.2 -14.6
*)
Operating profit 68.2 23.8 21.9 103.5
(EBIT)
*) Amortization of intangible assets includes EUR 8.4 million that is related to
fair value allocations of acquired businesses.
Q3/2009
Mining and Energy and Paper and Fiber Metso
Construction Environmental Technology
Technology Technology Group
EUR million
EBITA before non- 57.7 40.3 35.9 134.3
recurring items
% of net sales 11.7 11.5 10.1 11.2
Capacity
adjustment -10.6 -3.2 -3.5 -17.3
expenses
Gain on sale of 7.6 - - 7.6
Talvivaara shares
Amortization of
intangible assets -1.0 -4.2 -4.8 -10.5
*)
Operating profit 53.7 32.9 27.6 114.1
(EBIT)
*) Amortization of intangible assets includes EUR 4.4 million that is related to
fair value allocations of acquired businesses.
Metso´s January-September 2010 Interim Review
Orders received and order backlog
Orders received in January-September totaled EUR 4,446 million, an increase of
49 percent on the comparison period. Excluding the effect from exchange rate
translation, the growth would have been 39 percent. The growth was strongest in
the Paper and Fiber Technology segment with other segments also recording clear
growth in new orders. Our customers' improved capacity utilization rates led to
38 percent growth in our services orders compared to the same period a year
earlier.
The three countries with the highest value of orders received were China, the
United States and Brazil. The share of emerging markets in our orders received
was 53 percent (49% in Q1-Q3/2009).
At the end of September, our order backlog was EUR 4,144 million, which is 21
percent stronger than at the end of 2009 (EUR 3,415 million). Around EUR 1.6
billion of the orders are expected to be recognized as net sales this year and
around EUR 920 million of the total order backlog are services business orders.
At the end of September our order backlog included some EUR 395 million worth of
orders (EUR 395 million at the end of June, 2010) for projects with uncertain
delivery schedules and which will, according to present estimates, be delivered
after 2010. The pulp mill project for Fibria, Brazil, is included in these
projects.
Orders received by reporting segment
Q1-Q3/2010 Q1-Q3/2009
% of orders EUR % of orders
EUR million received received
million
Mining and Construction
Technology
1,806 40 1,203 40
Energy and
Environmental
Technology 1,081 24 793 26
Paper and Fiber 1,560 35 983 33
Technology
Valmet Automotive 48 1 42 1
Intra-Metso orders -49 -28
received
Total 4,446 100 2,993 100
Orders received by market area
Q1-Q3/2010 Q1-Q3/2009
EUR % of orders
EUR million % of orders received received
million
Europe 1,605 35 1,081 36
North America 659 15 509 17
South and Central 647 15 345 12
America
Asia-Pacific 1,323 30 869 29
Africa and Middle 212 5 189 6
East
Total 4,446 100 2,993 100
Net sales
Our net sales for January-September increased by 6 percent on the comparison
period and were EUR 3,865 million (EUR 3,663 million in Q1-Q3/2009). Excluding
the effect from exchange rate translation, the decline would have been 1
percent. The growth came from Paper and Fiber Technology, which recorded growth
of 30 percent on the comparison period. Net sales for Mining and Construction
Technology were at around the same level as in the comparison period and net
sales for Energy and Environmental Technology fell by 11 percent. Net sales for
our services business increased 11 percent (when excluding the impact of the
acquired Fabrics business, i.e. the former Tamfelt, the growth was 4 percent)
and its share of the total net sales increased to 46 percent (43% in Q1-
Q3/2009).
Measured by net sales, the largest countries were China, the United States and
Brazil, which together accounted for about 36 percent of our total net sales.
The share of emerging markets in our net sales was 49 percent (43% in Q1-
Q3/2009).
Net sales by reporting segment
Q1-Q3/2010 Q1-Q3/2009
EUR
EUR million % of net sales % of net sales
million
Mining and Construction
Technology
1,576 41 1,551 42
Energy and Environmental
Technology
978 25 1,104 30
Paper and Fiber Technology 1,301 33 1,002 27
Valmet Automotive 48 1 42 1
Intra-Metso net sales -38 -36
Total 3,865 100 3,663 100
Net sales by market area
Q1-Q3/2010 Q1-Q3/2009
EUR
EUR million % of net sales % of net sales
million
Europe 1,370 36 1,589 43
North America 665 17 574 16
South and Central America 532 14 458 12
Asia-Pacific 1,086 28 755 21
Africa and Middle East 212 5 287 8
Total 3,865 100 3,663 100
Financial result
In January-September, our EBITA before non-recurring items was EUR 341.2
million, i.e. 8.8 percent of net sales (EUR 311.0 million and 8.5% in Q1-
Q3/2009). Improved capacity utilization rates and higher sales led to about 1
percentage point improvement in gross profit margin which was partly offset by
an increase in SG&As from 18.8 percent of net sales in January-September 2009 to
19.2 percent in the same period this year. SG&As have grown as a result of
rapidly increased market activity evidenced by 49 percent increase in new
orders.
Our operating profit (EBIT) for January-September was EUR 313.0 million, or 8.1
percent of net sales (EUR 238.6 million and 6.5% in Q1-Q3/2009).
The EBIT for January-September includes EUR 14.9 million in non-recurring items,
which had a positive impact, as specified in the following table.
Non-recurring items
Q1-Q3/2010
Mining and Energy and Paper and Fiber Metso
Construction Environmental Technology
Technology Technology Group
EUR million
EBITA before non- 179.2 92.8 86.7 341.2
recurring items
% of net sales 11.4 9.5 6.7 8.8
Capacity
adjustment -1.2 -7.9 -5.6 -14.7
expenses
Gain on sale of 1.1 - - 1.1
Talvivaara shares
Gain on
intellectual
property 30.1 - - 30.1
settlements in the
United States and
in Australia
Gain on business 0.9 - - 0.9
disposal
Credit loss
reserve related to - - 0.9 0.9
two paper machine
customers
Provision for
prior years' ICMS -3.4 - - -3.4
(VAT) tax credits
in Brazil
Amortization of
intangible assets -4.7 -14.9 -21.8 -43.1
*)
Operating profit 202.0 70.0 60.2 313.0
(EBIT)
*) Amortization of intangible assets includes EUR 25.0 million that is related
to fair value allocations of acquired businesses.
Q1-Q3/2009
Mining and Energy and Paper and Fiber Metso
Construction Environmental Technology
Technology Technology Group
EUR million
EBITA before non- 159.4 109.5 54.5 311.0
recurring items
% of net sales 10.3 9.9 5.4 8.5
Capacity
adjustment -16.0 -6.0 -21.6 -43.6
expenses
Gain on sale of 13.8 - - 13.8
Talvivaara shares
Hedging reversal
due to a cancelled - - -9.0 -9.0
customer order
Credit loss
reserve related to - - -4.1 -4.1
two paper machine
customers
Amortization of
intangible assets -2.6 -13.2 -12.0 -29.5
*)
Operating profit 154.6 90.3 7.8 238.6
(EBIT)
*) Amortization of intangible assets includes EUR 13.7 million that is related
to fair value allocations of acquired businesses.
2009
Mining and Energy and Paper and Fiber Metso
Construction Environmental Technology
Technology Technology Group
EUR million
EBITA before non- 201.6 147.4 71.3 399.0
recurring items
% of net sales 9.7 9.7 5.1 8.0
Capacity
adjustment -21.9 -11.1 -41.7 -74.7
expenses
Gain on sale of 23.1 - - 23.1
Talvivaara shares
Hedging reversal
due to a cancelled - - -9.0 -9.0
customer order
Credit loss
reserve related to - - -4.1 -4.1
two paper machine
customers
Amortization of
intangible assets -4.0 -18.2 -15.7 -40.7
*)
Operating profit 198.8 118.1 0.8 293.6
(EBIT)
*) Amortization of intangible assets includes EUR 18.5 million that is related
to fair value allocations of acquired businesses.
Group Head Office's operating profit in January-September includes foreign
exchange gains of EUR 9 million from foreign exchange hedge contracts made by
reporting segments with Group Treasury (EUR 10 million gain in Q1-Q3/2009).
Corresponding foreign exchange losses are included in the operating results of
the reporting segments.
Our net financing expenses in January-September were EUR 53 million (EUR 59
million in Q1-Q3/2009). Interest expenses were EUR 52 million (EUR 56 million in
Q1-Q3/2009). Net financing expenses include EUR 9 million in foreign exchange
losses related to the above-mentioned Group Head Office's foreign exchange gain.
Our profit before taxes was EUR 260 million (EUR 180 million) and we estimate
our tax rate for 2010 to be about 30 percent (32% in 2009).
The profit attributable to shareholders was EUR 181 million in January-September
(EUR 125 million in Q1-Q3/2009), corresponding to earnings per share (EPS) of
EUR 1.21 (EUR 0.88/share).
The return on capital employed (ROCE) before taxes in January-September was
13.0 percent (11.1%) and return on equity (ROE) was 13.5 percent (11.4%).
Cash flow and financing
Net cash generated by operating activities for January-September was EUR 368
million (EUR 487 million in Q1-Q3/2009).
Net working capital decreased in January-September by EUR 31 million.
Free cash flow in January-September was EUR 321 million (EUR 449 million in Q1-
Q3/2009).
Net interest-bearing liabilities totaled EUR 415 million at the end of September
(EUR 583 million at December 31, 2009).
Our total cash assets at the end of September were EUR 984 million, EUR 362
million of which has been invested in financial instruments with an initial
maturity exceeding three months. The remaining EUR 622 million has been
accounted for as cash and cash equivalents. The syndicated EUR 500 million
revolving loan facility is available until late 2011, and it is currently
undrawn. Metso's liquidity position is good.
At the end of September, our gearing was 21.3 percent (51.1%) and equity-to-
assets ratio was 37.2 percent (33.2%). In April, following the Annual General
Meeting, we paid EUR 105 million in dividends for 2009.
Capital expenditure and R&D
Our gross capital expenditure in January-September, excluding business
acquisitions, was EUR 90 million (EUR 79 million in Q1-Q3/2009). The share of
maintenance investments was 59 percent, i.e. EUR 53 million. Capital expenditure
on fixed assets includes two small technology related acquisitions. In April we
purchased the paper machine web inspection and web break system business from
Viconsys with about 30 people, and in August we purchased Camoplast-Finntrack
Oy's rubber belt related business with 16 people to complement our service and
product offering to pulp and paper customers. We estimate new capital
expenditure in 2010 to somewhat exceed the 2009 level (EUR 117 million in 2009).
The first phase of Metso's largest single investment so far in India, Metso
Park, was completed in March and the second phase has been initiated. A
technology center specializing in automation and flow control solutions and
products was opened in May in Shanghai, China. In York, Pennsylvania, USA,
Mining and Construction Technology took up new office premises under operating
lease arrangements in May. In June, construction work was started in Vantaa for
a new facility for our industrial valve production in Finland. This investment
will be accounted as an operating lease. In Araucaria, Parana state, Brazil,
construction work on a new facility for our regional pulping and power
operations has been started. In Jyväskylä, Finland, we completed an upgrade of a
pilot machine at the Paper Technology Center. In Zibo, our third service center
in China for the pulp and paper industry is nearly finished. Investment projects
in global enterprise resource planning systems are underway in Mining and
Construction Technology and in the Automation business.
Metso's research and development expenses in January-September totaled EUR 76
million, representing 2.0 percent of Metso's net sales (EUR 84 million and 2.3%
in Q1-Q3/2009).
Acquisitions, divestments and joint ventures
In July, we acquired the repair service business of Wyesco of Louisiana, L.L.C.,
in the U.S. state of Louisiana. The business was affiliated to Metso's Paper and
Fiber Technology segment and it employs 30 people.
In April, we sold the Flexowell conveyor belt operations in Germany to ContiTech
Transportbandsysteme GmbH. Flexowell was part of Metso's Mining and Construction
Technology segment.
In November 2009, we concluded a combination agreement with Tamfelt, one of the
world's leading suppliers of technical textiles. The exchange offer was carried
out in November-December of 2009 and successfully completed on December
23, 2009. The remaining 2 percent of Tamfelt's shares were redeemed in
accordance with the Finnish Companies Act, and in May Metso gained title to all
the shares in Tamfelt. The redemption price determined in the Arbitral Tribunal
was EUR 7.17 per share. Metso paid the redemption price of EUR 4.3 million in
September 2010 to the minority shareholders of Tamfelt who were party to the
redemption proceedings.
Since the acquisition, Tamfelt has been a part of our Paper and Fiber Technology
segment and constitutes today the segment's Fabrics business line.
Personnel
At the end of September, we had 27,552 employees, which was 386 more than at the
end of 2009 (27,166 employees at December 31, 2009), and 719 employees less than
a year ago, taking into account the impact of the acquired and divested
businesses. The number of employees increased 5 percent in Mining and
Construction Technology, and in Energy and Environmental Technology as well as
Paper and Fiber Technology it stayed at around the same level as it was at the
end of 2009. During January-September, we had an average of 27,333 employees.
Personnel by area
% of total
Sep 30, % of total Sep 30, 2009 person- Change % Dec 31,
2010 personnel 2009
nel
Finland 8,767 32 8,321 31 5 8,746
Other Nordic 2,867 10 2,985 11 -4 2,995
countries
Rest of Europe 3,430 12 3,516 13 -2 3,678
North America 3,454 13 3,502 13 -1 3,428
South and
Central 3,045 11 2,720 10 12 2,618
America
Asia-Pacific 4,599 17 4,218 16 9 4,316
Africa and 1,390 5 1,401 6 -1 1,385
Middle East
Total 27,552 100 26,663 100 3 27,166
Changes in top management
In August, Metso's Board of Directors appointed Mr. Matti Kähkönen, M.Sc. in
Engineering, as the new President and Chief Executive Officer of Metso
Corporation and Metso Group. Kähkönen will start in his new position on March
1, 2011. Metso's current President and CEO, Jorma Eloranta, will continue in his
position until March 1, 2011. Until then, Kähkönen will continue as President of
Metso's Mining and Construction Technology segment.
In September, Metso's Executive Vice President and CFO Olli Vaartimo turned 60
years old, the age of retirement according to his executive contract. As of
October 1, 2010, Kähkönen took over as Metso's Executive Vice President and
Deputy to the CEO and as Vice Chairman of the Metso Executive Team. Vaartimo has
agreed to continue to provide support during the transition period, until the
end of June 2011, as changes are made in Metso's top management including the
search for a new CFO.
REPORTING SEGMENTS
Mining and Construction Technology
Q3/ Q3/
EUR million Change % Q1-Q3/ 2010 Q1-Q3/ 2009 Change % 2009
2010 2009
Net sales 563 492 14 1,576 1,551 2 2,075
Net sales of services 292 259 13 827 777 6 1,017
business
% of net sales 52 53 53 50 49
Earnings before
interest, tax and
amortization (EBITA)
and non-recurring
items 74.9 57.7 30 179.2 159.4 12 201.6
% of net sales 13.3 11.7 11.4 10.3 9.7
Operating profit 68.2 53.7 27 202.0 154.6 31 198.8
% of net sales 12.1 10.9 12.8 10.0 9.6
Orders received 643 420 53 1,806 1,203 50 1,660
Orders received of 311 239 30 915 733 25 970
services business
Order backlog at end 1,329 1,103 20 1,041
of period
Personnel at end of 9,974 10,014 0 9,541
period
The net sales of Mining and Construction Technology increased 2 percent on the
comparison period of January-September (excluding the impact of exchange rate
translation, net sales would have declined 8%), and were EUR 1,576 million. In
the mining business, net sales were up 3 percent while in the construction
business net sales were on par with the comparison period. The services business
net sales increased 6 percent and accounted for 53 percent of the segment's net
sales (50% in Q1-Q3/2009).
Mining and Construction Technology's EBITA before non-recurring items was EUR
179.2 million (non-recurring items analyzed in the 'Financial result' section),
i.e. 11.4 percent of net sales in January-September (EUR 159.4 million and
10.3% in Q1-Q3/2009). Improved capacity utilization rates and price levels
contributed positively to the profitability while a 7 percent increase in
selling, general and administrative expenses (SG&As) compared with 2 percent
increase in net sales had a negative impact on profitability. Growth in SG&As
was due to increased market activity.
Operating profit (EBIT) for January-September was EUR 202.0 million, i.e. 12.8
percent of net sales (EUR 154.6 million and 10.0% in Q1-Q3/2009). EBIT includes
positive non-recurring items of EUR 27.5 million net whereas non-recurring items
in the comparison period weakened the EBIT by EUR 2.2 million (non-recurring
items are analyzed in the 'Financial result' section).
Orders received by Mining and Construction Technology in January-September grew
50 percent from the comparison period and amounted to EUR 1,806 million. Orders
received grew in all geographical regions. Orders from mining customers
increased 71 percent and from construction customers 16 percent. The share of
orders received from emerging markets was 60 percent (50% in Q1-Q3/2009). New
orders received in January-September include grinding equipment deliveries for
the Kinross Gold goldmine in Brazil, mining equipment for Tisco's iron ore
processing plant in China, and mining and minerals processing equipment and
services for Nordic Mines' new gold ore processing plant in Finland.
The order backlog strengthened 28 percent from the end of 2009 and totaled EUR
1,329 million at the end of September (EUR 1,041 million at December 31, 2009).
At the end of September, our order backlog included mining equipment orders,
which are subject to uncertainties primarily related to delivery schedules, of
around EUR 75 million, unchanged from the end of June.
Energy and Environmental Technology
Q3/ Q3/
EUR million Change % Q1-Q3/ 2010 Q1-Q3/ 2009 Change % 2009
2010 2009
Net sales 312 350 -11 978 1,104 -11 1,523
Net sales of services 129 117 10 372 379 -2 516
business
% of net sales 42 34 39 35 35
Earnings before
interest, tax
and amortization
(EBITA)
31.7 40.3 -21 92.8 109.5 -15 147.4
and non-recurring
items
% of net sales 10.2 11.5 9.5 9.9 9.7
Operating profit 23.8 32.9 -28 70.0 90.3 -22 118.1
% of net sales 7.6 9.4 7.2 8.2 7.8
Orders received 341 250 36 1,081 793 36 1,297
Orders received of
services business
162 98 65 460 326 41 443
Order backlog at end 1,159 939 23 1,032
of period
Personnel at end of 6,015 6,119 -2 6,060
period
The net sales of Energy and Environmental Technology declined 11 percent on the
comparison period, as a result of weak order intake in 2009, and were EUR 978
million. The net sales declined 13 percent in the Power business, 11 percent in
the Automation business and 9 percent in the Recycling business. The net sales
of the services business were about on par with the comparison period and
accounted for 39 percent of the segment's net sales (35% in Q1-Q3/2009).
Energy and Environmental Technology's EBITA before non-recurring items was EUR
92.8 million, i.e. 9.5 percent of net sales (EUR 109.5 million and 9.9% in Q1-
Q3/2009). Negative volume leverage on profitability was partly offset by clearly
improved project execution in large delivery projects.
Operating profit (EBIT) for January-September declined and was EUR 70.0 million
and 7.2 percent of net sales (EUR 90.3 million and 8.2% in Q1-Q3/2009). The EBIT
includes EUR 7.9 million in non-recurring expenses (non-recurring items are
analyzed in the 'Financial result' section) primarily related to capacity
adjustment actions (non-recurring expenses EUR 6.0 million in Q1-Q3/2009).
Orders received by the segment increased 36 percent on the comparison period and
totaled EUR 1,081 million. Orders received increased in all of the business
lines. Major orders received include biomass boilers for RWE npower renewables
in the UK and for 4Ham Cogen in Belgium. In addition, several automation orders
for managing power plants, pulp mills, paper, board and tissue lines as well as
oil and gas projects were received. In the Recycling business, several sizable
metal recycling shredder orders were received.
The order backlog at the end of September, EUR 1,159 million, was 12 percent
higher than at the end of 2009. The order backlog includes projects worth
approximately EUR 80 million with uncertain delivery schedules. The uncertainty
is mostly related to the deliveries of power boiler and automation technology
for Fibria's pulp mill project in Brazil.
Paper and Fiber Technology
EUR million Q3/ 2010 Q3/ 2009 Change % Q1-Q3/ Q1-Q3/ Change % 2009
2010 2009
Net sales 443 356 24 1,301 1,002 30 1,408
Net sales of
services 194 135 44 539 410 31 569
business
% of net 44 38 41 41 41
sales
Earnings before
interest, tax,
amortization
(EBITA) and non-
recurring items 31.8 35.9 -11 86.7 54.5 59 71.3
% of net 7.2 10.1 6.7 5.4 5.1
sales
Operating profit 21.9 27.6 -21 60.2 7.8 n/a 0.8
% of net 4.9 7.8 4.6 0.8 0.1
sales
Orders received 417 369 13 1,560 983 59 1,384
Orders received
of services
business 198 119 66 625 391 60 524
Order backlog at 1,703 1,330 28 1,380
end of period
Personnel at end 10,388 9,475 10 10,459
of period
Net sales of Paper and Fiber Technology grew 30 percent in January-September,
and were EUR 1,301 million. The increase in net sales came from all business
lines. The comparable net sales growth, i.e. excluding the impact of the
acquired Fabrics business, was 19 percent. The net sales of the services
business increased 31 percent and accounted for 41 percent of the net sales (41%
in Q1-Q3/2009). The growth in the services business' net sales came primarily
from the acquired Fabrics business.
Paper and Fiber Technology's EBITA before non-recurring items was EUR 86.7
million, i.e. 6.7 percent of net sales (EUR 54.5 million and 5.4% in Q1-
Q3/2009). Clear improvement in the profitability resulted primarily from
strengthened financial performance in the services business and strong net sales
growth in the Paper business. In the third quarter of 2009, the underlying EBITA
margin was exceptionally strong because of high gross margins in some large
paper projects as a result of lower procurement prices enabled by low cycle
phase and overall successful implementation of the projects.
Operating profit (EBIT) for January-September was EUR 60.2 million, i.e. 4.6
percent of net sales. The EBIT includes non-recurring items (non-recurring items
are analyzed in the 'Financial result' section), which weaken the EBIT by a
total of EUR 4.7 million (non-recurring items in Q1-Q3/2009 weakened the EBIT by
EUR 34.7 million).
New orders from paper and board customers increased in January-September 8
percent and orders from the pulp industry were up 220 percent on the
exceptionally weak comparison period. Orders from tissue customers increased 59
percent. Overall, the value of orders received by Paper and Fiber Technology
increased 59 percent and was EUR 1,560 million. The increase in services orders
was 60 percent (30 percent without the Fabrics business). Among the orders
received in January-September were board-making technology and machinery for
Cheng Loong in Taiwan, for Saica Containerboard in the UK as well as for
Zhejiang Ji'An in China, a fine paper line for APRIL Fine Paper (Guangdong) in
China, a kraft pulp mill for Japanese Oji Paper to China and the main technology
for Ilim Group's new kraft pulp mill in Bratsk, Russia.
At the end of September, the order backlog was EUR 1,703 million. Around EUR
240 million of the order backlog relates to the pulp mill project for Fibria in
Brazil, for which the delivery schedule is still open.
Valmet Automotive
Valmet Automotive's net sales in January-September totaled EUR 48 million (EUR
42 million in Q1-Q3/2009). The operating loss was EUR 7.8 million (EUR 8.4
million loss in Q1-Q3/2009). Delivery volumes improved in the third quarter and
profitability turned positive. At the end of September, Valmet Automotive
employed 668 people (679 employees at December 31, 2009).
Valmet Automotive manufactures THINK City electric cars for the Norwegian
company THINK Global AS, and electric golf cars for the Danish company Garia
A/S. Additionally, Valmet Automotive has an assembly contract with Porsche AG
which is expected to end by the end of 2011.
Valmet Automotive also has an agreement with the U.S. company Fisker Automotive
Inc. for the manufacturing and engineering of Fisker Karma plug-in hybrid cars.
The first pre-series cars have been delivered and the series production is
scheduled to start in the first quarter of 2011. The annual production is
projected to reach 15,000 cars at full capacity.
Short-term risks of business operations
The growing budget deficits in many European countries and the United States
coupled with strong fluctuations in exchange rates have increased the
uncertainty, which could slow the economic recovery, particularly in Europe and
North America. Despite this, we estimate that the business environment in our
main customer industries will continue to develop favorably during the rest of
2010 and the first half of 2011. We estimate that the high share of our business
derived from services and emerging markets will diminish the possible negative
effects that market uncertainties may have.
If the recovery in the global economy is interrupted, it might have adverse
effects on new projects under negotiation or on projects in our order backlog.
Some projects may be postponed or they may be suspended or canceled. At the
moment less than 10 percent of orders in the order backlog are subject to
uncertainties relating to delivery schedules. In long-term delivery projects the
initial customer down payments are typically 10-30 percent of the value of the
project, in addition to which the customer makes progress payments during the
project execution. This significantly decreases our risk and financing
requirements related to these projects. We continually assess our customers'
creditworthiness and ability to meet their obligations. As a rule, we do not
finance customer projects.
We have adjusted our capacity and cost structure in order to maintain our
competitiveness. Also our suppliers have strongly adjusted their capacity during
the past two years and it is possible that now with the demand picking up
suppliers' ability to supply raw materials, components and sub-contracting
services may have weakened, which may result in delivery problems. If the
recovery of the global economy is interrupted, the markets for our products may
contract, which may lead to tightening price competition.
Securing the continuity of our operations requires that sufficient funding is
available under all circumstances. We estimate that our cash assets totaling EUR
984 million and available credit facilities are sufficient to secure short-term
liquidity. Committed credit facility available for withdrawal amounted to EUR
500 million. The average repayment period for our long-term debt is 3.0 years.
Less than one third of our long-term debt will mature by the end of 2011. There
are no prepayment covenants in our debt facilities that would be triggered by
changes in credit ratings. Some of our debt facilities include financial
covenants related to capital structure. We fully meet the covenants and other
terms related to our financing agreements.
The levels of net working capital and capital expenditure have a fundamental
effect on the adequacy of financing. We have developed our practices and the
supporting information systems relating to managing net working capital and we
expect that these will improve our capacity to control movements in our net
working capital as delivery volumes experience an upswing. We estimate that we
are well-positioned to keep our capital expenditure at a moderate level in the
coming years.
We have EUR 877 million of goodwill on our balance sheet which is mainly related
to business acquisitions made over the last 10 years. We conduct impairment
tests regularly once a year and more frequently if needed, and have not detected
any impairment. The principles for the impairment testing are presented in our
Annual Report.
Changes in the prices of raw materials and components can affect our
profitability. On the other hand, some of our customers are raw material
producers, whose ability to operate and invest may be enhanced by strengthening
raw material prices and hampered by declining raw material prices.
Currency exchange rate risks are among the most substantial financial risks.
Exchange rate changes can affect our business, although the wide geographical
scope of our operations decreases the impact of any individual currency. In
general, uncertainty in the economy is likely to increase exchange rate
fluctuations. We hedge the currency exposures that arise from firm delivery and
purchase agreements.
Short-term outlook
We anticipate that the gradual recovery will continue in most of our customer
industries. The growing budget deficits in several European countries and the
United States and the uncertainty caused by fluctuations in the exchange rates
may, however, slow down the recovery of the markets particularly in Europe and
North America. In the emerging markets the outlook continues strong. The
improving capacity utilization rates of our customer industries are supporting
our services business, and most of our customers are expected to gradually
regain their confidence to increase the level of investments in new and existing
capacity.
The number of quotations for equipment and projects from mining companies has
strongly increased since the beginning of this year. This has had a clear
positive impact on our orders and we expect this to continue during the rest of
2010 and first half of 2011. Due to the strengthening demand for minerals and
our large installed equipment base, we expect demand for our mining services to
continue strong.
We anticipate that demand for equipment used in aggregates production by the
construction industry will continue to be weak in Europe and in North America
during the rest of 2010 and the first half of 2011. In the Asia-Pacific region
and Brazil, infrastructure construction projects are maintaining good demand
thanks to continuing strong economic growth. We estimate that demand for our
services business for the construction industry will remain satisfactory.
Demand for power plants that utilize renewable energy sources is expected to be
good in Europe and North America in 2010 and first half of 2011. Several
European countries and the United States have published targets to increase the
use of renewable energy and this is expected to support demand for our power
plant solutions fuelled by biomass and waste. However, uncertainty in the
financial markets and pending policies over support mechanisms for renewable
energy may delay final decisions in some of the projects under negotiations.
Demand for the power plant services business is expected to be good.
We estimate that demand for our automation products will continue to get
stronger during this year and first half of 2011, as the oil, gas and
petrochemical industries increase their investments due to the improvement in
energy prices and demand. Demand for automation products in the pulp and paper
customer industry is also expected to develop favorably. Demand for our services
business for automation solutions is expected to be good.
We expect the demand for metal and solid waste recycling equipment to be
satisfactory. Demand for recycling equipment services is expected to continue
improving over the coming quarters as the capacity utilization rates of our
customers' plants and equipment improve.
Demand for new fiber lines, rebuilds and pulp mill services has clearly
recovered from the low levels of the past few years, and we expect the fiber
equipment market to continue to be active this year and into 2011. Demand for
paper and board lines is expected to be satisfactory and for tissue lines good
in 2010 and first half of 2011. We expect the improved capacity utilization
rates of the paper and board industry to boost the demand for our services
business.
As earlier, we estimate that our net sales in 2010 will grow about 10 percent
from the EUR 5 billion level of 2009, and that our profitability will be
satisfactory. Our estimate is based on our net sales of EUR 3.9 billion for the
first nine months and on the order backlog at the end of September, out of which
about EUR 1.6 billion is estimated to be recognized as net sales during 2010, as
well as on the expectation that the recovery of the global economy will
continue.
Our orders received for the first nine months of this year exceed the net sales
for the same period by 15 percent. Based on this and assuming that the gradual
recovery of global economy will continue we estimate that in 2011 our net sales
will grow about 10 percent compared to this year and EBITA before non-recurring
items will improve.
The estimates for our financial performance in 2010 and 2011 are based on
Metso's current market outlook and business scope as well as foreign exchange
rates similar to September 2010.
Helsinki, October 28, 2010
Metso Corporation's Board of Directors
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.
The Interim Review is unaudited.
CONSOLIDATED STATEMENT OF INCOME
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
EUR million
2010 2009 2010 2009 2009
Net sales 1,325 1,196 3,865 3,663 5,016
Cost of goods sold -969 -885 -2,857 -2,752 -3,808
Gross profit 356 311 1,008 911 1,208
Selling, general and administrative expenses -251 -210 -744 -688 -938
Other operating income and expenses, net -2 13 49 15 24
Share in profits of associated companies 0 0 0 1 0
Operating profit 103 114 313 239 294
% of net sales 7.8% 9.5% 8.1% 6.5% 5.9%
Financial income and expenses, net -8 -23 -53 -59 -72
Profit before taxes 95 91 260 180 222
Income taxes -28 -28 -78 -54 -71
Profit 67 63 182 126 151
Attributable to:
Shareholders of the company 67 62 181 125 150
Minority interests 0 1 1 1 1
Profit 67 63 182 126 151
Earnings per share, EUR 0.45 0.44 1.21 0.88 1.06
Diluted earnings per share, EUR 0.45 0.44 1.21 0.88 1.06
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
EUR million
2010 2009 2010 2009 2009
Profit 67 63 182 126 151
Cash flow hedges, net of tax 36 7 16 17 14
Available-for-sale equity investments, net of tax 1 -5 1 5 -1
Currency translation on subsidiary net investments -58 13 81 61 74
Net investment hedge gains (+) / losses (-), net of 17 -2 -10 0 0
tax
Defined benefit plan actuarial gains (+) / losses (-), - - - - -2
net of tax
Other comprehensive income (+) /
-4 13 88
Unternehmensinformation / Kurzprofil:
Datum: 28.10.2010 - 11:00 Uhr
Sprache: Deutsch
News-ID 46861
Anzahl Zeichen: 0
contact information:
Town:
Helsinki
Kategorie:
Business News
Diese Pressemitteilung wurde bisher 193 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Metso Corporation´s Interim Review, January 1 - September 30, 2010"
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).
